The Politics of International Economic Relations: Session 628 November 2006: The Politics of International Economic Relations: Session 6 28 November 2006


Evolution of the Global Trading Regime: Evolution of the Global Trading Regime Trade Relations in the 19th century, WW1 and interwar period (Creation the Bretton Woods Institutions) ITO and what was left over Early GATT rounds Kennedy and Tokyo Round Uruguay Round DDA


Trading arrangements prior GATT: Trading arrangements prior GATT Trade Relations in the 19th century Repeal of Corn Laws 1848 Cobden-Chevalier Treaty 1860 After 1870 return of protectionism Inter-war period World Economic Conference 1927 Smoot-Hawley tariff act 1930 World Economic Conference 1933 Reciprocal Trade Agreements Act 1934 MFN (most-favoured-nation)


Creation the Bretton Woods Institutions: Creation the Bretton Woods Institutions July 1944 Three pillars: World Bank, IMF and ITO The Conference proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for international trade


ITO and what was left over: ITO and what was left over November 1945: US Delegation at ECOSOC requests extension of BW Institutions UN Conference on Trade and Employment (Havana Conference) 18 states (w/o Soviet Union) US-Proposal "For Expansion of World Trade and Employment" of 1945, comments by Brazil, India and UK London Conference 1946 - Four results: Concessions in GATT Commodity agreements Statutes of an international organization (ITO) Decoupling from UN/ECOSOC


ITO and what was left over: ITO and what was left over Conferences in Lake Success and Geneva (April 47) Havana Charter (Nov. 47- March 48) 54 states signed Havana Charter Objectives and Content Full employment, balance of payments, safeguards, inflation Reconstruction, technology transfer, private investment MFN, national treatment, NTBs, subsidies and dumping, state trading, regionalism Competition policy / Restrictive business practices Regulating commodity markets ITO: Structure, Decision-Making


ITO and what was left over: ITO and what was left over The death of ITO Many exceptions (e.g. UK Commonwealth Preferences) Protectionism in the US US Senate (“strange bedfellows”), 1950 Truman What was left: GATT as an interim arrangement 23 GATT members


Early GATT rounds: Early GATT rounds 1st Round 1947 (Geneva) 23 Participants US-negotiators mandated to lower tariffs up to 50%. Caveats: Commonwealth preferences, existing bilateral agreements with the US Mechanisms: bilateral negotiations, reciprocity 45‘000 products / tariff concessions, covering 50% of world trade Rounds 2-4 (Annecy, Torquay, Geneva) New Members Slow Progress US signals „carrots“ Round 4: European Communities (first appearance)


Early GATT rounds: Early GATT rounds 5th Round (Dillon-Round) (1961/62) US-Under Secretary of State proposes 20% tariff reduction US fears negative effects of EC integration Objectives and Results: Art. 24 GATT (compensation negotiations) Tariff negotiations resulting in only 1% reductions


Kennedy Round (64-67): Kennedy Round (64-67) “test of the willingness of nations to avoid a breakdown (Winham)” Sputnik and Growth Rates (EC: 5%, US 3-4%) UK: EC Accession demand (1961) US: "Trade Expansion Act" 1962: E.g. competence transfer (Congress to President) tariff cuts of 50% over 5 years. EC as a single unit Objectives: Agricultural markets, CAP NTBs Outcome: Most successful in terms of tariff cuts First anti-dumping code CH joins


Tokyo Round (73-79): Tokyo Round (73-79) EC enlargement, FTAs with EFTA Growing Protectionism (chaos in the monetary system), export-led growth in Japan, NIEs Objectives: Tariff cuts NTBs Integrating agricultural produce (25% of US exports) Outcomes: Tariff cuts (controversial „Swiss formula“ – proportional to the size) Legal codes (customs valuation, import licensing, TBTs, subsidies and countervailing duties, government procurement and anti-dumping procedures) / safeguard clause code failed Voluntary participation as 2/3 majority was not found Enabling clause for developing countries


Uruguay Round (86-94) : Uruguay Round (86-94) Context World Economy in Recession /2nd oil crisis 1981/2 NTBs and export subsidies Bilateralism vs. Multilateralism In the run-up to Punta del Este: 1982 Geneva Ministerial Conference Four years preparatory work US-EC rivalry DC: Market Access (tropical products, textiles, agriculture) 1985 Fritz Leutwiler Report (mandated by GATT-DG Arthur Dunkel) Incorporation Agriculture, Textiles, Services in GATT, Amelioration of subsidy codes


Uruguay Round : Uruguay Round Punta del Este (Uruguay): 1986 The grand bargain („Ostry“) Services/IPRs/Investment vs. agriculture/textiles 15 negotiation group / 4 categories: Market access, reform of GATT rules, strengthen GATT as an institution, new issues


Uruguay Round: Negotiations : Uruguay Round: Negotiations Agenda-Setting Single Package/Undertaking 1988 Montreal (Mid Term Review) Brussels 1990 Blair House-Agreement (US-EC) The Great Power Game Creation of a new IGO


Uruguay Round Outcome : Uruguay Round Outcome New Dispute Settlement System Trade Policy Review Mechanism Supranational Organization Bretton-Woods is finally complete


Uruguay Round Outcome : Uruguay Round Outcome Pillar one: Agriculture (Tariffication) Multi-fibre agreement (ATC) Investments (TRIMS) Plurilateral codes turns into agreement Subsidies and countervailing measures Anti-Dumping Pillar two: IPR (counterfeit goods, patents and copyrights) Pillar three: Services


Decision-making: Decision-making Rule-interpretation Panels, Appellate Body, decentralized sanctioning (suspension of concessions) Rule-making Consensus vs. majority voting Power in decision-making: market size, BATNA, coalitions, use of ideas? Imbalance?


Decision-making: Circles: Decision-making: Circles Concentric circles G2 G6 (US, EU, Brazil, India, Japan, Australia) Green rooms General Council


Slide20: USA G–1 Source: ICTSD, WTO, Wolfe 2006


Slide22: Governing World Trade: What has changed? The Uruguay-Round: a watershed? New issues: AoA, SPS, TBT, GATS, TRIPS, TRIMS The jewel in the crown: the new Dispute Settlement Mechanism A global organization Shifts: From the Club model to the Multistakeholder model From „embedded liberalism“ to „supranational intrusiveness“ From negative to positive integration From menu à la carte to single undertaking


Slide24: What is Doha all about? From a Millennium Round to a Development Round Trips-Health Issue Key Issues on the Doha Development Agenda (DDA) Special and Differential Treatment, Implementation-Related Issues Agriculture (in-built agenda) Market Access for Non-Agricultural Products (NAMA) Services (in-built agenda) WTO Rules DSU Singapore Issues (Trade Facilitation)


Slide25: Where do we stand? Hot topics: Agriculture, NAMA, Services, SDT The Ministerial Conference in Cancun (2003) The July 2004 Agreement Cotton Framework for negotiations on agriculture The Ministerial Conference in Hong Kong (2005):A4T Summer 2006 (“Round Suspended”)


Slide26: Prospects for the DDA? Pessimistic view: No overlap of interests Development meets Trade Diplomacy Development Round Expectations-Capacity Gap Strong BATNA of G6-members Optimistic view: Timing Learning to negotiate in a changed environment Experience in PTAs Historical reference...


Slide27: Seven key challenges for the WTO I: Transatlantic Partnership Of Mars and Venus... Joint Sponsors of the GATT/WTO regime G2 in Cancun: Lessons learned Multipolar Trade World


Slide28: Seven key challenges for the WTO II: New Bilateralism, new Regionalism: threat to Multilateralism? The spaghetti-bowl effect Structural power (e.g. BATNA)


Slide29: Seven key challenges for the WTO III: Legalization Bindingness/obligation of international trade law Effects of Legalization on other policy areas Effects of Legalization on domestic politics Effects of Legalization on WTO


Slide30: Seven key challenges for the WTO IV: Positive Integration/Elaboration of new standards From Coordination to Collaboration Collaboration game: Choosing from various equilibrium solutions (obstacles to cooperation) Harmonization/One size fits all approach single undertaking straight jacket


Slide31: Seven key challenges for the WTO V: Governing North-South relations Legacy of the “grand bargain” (Ostry) New powerful voices from the South (i.e. G20) „Remedies“? Special and differential treatment (a Gordian knot?) Aid for Trade Foster south-south trade (e.g. EU’s EPAs, BRICSAM negotiations)


Slide32: Seven key challenges for the WTO VI: New (and Old) Forms of Protectionism Disguised Protectionism (subsidies, antidumping, tax breaks) Ethic-Moral Protectionism (biotechnology, child labor) Cultural Protectionism (audiovisual services) Foreign Policy Protectionism (US: Helms-Burton, EU:GSP)


Slide33: Seven key challenges for the WTO VII: Reputation/Image?