A better way to negotiate on agriculture

We indi­cat­ed in our ear­li­er paper on alter­na­tive frame­works for agri­cul­ture nego­ti­a­tions (Gal­lagher and Stol­er (2008b)) the ini­tia­tive for prod­uct-ori­ent­ed CMs would prob­a­bly come from com­mer­cial sources because such agree­ments inevitably have a mer­can­tilist cast. We showed from direc­tion-of-trade data that there appear to be fea­si­ble con­cen­tra­tions of trade—where a rel­a­tive­ly small num­ber of mar­kets rep­re­sents a high pro­por­tion of imports and exports of an agri­cul­tur­al product—that would meet the require­ment for a suf­fi­cient num­ber of par­tic­i­pants in a CM nego­ti­a­tion. But we thought the the chal­lenge would be to find fea­si­ble oppor­tu­ni­ties that offered worth while results for the par­tic­i­pants. The mer­can­tilist mar­ket access inter­ests of exporters and importers are dia­met­ri­cal­ly opposed; they are not like­ly to com­ple­ment each oth­er in an agree­ment on a sin­gle prod­uct or even a nar­row range of prod­ucts. Requests are like­ly to be one-sided and unrec­i­p­ro­cat­ed.

We point­ed to the poten­tial for ‘clus­ters’ of prod­ucts that could pro­vide the broad­er base of a rec­i­p­ro­cal agree­ment to be found with­in the data that we col­lect­ed at the 4–6‑digit lev­el of the Har­mo­nized Sys­tem (HS). With­in ‘cheese’ (for exam­ple), a cat­e­go­ry dom­i­nat­ed by a small num­ber of exporters and a large num­ber of importers, there is a wide vari­ety of dis­tin­guish­able prod­ucts (‘hard’, ‘grat­ing’, ‘soft’, ched­dar, and ‘arti­sanal’) that reveal a much more diverse net­work of exchanges. The same econ­o­my could find itself on the export side of one cheese trade and the import side of anoth­er (as Aus­tralia does with ‘ched­dar’ style and soft cheeses, for exam­ple).

Our mod­el for this sug­ges­tion is the exist­ing, suc­cess­ful, CM agree­ments in WTO to which Peter Lloyd (and oth­ers) refer. The ITA and the Ser­vices CMs have been con­struct­ed on top of a rich net­work of intra-indus­try exchange where the same economies find them­selves on both the export and import side of trades in the same four- or even six-dig­it sec­tor of the HS. The sig­nif­i­cant con­tri­bu­tion that intra-indus­try trade brings to trade, pro­duc­tion and, invest­ment growth, and to the oppor­tu­ni­ties for entre­pre­neurs to ben­e­fit from knowl­edge spillovers (spread­ing inno­va­tion) explains the long­stand­ing atten­tion of analysts.9 None of this requires a trade agree­ment, of course.
Intra-industry trade growth 1962-2006
If any pol­i­cy favors intra-indus­try trade then it is like­ly to be CM agree­ments focused on a prod­uct group in which there are high lev­els of intra-indus­try trade. A CM may be a the best-adapt­ed pol­i­cy frame­work for align­ing the reduc­tion of for­mal trade bar­ri­ers and joint action to facil­i­tate trade through co-oper­a­tive mea­sures on e.g. cus­toms for­mal­i­ties and stan­dards or, as Tim Josling argues, for an agree­ment com­bin­ing both export and import bar­ri­er under­tak­ings. Typ­i­cal­ly, pri­ma­ry prod­ucts exhib­it a low rate of intra-indus­try trade for obvi­ous rea­sons: there is sim­ply no point in trade with­in sim­ple prod­uct group in which prod­ucts have no ‘inter­me­di­ate’ com­po­nents. How­ev­er, sim­ply and elab­o­rate­ly processed pri­ma­ry prod­ucts do under­go intra-indus­try trade and the inten­si­ty of this trade is increas­ing rapid­ly, espe­cial­ly in the food sec­tor, accord­ing to a sur­vey con­duct­ed for the World Bank’s World Devel­op­ment Report, 2009.

“Pro­por­tion­al­ly the largest rise in IIT is observed in the “Food and Live Ani­mals” sec­tor (SITC sec­tor 0), which exhibits a nine-fold rise from a GL index of 0.02 in 1962 to a GL index of 0.17 in 2006. Clear­ly, with the increas­ing sophis­ti­ca­tion and dif­fer­en­ti­a­tion of food prod­ucts, even agri­cul­tur­al goods are now sub­ject to con­sid­er­able IIT.” (Brul­hart, 2008)

1 Comment

  1. What do you see as key near terms prospects and chal­lenges for Chi­nese Agriculture

Leave a Comment

Your email address will not be published. Required fields are marked *