ITC World Trade Net

NY Times urges liberalization of agriculture markets

In a lengthy, hard-hitting editorial today the NY Times makes the case for global agricultural trade liberalization

" By rigging the global trade game against farmers in developing nations, Europe, the United States and Japan are essentially kicking aside the development ladder for some of the world's most desperate people. This is morally depraved. By our actions, we are harvesting poverty around the world. "

NYTIMES

Working toward agreement

A round-up of news items from the past 10 days shows the rising volume (and pitch) of comment on the Ministerial Meeting. Services and agriculture are the focus of this selection.

Agriculture

The Economist newspaper, like many others, asks how the July EU reforms to future agricultural policy will affect the prospects for agreement at Cancún

By delivering reform, however compromised, and by reducing the trade distortions caused by the CAP, the EU seems to have won some goodwill in Geneva. Yet this could be squandered if the Europeans start using their limited reforms to demand too much from others.

The Economist

There is little doubt that Agriculture remains central to the hopes of developing and least-developing countries for the Doha round. Will those hopes be realized_

African countries were cajoled to participate in the Doha Round. They were assured that there would be trade concessions in agriculture. Instead of getting the developed countries to dismantle their agricultural subsidies and open their markets despite such promises, there are no visible signs of progress at least for now. There have been restrictions on products from Africa. Following the Doha round, trade negotiators were expected to conclude negotiations by March 31, 2003. From all indications, negotiations have been halted with respect to agriculture. Since the prospect for reform in agriculture appears bleak, the faith of many African countries in WTO continues to wane. The agreement is tacitly seen to promote the interests of rich countries member of WTO.

All Africa

Europe contends that it is making major strides, nonetheless, towards meeting the concerns of developing countries on Agriculture in particular. The European Parliament has given its opinion to the EU negotiators, stressing...

... the need to reduce export support and domestic support, to increase market access and take into account non-trade concerns. Calls on developed countries, in particular the USA and countries of the Cairns Group to show flexibility and match EU's commitments

EuropaWorld

Many commentators recall the delays and compromises that characterized the Uruguay Round and warn that similar circumstances may result in a similar outcome.

With EU members not yielding much ground on the Common Agriculture Programme (CAP) last month, Indian officials and trade experts fear a deal between the US and the EU will put the issue of agricultural subsidies on the backburner and market access will become the sole agenda.

New Delhi Business Standard

Services

Although there are fewer controversies, this time, about the negotiations on trade in services, suspicions remain in some developing countries that developed country exporters are targeting the supply of public services.

Labor Assistant Secretary Maria Anthonette Allones said in her presentation during the Philippine Business Forum Towards the Cancun Ministerial meeting that the government would resist further liberalization that require amendments to the Constitution or legislation of new laws

ABS-CBN.COM

In Africa, too, trade Ministers of the African Union are wary about the potential for services obligations to limit their scope to manage services markets in ways they consider helpful to development.

Ministers called for due respect for their rights to regulate trade in services and liberalise according to their national policy objectives. At the same time they emphasised the respect to the principle of progressive liberalisation subject to the principle of flexibility, as well as the need to promote and facilitate the participation of African countries in international trade in services.

InterPress

Meanwhile the negotiators are struggling to find services negotiating modalities that provide specifically for the needs of LDCs including, for example, in the use of services safeguards.

During its meeting on 4 July, the WTO Council for Trade in Services (CTS) negotiating session considered, inter alia, new informal documents on modalities for the special treatment of Least Developed Countries (LDCs) in the current services negotiations. Prepared by the WTO Secretariat and the US, the documents ... propose alternative language on LDC modalities, following a proposal made in May by Zambia on behalf of the LDC group of countries

ICTSD

Harsh judgements

The stumbling progress over the past two years has prompted skeptical appraisals of the fairness of the system for developing countries

[The Mauritian Minister of Industry and Trade] reminded ministers that 19 months after the hope and optimism evoked with the launch at Doha of trade negotiations under the title of ”Development Round”, the development agenda is stranded in missed deadlines. The negotiations have failed to yield ”balanced outcomes in which the interests of all, particularly those who are in most need are truly attended/

IPSNews

In other quarters, old-fashioned, anti-trade rhetoric is receiving more attention as the WTO negotiators struggle to live up to the promises of the Doha mandate. For example, in this report of Civil Society conference in Ghana ...

[An NGO activist] stressed that there is no compulsion for African Governments to make requests, respond to requests or make offers. He said it is the responsibility of African Ministers to ensure that the outcomes of discussions in Cancun and beyond do not undermine the htmlirations of African peoples and regional economic integration.

Accra Mail (via All Africa)

Perspective

Finally (for now), an article in the Bangladesh "Daily Star" newspaper brings an important sense of perspective, based on experience, to the preparations for Cancún

For Cancun to succeed, many impediments will need to be removed. Nonetheless, one should not lose heart. The Cancun Ministerial, it must be understood should not be seen as an end in itself, but simply as part of the Doha Round work programme. Cancun will allow Ministers to take stock of the last two years and establish 'roadmaps' for the remaining part of the Round. One should remember that the purpose of the Doha Round is to use it to help stabilise the global economy. To achieve this, all important groups and some countries will have to work together, particularly the EU and the USA (who have a significant share of global trade and good understanding of world trade issues).

Daily Star (Mhmd. Zamir)

Agriculture Chairman points to matters for decision

In his 3 July report to the Trade Negotiations Committee, Ambassador Stuart Harbinson detailed the matters that he believes need Ministerial decision in Cancún

"As matters stand, collective guidance and decisions are required on a number of key issues in order to clear the way for reaching this goal. In the following paragraphs, an attempt is made to highlight the issues and questions which, in the Chairman's view, are the most urgent. "

WTO

The brief report is reproduced on the WTO website. It provides an excellent guide to outstanding issues on which Network members may want to offer some advice to their governments. In particular, the report highlights the important difference of views among WTO members on market access and related issues.

Africans protest cotton subsidies

The Presidents of Burkina Faso and Mali write to the New York Times.

" In the period from 2001 to 2002, America's 25,000 cotton farmers received more in subsidies — some $3 billion — than the entire economic output of Burkina Faso, where two million people depend on cotton. "

The Presidents ask the USA to cut cotton production subsidies that they say lead to overproduction, distort market prices, and cause poverty across Africa.

"Our demand is simple: apply free trade rules not only to those products that are of interest to the rich and powerful, but also to those products where poor countries have a proven comparative advantage."

NYTIMES

Slides on market access for Non-agricultural products

A 'companion' to the slides on the negotations on agriculture (available for download.. see below).

This presentation, which I gave to an ESCAP regional meeting in Bangkok last week, is available for download as a 'zipped' file (248kb) of slides you can view in your web browser.

Click here to download the slides

The slides show the impact of trade barriers on developing country trade in industrial and minerals products with special reference to the effect of barriers in other developing countries (which tend to be higher than those in developed country markets). The presentation also looks at the value of uniateral-preferences ('GSP') and the impact of liberalization on fiscal policies in developing countries.

I'd really like to have your comments and feedback on this presentation. Please let me know how I could improve it for your use in your country networks.

Agricultural trade presentation available

Would you like a copy of the presentation that I made at Dhaka on trade in agriculture_

A copy of the presentation that you can view in your web browser is available here on this site.

You'll need to run the downloaded file (275kb) through your 'unzip' program. Inside the folder named 'agriculture_slideshow' you'll find a file named 'index.html'. Just click.

Click to download the slideshow files

Bangladesh business leaders' objectives for Cancun

The Bangladesh business community last week set out it's long-term trade objectives as part of its preparations for the Cancun meeting. A press release from the Dhaka Chamber of Commerce, which organized the business leaders meeting, is available here.

I had the priviledge, last week, of once more meeting with Bangladesh business during the LDC Ministerial Meeting held in Dhaka on 1-3 June.Silencer Mapurunga, ITC Senior Advisor in the World Trade Net program, John Clark from DG Trade in the European Commission and I were invited to address the meeting and to engage in a dialogue with them afterwards.

Among the concerns listed by the business leaders:

the lack of transparency of rules of origin (particularly in the case of preferrential access to markets)
need for assistance in meeting TBT and SPS standards
improved market access for LDCs including a moratorium on anti-dumping actions
support for post-Cancun negotiation on Trade Facilitation, Investment and Competition policy where these negotiations offer improvements in opportunities for least-developed countries

Please give some thought to whether you agree with the Banladesh business community on the priorities for the Cancún meeting and let us all have your thoughts in the discussion forum.

The effect of non-reciprocal trade preferences

There's been a long-standing debate about the value to developing countries of the non-reciprocal preferences available under the GSP schemes of many industrialized countries.

The approaching decision on MFN market access improvements as part of the Doha Development Agenda is likely to provoke still further debate about the continuing value of the (eroded) preference margins to beneficiaries.

There have been two broad lines of concern about "GSP" preferences.

The preferences offer a 'Faustian' bargain to beneficiaries because they tend to be reduced or withdrawn as the beneficiary becomes competitive in the markets in which preference has been granted. In other words, some preferences are available only as long as beneficiaries make little or no use of them.

The impact on economic policies in the beneficiary country: do the preferences, in fact, contribute to an environment that leads to accelerated development_ Even before the GSP was authorized for the first time (by a waiver) in the GATT, the trade economist Harry Johnson pointed out that preferences on access would not help development if developing countries maintained policies of import substitution in those industries whose outputs depended on preferences for export market access.

click image for a full-sized version

Now there is futher support for the view that GSP preferences actually work against trade liberalization policies in developing countries. Two World Bank economists, using a large database of trade flows for the period 1976-2000 have reported (.pdf file: 387kb -- rather technical) the results of an econometric experiment which demonsrates that countries that are 'dropped' from GSP preference schemes in the USA respond by reducing their own trade barriers.

The economic data don't tell us the reason for this change in policies when a country loses GSP preferences. But a plausible hypothesis has been around for some time. Governments in developing countries, as everywhere else, make trade policy decisions under pressure from lobbyists for both exporting and import-competing industries. While the preferences are in place, the exporting industries tend to be less demanding, leaving advocacy to the import-competing industries who tend to seek higher import protection. Once the preferences are lost, the exporters want a better deal - including lower input costs at home. Reduced protection from imports usually means more competitive exports.

EU-US dispute on GMO crops

The temperature is rising in the dispute between the EU and the USA over the alleged EU 'moratorium' on imports of US soybeans and corn that 'may contain GMOs' [genetically modified organisms]. President Bush, on his way to a summit in Europe, accused the EU of jeopardizing food programs in Africa by spreading what he considers unnecessary concerns about 'bio-crops'.

There are some economically important issues in this dispute and some tricky questions for the WTO to sort out. It's well worth following.

Here's a useful background piece from the Guardian newspaper in January 2003 that summarizes the issues in the current dispute.

Here's a robust response from the EU Commission to President Bush which says that the 'moratorium' claims are not accurate and that the EU is moving rapidly to creating WTO-consistent legislation that will authorize the use of GM crops in appropriate circumstances. (The Commission press release contains some very useful links and data on the extent of GM production and GM grains trade.)

Southern African countries, whose access to the EU market for their grains exports may depend on maintaining non-GM production technologies, face some particularly difficult choices. The Government of Zambia recently decided to maintain what it considers a 'precautionary' ban on the use of GM technologies (from The Post, Lusaka).

Although the Doha Deveopment Agenda does not contain any mandate specifically related to GMOs, it directs the Committe on Trade and Envionment to consider the impact of environmental measures on market access and to negotiate an agreement clarifying the relationship of WTO and the Mulitlateral Environment Agreements (MEAs). One area of potential conflict between WTO and the MEAs is the specific provision in the Cartagena Protocol of the UN Convention on Biological Diversity for a 'precautionary' approach to trade in 'live modified organisms' (effectively, GMOs). The Cartagena Protocol has not yet entered into force: it needs 50 states adhering to its provisions. Tanzania recently became the 48th member.

In order to help World Trade Net members consider the trade impact -- and by extension the business implications -- of the GMO issue, I have summarized the key results of an excellent paper produced for the World Bank 'standards' project on GMOs, trade policy and welfare.

For more information on the table below and the economic investigations in the World Bank study, please see the story on this site.

Equivalent Variations
($US million pa)

Country	No restrictions^	Trade Bans in EU*	Consumer Preferences (EU)**
North America	2,624	2,299	2,554
Southern Cone	826	663	785
China	839	804	834
India	1,265	1,277	1,267
South Africa	35	38	35
Western Europe	2,010	-4,334	715
sub-Saharan Africa	-9	42	-5
Other high-income	1,186	1,371	1,233
Other developing and Transition	1,085	1,258	1,085
World	9,859	3,419	8,503

(^) All regions grow GMO maize, oilseeds: no import restrictions
(*)EU bans imports of food that 'may contain GMO'
(**) No import restrictions, but 25% of EU consumers choose not to buy grains or oilseeds that 'may contain GMOs' from any source

Source: "GMO's, Trade Policy and Welfare...", Nielsen and Anderson

Russian accession to WTO delayed

A fairly detailed report of the negotiations from the Russian press .

"The Russian Ministry for Economic Development and Trade has confirmed that there is no chance of Russia's accession to the WTO this year. At the same time officials did not rule out entry in 2004. So far, the WTO member-states and Russia have failed to eliminate disagreements on issues such as pricing polices for the energy sector and agriculture, as well as currency control legislation."

Gazeta

The impact of the Harbinson proposals

Over the next few months, as World Trade Net networks prepare for the Cancún meeting, I will try to provide some accessible reference material that will help you to sort out the business implications of the proposals being considered by government negotiators.

The Danish Research Institute of Food Economics has published a very interesting analysis of the Harbinson 'compromise' proposals for the Agriculture Agreement. The Institute has used a standard general equilibrium trade model to estimate the impact of the proposals on particular commodity groups and countries.

Overall, the size and distribution of the impacts may surprise you. Those countries with the highest level of protection see the greatest boost to economic welfare (roughly speaking, the same as 'consumer buying power') because they benefit the most from liberalizing their own highly protectionist barriers.

Every country sees an increase in GDP, but in some countries -- particularly developing countries -- the 'terms of trade' (the cost of imports measured in exports for any country) results are negative. The authors point out, however, that this would not matter if there were a 'compensation' mechanism:

" ... The simulation illustrates that the developed countries such as the EU and the United States could compensate fully the developing countries for lost welfare and still be better off if such a step combining trade liberalisation and de velopment aid was initiated. The welfare losses in the least developing countries are relatively minor (some 200-250 million US$) as compared to the combined EU-US gain of more than 40 billion US-$. i.e. there is in principle clearly an economic possibility to compensate potential losers in such a trade liberalisation scenario. Also, combining such initiatives with domestic reforms in the developing countries would clearly modify or even dominate the possible negative impacts of changes in world market prices and the erosion of trade preferences."

Among the commodity results of interest:

Paddy rice exports up 50.3%
Vegetables, fruits and nuts up 17.2%
Oilseeds exports up 20.2%
Processed rice exports up 66.6%
Beverages and tobacco up 29.3%

The text of the report (a .pdf file) is here. At 1 mb it is rather large, but well worth it.

Biggest US businesses call for dramatic advances at Cancun

The Business Round Table is an association of CEOs of the largest US companies. In a statement sent to the recent G8 summit meeting it called for dramatic progress at the Cancún Ministerial meeting

"Trade liberalization of goods and services could create annual global income gains of up to $2.8 trillion by 2015 ... WTO Members have the responsibility to develop a bold proposal in the area of tariff reductions. Worldwide economic growth will suffer if the agreement falls short in this area, and this all will be placed in jeopardy if the Doha Round stalls.
Governments must overcome domestic political pressures and move forward boldly on market access to complete the Doha negotiations in 2005 ...The initial unity that was launched at Doha is now fractured by the stresses of a weak global economy."

Business Round Table

A summary of the BRT demands for liberalization is contained on their site

Saharan countries seek an end to cotton subsidies

Benin, Chad, Burkina Faso and Mali have together proposed that US domestic subsidies on cotton be scrapped under an agreement that they want to see put in place at the Cancún meeting. They are reportedly seeking compensation for losses that they claim are due to the effect of the US subsidies on the world cotton price.

According to the BBC Online...

"The US, which is a net exporter of cotton, gave their cotton farmers $3.9bn worth of subsidies last financial year, three times more than the aid it gives to Africa.
The subsidies have led to massive over-production of cotton, causing cotton crops to halve in value since the mid-1990s."

BBC

EU submits an offer on Services trade to WTO

The EU is the world's biggest services market. The offer has been made as part of the services negotiations in the Doha round.

In announcing the offer (available for download here) the Trade Commissioner, Pascal Lamy, said that it was designed specifically to respond to developing country requests on "Mode 4" access -- that is, for the movement of personnel.

"The EU offer goes far in meeting developing countries' requests, who do have significant export interests in services, as has been shown by the requests they have addressed to the EU. This is the case with the temporary entry of foreigners into the EU to provide services (so-called Mode 4), where the EU offers to widen the scope of sectors covered and the duration of the stay in the EU. This is in response to the requests received from developing countries and a clear sign of the EU's commitment to a development round."

EU Commission

The EU document contains conditional offers of expanded acces for telecoms, financial services, business and professional services, distribution, environmental services, construction, news agencies and tourism.

Supachai urges action

Speaking at the OECD Trade Committee meeting in Paris, the WTO Director General told trade ministers that the time had come to give their delegations instructions to reach agreement on market access issues. He said he had the impression that some were 'dragging their feet', particularly on agriculture.

Despite his concerns about lack of progress, Supachai was nevertheless hopeful about eventual success:

"From all my contacts I have the impression that governments remain committed to finishing the Round by the agreed deadline of January 1, 2005"

Daily Times (Pakistan)

Food aid, GMOs and trade

The European Union is revising it's rules on the traceability and labeling of genetically modified organisms (GMO's) in food, including imported food. The new, more restrictive regulations are very likely to lead to continuing conflicts over trade in these products across the Atlantic.

But food markets are, of course, global. Few differences can be confined to a bilateral context.

Indeed, the main significance of the current U.S.-Europe dispute over GMOs may be that agriculture ministers the world over are watching it very carefully. Zambia, Zimbabwe, Mozambique and Malawi -- African countries on the edge of famine -- all made headlines last August when they refused U.S. gifts of surplus GM corn. At first blush it seemed that their refusal was nonsensical; surely the risk of starvation exceeded the risk of consuming GM food. But as African leaders pointed out, if their farmers had planted kernels of the U.S. corn, the gift ultimately might have destroyed their ability to export food to European or Japanese markets. Only when the United States finally agreed to mill the corn before sending it did the shipments -- except to Zambia -- go through.

American Prospect