Wednesday, July 13, 2005

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Progress for the Doha round?

Richard McGregor reports in the Financial Times about a potential breakthrough in the agricultural negotiations for the Doha round of world trade talks.

Sounds great, until you get to the nitty-gritty of the proposal:

The G20 proposal centres on a new five-tier tariff system for developed countries, setting uniform tariff cuts in each band, and also capping the maximum tax on imports at 100 per cent.

The plan offers greater leeway for developing countries, with a four-tiered system and a maximum tariff of 150 per cent. Mariann Fischer Boel, EU agriculture commissioner, said: “We welcome the G20 proposal on market access.”

Rob Portman, US trade representative, also backed the G20 plan as a potential basis for negotiations, saying: “The US is prepared to move, and move to the middle.”

The differences between the world's two largest trading blocs remain substantial, with the EU proposing a variation on the G20 plan to give it greater flexibility to resist sharp tariff cuts.

The EU is also demanding that the US put on the table a plan to reduce its domestic farm subsidies as part of any negotiating package, something that Mr Portman rejected yesterday as “not realistic”.

With only about two weeks to go before a framework is needed to allow time for the detailed and difficult negotiations ahead of Hong Kong, not everybody was optimistic about a genuine resolution to the impasse.

“I am pessimistic but I want to be proved wrong,” said Supachai Panitchpakdi,the WTO director-general.

“We have days. We don't have weeks.”

The G20 plan potentially faces stiff resistance from countries such as Japan, Taiwan and South Korea, which have tariffs on farm goods far higher than the caps set by the G20 proposal.

The scary thing is that what's proposed represents liberalization of a sort -- agriculture is so heavily protected and subsidized that it will take decades for complete liberalization.... if it ever happens.

Supachai is more pessimistic about the overall progress of the Doha round. Click here for his statement from last week. Key paragraphs:

It is true that some progress has been made in certain areas of the negotiations. But let us be clear: this progress is nowhere near sufficient in terms of our critical path to Hong Kong, and it is not being seen in the key issues which would help unblock progress across the board. Overall, there seems to be a renewed sense of blockage and frustration. We are also seeing a resurgence of sterile debate about process, rather than negotiations on substance.

I am afraid we have to face the facts. These negotiations are in trouble. Very little of the political support which has been shown at successive Ministerial meetings has been turned into concrete progress in the negotiating groups. Everyone has a generalized commitment to progress, but when it comes to the specifics, the familiar defensive positions take over.

posted by Dan on 07.13.05 at 10:47 AM


So far Portman, an Ohioan, has shown himself unable to negotiate anything with the Chinese, so I have no confidence he can negotiate anything positive with anyone.

His appointment was a bit ironic, seeing as how Ohio's economy is usually ranked 49th or 50th in the country.

I feel really good knowing George Bush, John Snow and Rob Portman are representing my economic interests (heavy sarcasm).

posted by: save_the_rustbelt on 07.13.05 at 10:47 AM [permalink]

I'm gonna put that on a pillow: "I am pessimistic, but I want to be proven wrong." Brill.

posted by: Kelli on 07.13.05 at 10:47 AM [permalink]


These talks are definitely an interesting and important topic that gets little news coverage. The meeting in Dalian this week is going to be crucial in reaching a "first approximation" for December's Hong Kong ministerial. As unfortunate as this proposal is, it is at least a sign of negotiation progress. I follow these negotiations closely for my company and our clients, and the ag negotiations have been tooth-and-nail on every topic. Other very contentious topics included the source of data use to translate specific tariffs into ad-valorem equivalents and the treatment and expansion of geographic indicators.

In my humble opinion, I think this is a smart move by the G-20. After the G-20 came out strong to scuttle to Cancun ministerial in 2003, there was much criticism about their lack of realistic ideas and proposals. This is a definite turn from that stance, and perhaps shows a bit of maturity in the G-20 coalition. For once, instead of just standing against something and for some ideal, they are working to propose a realistic proposal and bridge compromise.

The G-20 has just as much at stake with the global economy as the US, EU, Japan, etc. If a deal is not reached, and WTO talks continue to sputter, some liberalization is better than no liberalization. Would it be great if an agreement could be reached to completely lower ag tariffs globally? Sure, but it is hardly politically possible in the US, Japan, and EU right now. Unfortunately, this slow, jerky liberalization will have to be the way.

posted by: DPA on 07.13.05 at 10:47 AM [permalink]

Save the rustbelt,

As much as I dislike the Bush Admin and their trade policies, I don't think you can fault them much for how they have handled China. Last I checked, China is a sovereign country and it is entitled to run its own trade policy, monetary policy, and fiscal policy. I, personally, don't think that China's policies have drastically hurt us.

First, is the currency issue. Having the Yuan tied to ours is currently helping them, but it hurts them just as much when the dollar strengthens. If anyone is to really complain about China's policy, it should be most of the developing world that is losing jobs to China, not necessarily us. Even so, it keeps the products we purchase from China cheap. I guess it depends on how you look at the issue. If you are talking about a textile worker in South Carolina who has benefited from WTO-illegal subsidies for years, which has hurt workers in developing countries who could produce the same part of jeans more efficiently, then China's policy may hurt you. However, if you are the millions of Americans that purchase anything Chinese made, you are winning on this end. Additionally, the rapid growth of China has help to bolter world steel, aluminum, and other metal products. Tell me how that hurts the “rustbelt.”

Second, the Chinese have proven able and willing to negotiate. In fact, agreements were reached this week between the US and China regarding important intellectual property rights issues and agricultural market access issues:

Also, the media and media-hungry politicians make a big deal about the growing amount of trade with China. But if you actually look at official US trade statistics, while China’s exports to the US have grown 96% from 2000-2004, US exports to China have grown 115%. This trade relationship is not one that is completely benefiting one side.

Blaming the Bush administration for this “China” problem doesn’t really fit. A democratic president, unfortunately, couldn’t deal with them any better. Should we place an embargo on China or place high-punitive tariffs on Chinese goods? Well what happens with the billions, and probably trillions of dollars of our debt that China holds. You want to get the Bush admin on something, focus on the budget and fiscal issues. Our spending glut is what allows China (and others) to enable our deficit addiction. Focusing on China ignores some serious other structural problems in our economy.

Do we have some serious trade issues with China? Sure. They also have some pretty serious trade issues with US, as well as the rest of the world (cotton, steel, online gambling, Canadian cattle, etc). That is the nature of trade politics; everyone wants access to everyone’s market without having to potentially compete.

Save the Rustbelt, don’t work to save the rustbelt. Recycle it. Change the rustbelt to more effectively compete in the global economy. Change isn’t required, but neither is survival.

posted by: dpa on 07.13.05 at 10:47 AM [permalink]

I thought this rather discouraging, particularly Portman's response on US farm subsidies. This is a bit involved, but bear with me.

Measured by overall levels of protection -- including production and income subsidies, import barriers, and export subsidies -- American farm policy is much less protectionist than either Europe's or Japan's. Both Europe and Japan have much more formidable import barriers than we do (outside of a few commodities like peanuts and sugar), and both governments dole out large production subsidies as well. In that area, though, the gap between our policies and their is less increasing global market access by addressing import barriers only would require Europe and Japan to change their policies substantially, while the United States would not have to do very much.

Obviously, Europe and Japan won't be buying that. They will want us to reduce production/income subsidies and export subsidies as well. The problem with that concerns Congress. Farm policies, including export subsidies, are laid out in farm bills, comprehensive pieces of agricultural legislation passed every five years. The last one was enacted in 2002, so authorization for current programs won't expire until 2007.

2007 is too late for Doha, and would be even if the parties had not committed to getting an agreement framework worked out by December when they are to meet in Hong Kong. What I think Portman is suggesting is that not only will the administration not ask Congress to reopen the farm bill before 2007, it is unwilling to discuss in the Doha forum what it would ask Congress to give it.

This looks like a huge obstacle. It is incidentally also a problem per the WTO ruling against American cotton subsidies -- if Congress is allowed to wait until 2007 to take up a farm bill, WTO will have to authorize retaliatory measures against these.

I don't blame Portman. The fact is that he has very little leeway. Support for trade liberalization in Congress and elsewhere is well below its high-water mark of a few years ago; even the very modest CAFTA agreement may well be rejected in the House. The White House will not be willing to sail into that wind even if Portman is. If that weren't bad enough, taking up trade issues and reopening the farm bill would demand a great deal of work from a President who has not spent much time with these issues to date. So Portman has his hands tied.

posted by: Zathras on 07.13.05 at 10:47 AM [permalink]


I am trying to change the Rustbelt, but with our own government doing more harm than good I'm not optimistic.

The intellectual property agreement reminds me of being a teenage boy, "trust me and I'll respect you in the morning." Doesn't seem sincere to me.

None of this is simple, but even though I am a Repub I think the Bush administraation is a minor league team in a major league game.

Beyong that I think the Bushies are "truth impaired" and have sold out to large and narrow business interest. I wish the Dems had had a viable candiate for President in 2004.

Sorry, I'm pessimist.

posted by: save_the_rustbelt on 07.13.05 at 10:47 AM [permalink]


I feel you on the 2004 race. I am pretty much as frustrated with my party as it sounds like you are with this admin. The recent glimmer of hope for me is that Biden "announced" for 2008. He has a pretty strong background and record on a lot of trade, foreign policy, and business issues. You should check out his site:

posted by: DPA on 07.13.05 at 10:47 AM [permalink]

Save, I've seen your postings for many months now. You are clearly disappointed with the Bush admin's trade policies. What would you do overall about 'saving the rustbelt'? Just curious.(very curious)

posted by: Klug on 07.13.05 at 10:47 AM [permalink]


Odd, isn't it, how the sins of the Bush administration are putting the final nails in the coffin of SOME rust belt states, but not others, while non-Rust Belt states continue to thrive. What COULD be going on here? Hmm. Could it be lousy leadership on the STATE level? Could the unwillingness of Govs like Pataki, Granholm, et al to cut taxes, sweeten the pot for businesses to expand/move to their states, or in any way address the fundamental problems of their states have ANYTHING to do with it? Should Bush and Co. really get the blame on this?


Biden is considered by staunch Dems inside the beltway as a sincere but dull man who has, if memory serves, already put himself forth as the savior of the country at least once before. The response was...crickets chirping from the empty rafters. I'd look elsewhere if I were you.

posted by: Kelli on 07.13.05 at 10:47 AM [permalink]

The problem with rust-belt communities is that their economic health is usually tied to one industry, whether it be steel, automobiles, or something else. When the really big companies go bad (and they all seem to do so, eventually), it can wreck a community.

And big companies generally don't go bad all at once. Someone like Granholm in Michigan is in a tough spot -- can she offer Toyota the tax breaks it can get in Alabama, in order to put a new manufacturing plant in Michigan? Probably not, when GM and Ford are still her state's biggest businesses. These companies can hang on a long time, and it can be tough to predict their futures.

At any rate, our country is quite prepared to let communities die. Citizenship and republican self-government come a distant second to the Econ 101 textbook in the United States, even if the Doha round doesn't produce anything significant.

posted by: Andrew Steele on 07.13.05 at 10:47 AM [permalink]

The EU is also demanding that the US put on the table a plan to reduce its domestic farm subsidies as part of any negotiating package, something that Mr Portman rejected yesterday as “not realistic”.


How about "The US will reduce it's farm subsidies to EU levels on products where US levels are higher, if the EU will reduce it's farm subsidies to US levels on products where EU levels are higher"?

It takes a lot of chutzpah for EU reps to give US reps flak on farm subsidies.

posted by: rosignol on 07.13.05 at 10:47 AM [permalink]

It may be chutzpah, but it's no laughing matter when we're talking about something that could stall out the whole Doha round.

Look, American subsidies to the farm sector are overall lower than those of Europe and Japan because in a more liberal trade environment our farmers win and their farmers lose. That's not true for all American farmers everywhere, but the point is that we shouldn't be pursuing trade liberalization in agriculture because we want world peace. We should do it because it helps more of our farmers than it hurts. If the administration is not willing to do this because it fears the outcry from those farmers who are heavily subsidized now, and is resigned to letting Doha grind to a halt over agriculture, that is very bad news regardless of European attitudes.

posted by: Zathras on 07.13.05 at 10:47 AM [permalink]


We have not had great leadership at the state level, especially here in Ohio, but the Clinton/Bush idea of allowing manufacturing to be replaced with "high value service jobs" is a crock and a failure.

If the feds are going to encourage "creative destruction" in Ohio so Virginia and California can be more prosperous, then it seems to me the feds have some responsibility to mitigate the damage.

(heavy irony, the Bush administration has done more for the Blue states, plus Texas and Florida, than for the Red states)

posted by: save_the_rustbelt on 07.13.05 at 10:47 AM [permalink]


Excellent question.

I have been collecting ideas to turn into some kind of white paper and perhaps a blog.

My two basic ideas are:

1. At best the feds will be a neutral influence, at worst they are our enemy.

2. We need to make about 20 years worth of changes in about 5 years, which will require dynamic leadership.

It will probably be a waste of paper and time, but I may have a streak of Don Quiote (sp?) in me.

Most likely scenario: continued economic and demographic deterioration, slowing when the national economy is good, accelerating when the national economy goes into recession.

Move south or west young man!

posted by: save_the_rustbelt on 07.13.05 at 10:47 AM [permalink]

Save, what might those changes be?

posted by: Klug on 07.13.05 at 10:47 AM [permalink]


Very generally......

1. total overhaul of the public sector (we can no longer afford fat government with low productivity, we need lean and mean).

2. total overhaul of education K-12 and collegiate

3. change the "unemployment system" to something more attuned with the 21st century, folding in job benefits, health continuation, etc.

4. overhaul taxation systems (Ohio already did a half-hearted job, Michigan needs work)

5. develop statewide cooperatives for small business including health insurance and retirement packages (not government systems necessarily)

6. state specifics efforts to enhance venture capital

7. state efforts to combat brain drain

8. targeted environmental and brownfield clean up programs, emphaisze our relative strong points (water!)

These are pretty general, but you might see where I am headed.

Given the targeted nature of lobbying and interest groups I am probably wasting my time, but my family has seven generations invested here.


posted by: save_the_rustbelt on 07.13.05 at 10:47 AM [permalink]

Look, American subsidies to the farm sector are overall lower than those of Europe and Japan because in a more liberal trade environment our farmers win and their farmers lose. That's not true for all American farmers everywhere, but the point is that we shouldn't be pursuing trade liberalization in agriculture because we want world peace. We should do it because it helps more of our farmers than it hurts.

Eenh. I favor trade liberalization because it benefits our consumers, not the producers.

Why is the agriculture sector entitled to a government handout? I see no reason for the US government to subsidize production of goods sold overseas- that benefits overseas consumers, not us- and only very weak reasons to subsidize production of goods sold domestically.

posted by: rosignol on 07.13.05 at 10:47 AM [permalink]

I don't disagree in principle. In practice, though, we should remember that American consumers already have cheap food -- just about every kind of cheap food. A little of that is because of farm subsidies. More of it is because of low import barriers to most foreign farm products. By far the biggest factor is that the United States has enormous amounts of the best farmland in the world and large numbers of farmers who are better at what they do than almost anyone in any industry anywhere.

Small changes in the price of food products mean very little to the consumer, and a great deal to small groups of producers, so naturally in government the producers speak with a louder voice. And from the perspective of our best producers, what trade liberalization means is greater access to markets that now have high import barriers, principally Europe and Japan. Again, this isn't true of our protection-dependent sugar growers or some others. Overall, though, a world trading environment with lower import barriers, production subsidies and export subsidies will see American agriculture making out just fine, which to me is why it is so discouraging to see the Bush administration unwilling to take any political risks to make it happen.

posted by: Zathras on 07.13.05 at 10:47 AM [permalink]

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