Slide1: Wally Tyner PROSPECTS FOR INTERNATIONAL TRADE AGREEMENTS AND THE WTO NEGOTIATIONS


Slide2: 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 Friedman’s – The World is Flat


Slide3: 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


Slide4: Fundamental GATT Principles Most favored nation (MFN) treatment Equal treatment of imported and domestic goods Reduction of trade barriers Tariffication of non-tariff barriers


Slide5: Additional GATT Principles Transparency Consultation Dispute resolution Fair trade/competition Safeguard measures


Slide6: 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


Slide7: 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


Slide8: 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


Representative Farm in Central France – Income from the “Market” and Direct Payments.: Representative Farm in Central France – Income from the “Market” and Direct Payments.


Slide10: Government Subsidy Varies with Market Price


Slide12: 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


Slide13: 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


Slide14: 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


Slide15: Major GATT Problems Dirty tariffication Tariff-rate quotas State trading Lack of transparency


Slide16: 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


Slide17: 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


Slide18: Major WTO Negotiation Issues Increased market access SPS regulations Export subsidies Domestic agricultural subsidies Labor and environmental issues


Slide19: Major WTO Negotiation Issues State trading Intellectual property rights Biotechnology Transparency and consultation


Slide20: 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


Slide21: SPS Regulations as Barriers Most important perceived trade barrier Greatest problem with EU Transparency and consultation Exporter quality control a must


Slide22: 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


Slide23: 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


Slide24: 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


Slide25: 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


Slide26: 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


Slide27: 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


Slide28: 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


Slide29: 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?


What do developing countries want from the Doha round?: 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


What do developed countries want from the Doha round?: 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


US Proposal this week: 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


US Proposal this week: 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


EU Proposals this week: 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


Oxfam Reaction to US Proposal: 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