Tuesday, November 8, 2005
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So how is trade integration going?
I've seen better weeks for those who want trade expansion.
At the Summit of the Americas in Mar del Plata, everyone took a "wait-and-see" approach to the proposed Free Trade Area of the Americas. The Economist explains:
This makes sense. So how are those WTO negotiations going? The Associated Press reports that India's Commerce Minister is not optimistic:
[So this is Europe's fault, right?--ed. Well, at this point the answer is yes and no. Certainly EU intransigence on agricultural matters doesn't help. On the other hand, the developing countries are now in a position where they need to make concessions as well. Consider the Indian Commerce Minister's remarks in this story by the Independent's Philip Thornton In a wide-ranging interview with The Independent, Kamal Nath lashes out at the attitude taken by rich nations in the WTO talks especially that of Europe's trade commissioner Peter Mandelson. He appears baffled that Europe has offered to eliminate domestic subsidies and reduce tariffs but in exchange for concessions in other areas, notably service industries and market access for industrial goods.
"I welcome Peter Mandelson's proposal to say he will reduce by so much but then he says 'I want my pound of flesh'," Mr Nath said. He compared Mr Mandelson to a politician seeking a knighthood simply for obeying a traffic light. "He is looking to be rewarded and rewarded for behaving as one should.
"It is a step in the right direction but it is a question of giving an inch and asking for a mile not just asking for a foot but a mile."
On the one hand, Nath is correct in saying that the EU should liberalize its agricultural sector no matter what. On the other hand, the GATT/WTO process was designed for states to get concessions from other countries in order to gain the concessions they want. From an economic standpoint, this kind of reciprocity makes no sense (it's better for countries to unilaterally lower all their tariffs, quotas, and barriers). From a political standpoint, however, the Indians -- and other large-market developing countries such as Brazil and China -- are going to have to reciprocate for the Doha round to have any meaning.
UPDATE: Oh, goody, the U.S. has scored a trade "victory," according to Edward Alden of the Financial Times:
posted by Dan on 11.08.05 at 10:32 AM
I think you are not being completely fair here. You have to remember that the developing countries have already made the concessions by opening a big part of their markets in the first place -- not to mention financial markets and so on. We wouldn't even be having this discussion if it wasn't for this.
It seems weird that developed countries want more concessions when they have been stalling and postponing a much needed reversal of their agricultural policies and subsidies. In my understanding of the situation, the ball is completely on the EU and the US' courts.
Best.posted by: BB on 11.08.05 at 10:32 AM [permalink]
Why should anyone trust the USA as a partner in a trade deal when they have shown with the softwood lumber issue that they can't be trusted to honour its terms. In spite of several NAFTA and WTO rulings against them, the USA plays politics to the lobbys and continues to charge billions of dollars in illegal tariffs. Not only that, they won't return 4.5 billion of illegal tariffs they have already collected.
On top of that, Bruce, this administration has demonstated a hard-core 'f*ck the world' attitude, combined with bizarre levels of incompetancy.
Why negotiate with it, when you can't trust them on multiple levels?
If it persists, you'll have to, but if it changes, then you'll be happier that you hadn't commited yourself.posted by: Barry on 11.08.05 at 10:32 AM [permalink]
I think your comments with respect to reciprocity and the GATT/WTO are somewhat off the mark. The norm of strong reciprocity under the GATT was largely limited to OECD countries, with differential treatment and more favorable treatment additional norms to deal with developing countries. One could plausibly argue that the conclusion of the uruguay Round creation of the WTO marked the beginning of a major developing country concession (eliminating special trtment, TRIPS, etc) which has yet to be repaid, as much of the developing country agenda was not addressed in the Uruguay Round. There's clearly a difference between Brazil, India, and the least developed countries, and there's no shortage of posturing, but it caould be argued that it's the Quad's turn to make good on reciprocity..posted by: John Gershman on 11.08.05 at 10:32 AM [permalink]
Your first passage above makes clear that any attempt to paint Hugo Chavez as the Villain of Mar del Plata, as some of their lamer post-summit spin was attempting to do, won't fly. Chavez certainly had his fun but Brazil and Argentina had zero interest in a FTAA deal and were happy to let him carry the ball on that one.posted by: P O'Neill on 11.08.05 at 10:32 AM [permalink]
Since reciprocity makes no sense from an economic standpoint, why should we be worrying about trade talks at all? Why should countries concern themselves with the trade policies of other nations? If they can't agree on free trade, perhaps they should agree on common trade, treating each other equally, even if it does mean a domestic bias as long the bias is equivalent everywhere.
Reciprocity is important from the point of view of the domestic political economy of liberalization.
If a government is to liberalize access to its country it has to accumulate support to more than offset the resistance of domestic firms (and their stakeholders) that compete with imports. Generally, consumers of imports are diffuse and do not have enough at stake to lobby for liberalization. So the government needs to enlist the support of firms that hope to get access to foreign markets. This is why reciprocity is important; reciprocity enables the government to put together a coalition of concentrated winners from liberalization to outweigh the coalition of concentrated losers.
In a world without transactions costs reciprocity would not be necessary, but that is not the world we live in.posted by: Acad Ronin on 11.08.05 at 10:32 AM [permalink]
Here in Ohio, we have had about as much of the "trade brings prosperity" mantra as we can stand.
Maybe all parties would benefit if we would slow down and clean up the damage as we go.posted by: save_the_rustbelt on 11.08.05 at 10:32 AM [permalink]
Dollar is at a 2 year high against the Euro. If 6 months ago when it was in 'free fall' the sky was falling, wouldnt the opposite then be roaring prosperity? Just a thought.posted by: Mark Buehner on 11.08.05 at 10:32 AM [permalink]
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