Posts Tagged ‘WTO’

EU Agricultural Subsidies And The WTO Round

January 24, 2009

I am getting even more worried about the WTO Doha Development Agenda negotiations.  The rise in protectionist sentiment in major economies is unhelpful to the conclusion of the negotiations.  But structural issues inside the EU are also proving unhelpful.

I haven’t seen any of the MAF or MFAT internal reporting on the agriculture component of the negotiations for over four years so i may be wrong here.  But the impression i had was that New Zealand (and Australia) believed that the world had gone through a fundamental change.  Subsidies were no londer as important to the operation of the EU’s common agirculture policy.  So when I called for the world to accept a minimilast outcome from the current negotiations based around agreement to abolish export subsidies once and for all, coupled with some modest action to trim levels of domestic subsidisation, I was told that I was a fool and that this was not nearly good enough.  EU agreement to end export subsidies was going to happen anyway and EU domestic subsidies were too expensive to sustain.  What I was suggesting was therefore non-meaningful.  What was needed was progress on market access also.

Well has the world changed?  According to my research we don’t just have a resumption of EU export subsidies but we have an increase in domestic subsidies and a return of our old friend the “butter mountain”.  There is also a “skimmed Milk powder mountain” developing.  The EU has just agreed to buy 30,000 tonnes of butter at a guaranteed price of 2,299 Euro a tonne and 109,000 tonnes of SMP at 1,698 Euro a tonne (the current world price is around 1,400 Euro a tonne).

Why am I worried about the Doha Round?  Because we are going to be lucky to hold the exisiting text, let alone improve upon it.  The Round haas floundered so far because countries like New Zealand, the US and Australia have been saying that we need to secure more commitments, particularly on market access.  In current circumstances expectations of further improvement to the text looks to be highly optimistic.

I don’t believe that the Round is necessarily dead, but I suspect that business as usual is not going to be an option.  I think that a fundamental re-think is going to be needed about a strategy for getting the negotiations completed.  This is only going to come at the political level.  In this context, next week’s discussions at Davos are well timed.  These won’t achieve a breakthrough, but they could start some new ways of thinking about this negotiation in the run up to the G20 meeting in April.

My suggestion would be for Ministers to stop looking at the negotiation in terms of the pillars – agriculture, non-agricultural market access, services etc.  and instead look at what can be realistically be achieved in current market circumstances.  What will need to be done in other areas to keep the EU to its current position on the abolition of agricultural subsidies and cuts to domestic subsidies?  The answer will be some modest cuts in industrial tariffs and some modest forward movement on services.  Countries can leave expectations of substantial improvement in market access conditions to bilateral and regional trade negotiations.

This formula has hope of achieving an outcome, maybe before the end of this year.  It will achieve a meaningful outcome and allow the WTO to consolidate its functions.  Continuing along the current negotiating track carries the risk of failure.  That will be a disaster for the global economy.

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EU Export Subsidies

January 19, 2009

I am still thinking through, and talking through with people here, the full implications of the resumption of export subsidies by the EU.  This seems to be aa reaction to the fall in international prices.  Unfortunately international prices for key agricultural commodities look as though they are going to be soft for some time.  Will the EU really be willing to agree to the text currently on the table in the WTO if prices stay soft?  The current text would see an end to export subsidies for agriculture.  They are already illegal for non-agricultural products.  No disciplines yet exist on subsidies in the services sector.

Export Subsidies

January 18, 2009

Like many I am perturbed by the EU decision to resume export subsidies for agricultural products.  This policy has in the past been extremely damaging to New Zealand exports and those of many developing countries also.  The prohibition of these subsidies should be our #1 goal for the current WTO negotiations.

Protectionism The Real Enemy

December 25, 2008

I started to read the special Christmas double edition of The Economist last night (I managed to find a copy at Cromwell Paper Plus).  The first Leader is a story entitled Fare well, free trade.  It talks about how we are seeing a frightening combination of forces – a contraction of both capital investment and world trade.  The shifting of both trade and capital flows into reverse has not happened for a generation.

The article also deals with a factor that worries me enormously, the ability of world leaders to say one thing on the international stage, and to act very differently at home

In many countries politicians’ fealty to open markets is already more rhetorical than real. In November the leaders of the G20 group of big rich and emerging economies promised to eschew any new trade barriers for a year and to work hard for agreement on the Doha round of trade talks by the end of December. Within days, two of the G20 countries, Russia and India, raised tariffs on cars and steel respectively. And the year is ending with no Doha breakthrough in sight.

As economies weaken, popular scepticism of open markets will surely grow. Among rich countries, that danger is greatest in America, where grumbles were heard long before recession set in. The new Congress, with bigger Democratic majorities, has a decidedly less trade-friendly hue. Barack Obama’s campaign rhetoric left an impression of a man in two minds about trade, which he has since done nothing to dispel.

And to add into the mix trade distorting policies are beginning to abound

Politicians from Washington to Beijing are being pressed to help troubled industries, regardless of the consequences for trade. A bail-out of Detroit’s carmakers, whatever its final extent, will be a discriminatory subsidy. As China’s exporters go bust by the thousand, industries from textiles to steel have been promised handouts and rebates. Subsidies will beget more subsidies: Nicolas Sarkozy, France’s president, says that Europe will turn into an “industrial wasteland” if it too does not prop up its manufacturers. They will also invite retaliation. With China’s bilateral trade surplus at a record high even as America’s economy slumps, Congress will not take kindly to Beijing’s bolstering of its exporters.

The Economist suggests a policy prescription which I can only endorse

Add all this together and it is hard for a free-trader not to worry. So what is to be done? The first requirement is political leadership, especially from America and China. At a minimum, both must avoid beggar-thy-neighbour policies. Second, a conclusion of the Doha round would help. A deal would reduce the risk of broader backsliding by cutting many countries’ bound tariffs—and it would establish Mr Obama’s multilateral credentials. Third—Doha deal or not—is greater transparency. A good recent idea is that the WTO publicise any new barriers, whether or not they are allowed by its rules.

But The Economist misses one new factor which is probably more worrying than anything else it talks about.  That is the prospect of new instruments being introduced to keep US and European industry internationally competitive after cap and trade or carbon taxes are introduced as a response to climate change.  My fear here is that these policies will spark a trade war which will threaten to future of the WTO rules based system.  Avoiding such an outcome will be one of my key themes for the year ahead.

Lamy Expects A Several Month Delay Before Next WTO Ministerial Attempt

December 14, 2008

WTO Director-General Pascal has given his first substantive interview since deciding to can the idea of a Ministerial meeting before the end of the year.  It is to Le Monde.  In it he explains the reasons why progress has been achieve and he confesses that there will now be a several month delay before the next attempt at finalising modalities (“several months after Obama enters the White House”).  My view is that we will have to wait for the new USTR to be in the job and the new US WTO team to have been in place for several months before we can expect any progress.  Thiss suggests a June/July timing if we are lucky.  New Zealand’s Trade Minister Tim Groser has flown to Geneva for the weekend from Poland.  It will be interesting to get his take on the prospects for the negtotiation.  Here is the interview (OMC is French for WTO):

Vous avez renoncé, vendredi 12 décembre, à convoquer une réunion ministérielle au siège de l’Organisation mondiale du commerce (OMC) à Genève, pour poser les bases d’un accord de libéralisation des échanges dans le cadre du cycle de Doha. Les Américains et les Indiens sont-ils responsables de ce nouvel échec ?

Je ne peux désigner de pays en particulier. Depuis juillet dernier, nous avions bâti des compromis solides dans les domaines industriel et agricole, mais trois dossiers – où il y avait de sérieuses divergences – demeuraient ouverts : le coton, pour lequel des évolutions étaient envisageables, mais surtout la clause de sauvegarde agricole qui doit permettre aux pays en développement de protéger leur agriculture contre des bouffées d’importation, et les négociations sectorielles dont les pays industrialisés attendent des réductions supplémentaires de droits de douane, par exemple sur les articles de sport ou l’électronique. Sur ces deux derniers points, les positions politiques sont devenues très rigides.

 

Ces positions étaient-elles tellement éloignées ?

La clause de sauvegarde agricole et les négociations sectorielles industrielles sont des affaires économiques de relativement moindre importance au regard des centaines de sujets qui ne soulèvent pas de problèmes. Mais chacune des parties s’est persuadée que, si elle cédait à la marge, elle serait perdante. A l’évidence, il y a une disproportion entre la réalité économique et l’enjeu politique. Et pendant ce temps-là, les pays en développement s’impatientent de ne pas profiter des avantages qui sont contenus dans un accord global presque achevé et toujours repoussé !

 

 

Quand reprendront les négociations ?

 

Quand la nouvelle administration américaine sera en place. Cela prendra plusieurs mois après l’entrée de Barack Obama à la Maison Blanche.

 

N’êtes-vous pas fatigué de ces vains efforts pour persuader 153 pays membres de réduire leurs obstacles au commerce ?

Ce n’est ni dans mon tempérament ni dans la conception que je me fais de mon métier dès lors qu’ils ont décidé par consensus que c’était nécessaire. Albert Camus a écrit qu’il fallait imaginer Sisyphe heureux…

No WTO Ministerial This Year

December 13, 2008

As I predicted on Morning Report on Wednesday, WTO Director-General Lamy has decided against calling a Ministerial meeting to try and finalise the modalities for the WTO Doha Round.  It amazes me that Trade Ministers and officials were able to get away with ignoring the instructions from their leaders at the G20 and APEC meetings.  This report is from Reuters

GENEVA (Reuters) – The World Trade Organization (WTO) dropped plans on Friday to seek a breakthrough for a new trade deal this year, risking an increase in protectionism as the world economy suffers its worst crisis in decades.

Key members voiced disappointment at the decision, but vowed to push on with the negotiations next year, when economic conditions will be harder and the new administration of Barack Obama will have taken office in the United States.

WTO Director-General Pascal Lamy told members he had decided against calling trade ministers to Geneva this month to push for a deal in the WTO’s seven-year-old Doha round, because they were not showing enough political will to narrow differences.

The decision means ministers were unable to meet a call by leaders of the G20 rich and emerging nations last month to reach an outline Doha deal by the end of this year to help counter the financial crisis by warding off protectionism.

It also promises an uncertain period for international trade, the lifeblood of the global economy, as the world navigates the worst economic crisis since the 1930s.

Lamy, an ascetic Frenchman, said a meeting to produce a Doha deal would have boosted business confidence by showing that governments could work together to solve problems.

“Next year the world will be in even more need of reassurance that governments can take their collective responsibility to strengthen the trading system through a Doha agreement,” the keen marathon-runner told a news conference.

WTO Ministerial Looking More Unlikely

December 12, 2008

Everything I am hearing out of Geneva and around the world is casting increasing doubt over whether WTO Director-General Lamy will be calling a Ministerial meeting together.  Lamy doesn’t want to risk another meeting that might be seen to be a failure so is being cautious.  This report from Reuters is a good summary of what is going on

GENEVA (Reuters) – World Trade Organisation Director-General Pascal Lamy is in intensive talks with major trading powers to seek a breakthrough in the WTO’s seven-year-old Doha round, officials said on Wednesday.

“He’s been in touch with numerous ministers from major players trying to find a common way forward,” WTO spokesman Keith Rockwell said.

However, Geneva sources said they heard the talks were proving difficult.

Lamy is in touch with ministers from the United States, China, India, Brazil, South Africa and other countries to see whether it is worth holding a meeting on Doha, launched in the Qatari capital in late 2001 to free up world trade.

Last month leaders of the G20 rich and emerging nations called for an outline Doha deal by the end of this year to help counter the financial crisis by warding off protectionism.

Lamy had previously indicated that a meeting could be held around December 13-15.

But on Monday, after meeting key WTO ambassadors to discuss revised negotiating texts on agriculture and industrial goods issued at the weekend, he decided that further consultations were needed on three sensitive issues before deciding whether to call in ministers next week.

These are proposals to create duty-free zones in some industries such as chemicals, a proposal to safeguard farmers in poor countries from surges in imports, and cotton subsidies — all of which touch on key U.S. interests.

“We have been and continue to be in a steady stream of communication between key trading partners and the WTO,” said Gretchen Hamel, a spokeswoman for Susan Schwab, the top U.S. trade official.

Officials say a decision on whether to call a meeting is likely later this week.

Schwab is under pressure from leading U.S. lawmakers, farm groups and manufacturers not to go to Geneva for a ministerial meeting because they do not believe a good deal is possible on the basis of the latest texts circulated over the weekend.

Schwab is expected to discuss the troubled Doha round on Thursday with EU Trade Commissioner Catherine Ashton, who is making her first trip to Washington since taking over the EU’s top trade post in October.

She and other EU officials will be in town for a meeting of the Transatlantic Economic Council, a U.S.-EU forum to discuss bilateral trade, investment and regulatory issues.

Schwab will also meet on Thursday with Australian Trade Minister Simon Crean, who will be in Washington in the hope of traveling on to the possible ministerial in Geneva.

Australia, a major agricultural exporter, has been pressing hard for a conclusion to the Doha round.

More Unhelpful Bi-partisanship From Washington

December 9, 2008

Now we have 22 Senators adding an unhelpful complication to the WTO negotiations

WASHINGTON (Reuters) – Senators from U.S. farm states and the nation’s largest farm group criticized a new negotiating text for a World Trade Organization deal on Monday, saying it won’t get more U.S. farm goods into foreign markets.

The draft text on “modalities” — the outline for a deal that WTO members have struggled to reach since 2001 — contains “substantial loopholes” that would limit U.S. market access, a bipartisan group of 22 U.S. senators said in a letter to President George W. Bush.

The United States has offered to cut its domestic subsidies, but other countries haven’t gone far enough, said the group, led by Tom Harkin, the Iowa Democrat who chairs the Senate Agriculture Committee, and Georgia Sen. Saxby Chambliss, the Republican leader on the committee.

“The potential modalities framework now under consideration by negotiators in Geneva is not sound or balanced from the perspective of U.S. agriculture,” the senators wrote.

The draft modalities text — an update to what world trade ministers rejected in July — was released on Saturday. WTO Director-General Pascal Lamy is weighing whether to call together ministers next week to try again to negotiate a deal.

“Absent substantial improvements in the July framework, any modalities agreement will not benefit U.S. agriculture and will not have our support,” the senators said.

The 6 million-member American Farm Bureau Federation said the draft failed to make “meaningful progress” and the United States should reject it.

“A ministerial meeting should not be called until there is a consensus for greater ambition in the agricultural text,” said Bob Stallman, Farm Bureau president, in a statement. “Any trade deal that legitimizes agricultural trade barriers and protectionist behavior is unacceptable.”

The National Cotton Council also criticized the new text for cutting U.S. farm supports without giving U.S. farmers better market access in return.

Ranchers still hope the United States pushes for a deal, and hope to gain access in Europe and Japan, said Gregg Doud, chief economist of the National Cattlemen’s Beef Association.

But Doud said he was surprised to see how the text accommodated some nation’s sensitive products, particularly Canada’s supply-managed dairy and poultry industries.

“Are we going to liberalize market access or not?” Doud said in an interview.

“It’s hard not to get the impression at this point in time that we’re watering it down, and that’s not good,” he said.

Bad News From Geneva

December 9, 2008

Media reports from Geneva are casting doubt on there being a WTO Ministerial held before the end of the year.  This is despite the fact that APEC Leaders and G20 Leaders instructed Trade Ministers to meet.  I must say that having read the agriculture text in detail I was a bit worried about the chances of any Ministerial doing anything other than “make progress” as oppose to “finalise”” or “reach agreement on” modalities.

This report from AP is typical

The World Trade Organization appeared close to abandoning a ministerial conference this year to hammer out a new global commerce pact, officials said Monday.

WTO Director-General Pascal Lamy had hoped to invite top trade negotiators to Geneva from Saturday to work out the many issues hindering a deal designed to lift millions of people out of poverty and add billions of dollars to the global economy through lower trade barriers.

But senior officials from Argentina, Brazil and India said those plans were dropped during a meeting Monday at the WTO’s Geneva headquarters. They could not say if trade ministers would meet at all before Dec. 31.

The talks, which were kicked off in Doha in 2001, have suffered a number of debilitating collapses, and some diplomats, politicians and industry groups had expressed concern that Lamy was forcing through a meeting that stood little chance of success. Negotiating drafts released this weekend showed the WTO’s 153 members were divided over the same issues that scuppered the last major effort, a nine-day summit in July.

That collapse had led many to write off any short-term chances for a deal. But, prompted by the global financial crisis, 20 of the world’s industrialized and emerging economies called last month in Washington for agreement to open up trade in farm commodities and industrial goods by year-end.

“That was a political statement,” said Nestor Stancarelli, Argentina’s chief trade negotiator. “If you have to move dates, it’s not so serious.”

Stancarelli and Indian Ambassador Ujal Singh Bhatia said Lamy was now considering whether to call ministers to Geneva for a three-day meeting starting Dec. 17.

But wide differences among members remained, they and other negotiators said.

The United States and China were at odds over an American demand for massive tariff cuts in the global chemicals sector, while the U.S. was on the defensive over the hundreds of millions of dollars in cotton subsidies it hands out each year, officials said.

Brazil’s WTO negotiator said Lamy would now have to assess whether there was any realistic hope of a breakthrough before the end of the year. Otherwise, a ministerial meeting would be meaningless.

“People can stomach risk, but not guaranteed failure,” Ambassador Roberto Azevedo said.

WTO Talks Hanging In Balance

December 7, 2008

As new texts for agriculture and non-agricultural market access have been circulated to WTO members in Geneva members are assessing the full import of last week’s bi-partisan letter from the Congressional leadership on the talks.

Unfortunately, the negotiating texts currently on the table would provide little if any new market access for US goods, and important advanced developing countries are demanding even further concessions from the US,” said a bipartisan letter from Charles Rangel, Max Baucus, Jim McCrery and Charles Grassley. Democrats Rangel and Baucus chair the Ways and Means and the Finance committees respectively, while McCrery and Grassley are the ranking Republican members.

“We see no tangible progress, and in fact believe that some of our trading partners have become even further entrenched in their unacceptable positions.”

“We strongly urge you not to allow the calendar to drive the negotiations through efforts to hastily schedule a ministerial meeting, without adequate groundwork having been laid.

“Developed and advanced developing countries must commit to provide meaningful new market access opportunities if Congress is to support a deal.’

“Achieving the necessary flexibility from our trading partners could require new thinking … and our negotiators should be given time to explore such options. Otherwise, the likely result will be a deal that Congress cannot support – an outcome that would be detrimental to US farmers, workers and firms, the global economy, and the WTO itself.”

While not fatal this letter does make it essential that the texts that have just been circulated signal both a realistic prospect of agreement being possible, and forward movement.  Unless Lamy gets a clear signal from Key WTO members that both pre-conditions are met he will not go ahead with his plans for a Ministerial meeting from 13-15 December.

I will monitor reactions closely over the next couple of days.  A quick glance suggests that the texts do still have some work required before agreement is possible.  And we should not forget the importance of services to achieving an outcome that satisfies all concerns.