Wally Tyner

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PROSPECTS FOR INTERNATIONAL TRADE AGREEMENTS AND
THE WTO NEGOTIATIONS

• Wally Tyner

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• Drivers of Globalization

• Information and communication technology
• Trade in services
• Electronic exchange
• Internationalization of financial markets
• Trade is 3tri./yr. finance is 3tri./day
• FDI more important than trade
• Increased trade and economic interdependence
• Read Friedmans The World is Flat

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• GATT Round

• Began in 1986 in Uruguay, so it is sometimes
  called the Uruguay round
• Concluded with an agreement 8 years later in
  1994.
• Agreement signed in Marrakech, Morocco
• Agriculture was included for the first time in an
  international trade agreement
• WTO created in 1995 as one result of the
  negotiations

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• Fundamental GATT Principles

• Most favored nation (MFN) treatment
• Equal treatment of imported and domestic goods
• Reduction of trade barriers
• Tariffication of non-tariff barriers

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• Additional GATT Principles

• Transparency
• Consultation
• Dispute resolution
• Fair trade/competition
• Safeguard measures

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• GATT Agreement on Agriculture Market Access

• Non-tariff measures replaced with tariffs
• Tariffs reduced 36 over six years by developed
  countries
• Developing country tariffs reduced 24 percent
  over ten years
• Least developed countries not required to reduce
  tariffs
• Quotas to be changed to tariff-rate quotas and
  expanded to at least 5 percent of market over the
  implementation period

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• GATT Agreement on Agriculture Domestic Support

• Domestic support classified in three categories
• Green box domestic support measures that have,
  at most, a minimal impact on trade such as
  research, extension, infrastructure, and
  decoupled support payments
• Blue box direct payments under production
  limiting programs
• Amber box all support provided on a product
  specific basis or that links the level of the
  payment to amount or value of production

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• GATT Agreement on Agriculture Domestic Support

• Green box and blue box subsidies not required to
  be reduced
• Other measures that do not exceed 5 of the crop
  value for developed countries or 10 for
  developing countries are permitted
• Total support not excluded above must be reduced
  20 for developed countries and 13.3 for
  developing countries
• Least developed countries not required to make
  reductions

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Representative Farm in Central France Income
from the Market and Direct Payments.
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Government Subsidy Varies with Market Price
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(No Transcript)
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• GATT Agreement on Agriculture Export Subsidies

• Export subsidies must be reduced 36 below the
  1986-90 base period over six years
• The quantity of subsidized exports must be
  reduced 21 over the same period
• Developing country reductions are 2/3 those
  required of developed countries and over a ten
  year period

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• GATT Agreement on Agriculture Sanitary and
  Phytosanitary

• Members encouraged to base sanitary and
  phytosanitary measures on international standards
• Higher standards permitted if there is a
  scientific justification or if justified on risk
  assessment

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• GATT Agreement on Textiles

• General phasing in of tariff based protection of
  textiles and clothing
• The Multi-Fiber Agreement on Textiles expires
  completely on January 1, 2005, and all protection
  is tariff based.
• Certain safeguard measures permitted in the case
  of a surge of imports

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• Major GATT Problems

• Dirty tariffication
• Tariff-rate quotas
• State trading
• Lack of transparency

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• WTO Round

• Seattle a rough start (1999)
• Doha what happened? (2001)
• Cancun what happened? (2003)
• What the US wants
• What Europe wants
• What developing countries want

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• WTO BACKGROUND

• This round is known as the Millennium Round, the
  Doha Round, and the Development Round
• Political environment there are now 148 WTO
  members about twice the GATT round
• Progress on regional agreements
• Countries negotiate only what they would do anyway

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• Major WTO Negotiation Issues

• Increased market access
• SPS regulations
• Export subsidies
• Domestic agricultural subsidies
• Labor and environmental issues

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• Major WTO Negotiation Issues

• State trading
• Intellectual property rights
• Biotechnology
• Transparency and consultation

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• Anti-dumping Levies

• Imposition of anti-dumping duty requires
• demonstration of dumped imports
• material injury to a domestic industry
• causal link between dumped imports and the injury
• Calculation procedures too flexible
• Developing countries could gain concessions in
  this area

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• SPS Regulations as Barriers

• Most important perceived trade barrier
• Greatest problem with EU
• Transparency and consultation
• Exporter quality control a must

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• Export Subsidies

• Most remaining export subsidies are European, and
  they have agreed to eliminate export subsidies if
  the US eliminates export credits and marketing
  assistance
• U.S. and Cairns group advocate eliminating all
  export subsidies
• Developing countries have insisted on elimination
  of export subsidies

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• Domestic Subsidies

• Amber box includes coupled incentives
• Blue box includes payments in production limiting
  programs
• Green box includes decoupled payments as well as
  many other indirect ag support measures
• The July 2004 framework agreement maintains these
  categories but includes US counter-cyclical
  payments in blue box

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• Labor and Environmental Issues

• Considerable pressure in the US and other
  developed countries to include these issues
• Means a change from product to process
• Private sector ahead of governments
• Doubtful developing countries will concede to any
  significant process controls in WTO

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• State Trading

• GATT agreement places some restrictions on STEs
• STEs handle 1/3 of exports and up to 1/2 of
  imports for wheat
• STEs perceived as a trade barrier and are on WTO
  agenda

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• Intellectual Property Rights

• IPR protections should have been in place by
  January 2000 with some exceptions
• IPR protection is very important to increasing
  the rate of investment and growth

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• Biotechnology and GMO Issues

• Closely related to IPRs and SPS
• Very contentious issues dividing the US/Canada
  and EU
• In some ways, private sector is ahead of
  governments

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• Transparency and Consultation

• Common perception that trade rules are far from
  transparent
• Complaints of unilateral action without
  consultation
• Requirement that all rules and changes be posted
  on a WWW site might help

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• WTO Round

• What are the prospects?
• What about regional agreements?
• What about private sector driven trade rules?
• What does it mean for the food and ag system?

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What do developing countries want from the Doha
round?

• Reduction or elimination of OECD subsidies
• Increased market access to OECD markets
• Reduced tariffs and increased quotas
• Elimination of special restrictions such as
  import windows, minimum import prices, etc.
• Elimination of non-tariff barriers such as SPS,
  and labeling and packaging rules
• Elimination of tariff escalation

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What do developed countries want from the Doha
round?

• Varies significantly among the countries
• Japan and the EU insist on excluding a certain
  number of sensitive products
• US claims to want free trade, but our actions do
  not match our words
• Protection of intellectual property rights is
  important

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US Proposal this week

• Market access phase 1 (5 years)
• Developed countries cut tariffs 55-90, with the
  highest cuts for the highest tariffs
• Tariff rate cap of 75
• Up to 1 of tariff lines be permitted to have
  sensitive product treatment with TRQs
• Developing countries have somewhat lower cuts and
  longer phase-in periods
• All trade distortions eliminated in 10 years

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US Proposal this week

• Domestic support
• US cuts amber box 60 and 83 for Japan and the
  EU
• This difference is called harmonization because
  support is now higher in Japan and the EU
• Blue box be limited to 2.5 of the value of ag
  production instead of 5
• No change in green box

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EU Proposals this week

• Domestic support
• 70 cut in the amber box supports
• Reduction in de minimus support, possibly 65
• Possible cuts in blue box
• Market access
• Four tariff bands with higher cuts in higher
  tariffs
• Minimum recourse to sensitive product category
• End all export subsidies

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Oxfam Reaction to US Proposal

• US says 60 reduction in amber box, but the
  reality is only about 2 because of the space
  between payment ceilings and actual payments
• Movement of counter-cyclical payments to blue box
  means US could actually increase payments