Trading Ideas

an lang=”EN-GB”>By Carlos Perez del Castillo

Cross-posted at GMF 

Significant progress occurred during the July negotiations in Geneva. However, many differences remained, both within the issues included in the Lamy package and in other areas that were never seriously tackled, such as cotton and geographical indications. As a result, I believe that it is an over- simplification to place sole responsibility on the Special Safeguard Mechanism (SSM) for derailing the negotiations. If that issue had been resolved, I can think of a number of other points in both the agriculture and NAMA negotiations that would have subsequently threatened to prevent an agreement on the modalities.

At this juncture, I would like to voice my concern about the dramatic erosion of multilateralism. Close scrutiny of the texts produced by both the Ag and NAMA chairs reveals that there is very little multilateralism left in them. Efforts were constantly made to accommodate the interests, concerns and sensitivities of individual countries or groups of countries - both developed and developing.  Beyond the special and differential treatment for developing countries, particularly LDCs, small and vulnerable economies (SVEs) and recently acceded members (RAMs), the texts also introduce different treatments for a large number of other cases: the U.S. on domestic support; Switzerland and Norway on sensitive products; Venezuela, Mercosur and SADC countries in the NAMA text.

Equally worrisome are the multiple flexibilities that have been introduced in the market access pillar of the agriculture negotiations. The acceptance of sensitive products, special products, the Special Agricultural Safeguard (SSG), the SSM, and other provisions for exemptions will allow substantial deviations from the full application of the tariff reduction formula (up to two-thirds). This will seriously reduce and in many cases prevent the possibility of real market access.  Of even greater concern are the long term implications for agricultural market access embodied in such flexibilities. They are not temporal in nature and will likely become permanent features of the Agreement on Agriculture. As such, they are not in line with the long term interests of trade liberalization and fundamental agricultural reform.  Some people will defend this strategy as a pragmatic approach to help attain convergence among Members and finally a successful outcome. It may well be so, but, in my mind, the costs are too high.

Moreover, the approach chosen at the July Ministerial—to agree on modalities on Agriculture and NAMA first, and then to continue negotiations on other issues—seriously challenges the important concept of the “single undertaking.”  The benefit of a Round encompassing a wide range of members and sectors is the creation of trade-offs. The name of the game is to look for an overall balance in the wide context of the negotiations rather than in each sector or issue that is being negotiated.   While the concept of single undertaking remains “theoretically” alive in these negotiations, the reality is that Members have been looking for balances in each individual sector. Agriculture and NAMA are two prime examples.

• Continue reading or leave a comment...

2001, the year the Doha Development Round negotiations began, the average prices for rice, wheat, and corn were $4.43, $2.83, and $1.89 per bushel respectively.  By May 2008, these had climbed to $11.45, $9.48, and $4.73, leading some to argue that the Doha Round is simply no longer relevant in this new environment of higher prices.  As ministers gather in Geneva for what may well be the last attempt to reach a Doha Round conclusion this year, it is an opportune moment to examine these arguments:

Q: The WTO negotiations are about yesterday’s problems, namely how to address trade-distorting policies and overproduction in developed countries.  They are irrelevant since what we need today is more, not less, production.

A:  Increased production is indeed required, but is most important in developing countries, whose agricultural sectors have suffered from chronic underinvestment.  The best way to stimulate investment and production in these countries is to remove distortions, such as high tariffs and trade-distorting support in developed counties, which disadvantage producers in developing countries.  It would be shortsighted to argue that production incentives in developed countries need to remain in place.

Q:  If the Doha Round will not lead to a decrease in prices, why should we still worry about concluding it?

A:  It is true that the Doha Round will not lower prices in the short run. But it would be erroneous to focus solely on short-term efforts that reduce prices, since higher prices send an important signal that the world needs to increase production to meet growing demand.  A non-distorted trading regime will facilitate the required supply response, which will - in the long run - allow prices to even out.

Q:  Aren’t WTO members simply haggling over things that are no longer relevant in today’s price environment?

A:  Certainly, there is some truth to this.  It should be easy for the U.S. to agree to a $13 billion ceiling for overall trade-distorting support when actual outlays only total around $7-8 billion.  Likewise, it should be easy for the G-33 to agree to more substantial cuts to bound tariffs and less market access exceptions when applied tariffs have acutally been significantly reduced as a response to high food prices.

At the same time, however, we should not dismiss the importance of reducing the caps on allowable tariffs and levels of domestic support, as they will imply significant disciplines should prices decrease in the future.  As such, they send an important signal to agricultural investors and producers.

Q:  The Doha Round is about ensuring market access.  What really matters today is adequate supply.

A:  There is indeed a need for strengthened WTO rules on export restrections, which have increased concerns about inadequate food supplies, contributed to higher food prices, and hampered the procurement of food aid for needy countries.  The Doha Round should address the present imbalance between rights of exporters and importers.

• Continue reading or leave a comment...

As far as renewables are concerned the proposals provide for a fair distribution of efforts across Member States establishing national overall targets for each of them (GDP per capita being the main criterion). Three sectors are concerned: electricity, heating and cooling, and transport. Member States retain discretion as to the mix of these sectors except for transport where a minimum binding target of 10% in 2020 has to be achieved.Transport produces nearly one-third of CO₂ emissions presenting the most rapid increase of all sectors of the economy. Moreover, the transport sector relies heavily on imported oil. The objectives set in the biofuel directive of 2003 (2% in 2005 and 5.75% in 2010) are far from being met. The biofuel share in 2005 was less than 1%.