Tag Archives: trade framework

Nothing to see here

Is there any point in continuing to puzzle over trade policy and agreements? Do they really make any difference to anything? It seems they’ve become too hard to put together; but does that matter? Since about 2001, I’ve been writing a weblog analysing international trade agreements, national trade policies and the post-WWII “system” of government […]

“Critical Mass” on US business agenda

The US National Foreign Trade Council has released a short paper (PDF file) endorsing a “critical mass” (CM) approach to new WTO-associated trade agreements, without, however, producing any new ideas on how to accomplish this in the current multilateral trade framework. A top U.S. business group, frustrated with years of stalemate in world trade talks, […]

ACTA is an attack on the WTO

India has complained in the recent TRIPS council that the ACTA provisions modify the balance of rights and obligations established by a multilateral agreement (TRIPS) covering the same domain. The secret negotiation of this plurilateral agreement by a cabal that included Australia is an attack on that balance and hence on one of the pillars […]

Schubert and the GATT

From a 1984 speech to the Confederation of British Industry by Hugh Corbet, then Director of the London-based Trade Policy Research Centre.

The situation* puts one in mind ofthe report prepared by a well-known firm of management consultants commissioned to advise on the commercial difficulties of a famous symphony orchestra. Part of the report that was prepared dealt with a concert performance by the orchestra of Schubert’s Unfinished Symphony. The comments of the consultants read as follows:

  1. For considerable periods, four oboe players had nothing to do. The number in this section should be reduced and their work spread over the whole of the orchestra, thus eliminating peaks of inactivity.
  2. All twelve violins were playing identical notes. This seems to be unnecessary duplication and the staff in this section should be drastically cut. If a large volume of sound is really required, it could be obtained through an electronic amplifier.
  3. Much effort was absorbed in the playing of demi-semi-quavers. This appears to be an excessive refinement and it is recommended that all notes should be rounded up to the nearest semi-quaver. If this were done it would be possible to use trainees and low-grade operators.
  4. No useful purpose is served by repeating with horns the passage that has already been handled by strings. If all such redundant passages were eliminated, the concert could be reduced from two hours to twenty minutes.
  5. Finally, if Schubert had attended to all these matters, he would probably have been able to finish his symphony.

Just as the consultants overlooked the purpose of the orchestra, so trade negotiators appear to overlook the purpose of the GATT, which is to provide a stable institutional environment for the conduct of international trade, enabling private enterprises to know where they stand vis-u-vis their governments, and the governments of other countries, so that they can plan for expansion or if need be for adjustment – thereby facilitating the process of economic growth.

* 1984 was marked by rancourous disputes and ‘blowups’ over problems that were eventually addressed in the Uruguay Round: PWG

The suggestion that the negotiators (now WTO rather than GATT) have lost a sense of what the Organization is for, while building the complex maze of managerialist ‘fixes’ that is the proposed Doha deal, is still apt.

Rotten ideas about the renminbi

The prospect of a U.S.-China clash over currency controls next month when the U.S. Treasury Secretary is supposed to pronounce on China’s ‘currency manipulation’ has prompted hyperbolic fears (Martin Wolf, in the FT says he “wonders whether the open global economy is going to survive…”!) and at least two feeble plans.

One is from the IMF, which wants a new mandate—although it admits that’s not really necessary—to undertake explicit multilateral surveillance of Systemic Stability (i.e. imbalances in external accounts). But the Fund does a bad job of justifying its claim for a new role. The Conclusions (on page 12) of the current proposal from the Fund management offer no better reason that that it wants to feel important as the manager of a new ‘peer review’ process. Ho hum!

A much worse idea comes from Arvind Subramaniam in today’s Financial Times. He wants the WTO not only to engage in surveillance but also to enforce the ‘right’ value for currencies.

“The World Trade Organisation is a natural forum for developing new multilateral rules. First, undervalued exchange rates are de facto protectionist trade policies because they are a combination of export subsidies and import tariffs…:”

Even if we accept that there is an equivalence between currency management and trade measures, we have to ask so what? You’d imagine, wouldn’t you, that a trade economist would recall that, in WTO, neither of these trade instruments is necessarily “protectionist” and that neither is illegal (or even deprecated)! This is not much of an argument for WTO intervention.

Second, the WTO has a better record on enforcement of rules. Its dispute settlement system, although not perfect, has been reasonably effective in allowing members to initiate and settle disputes…What is needed is a new rule in the WTO proscribing undervalued exchange rates.

Uh-huh. But does Prof. Subramaniam recall what is needed to add a ‘rule’ to the WTO? If not ‘consensus’ (or ‘explicit consensus’ in the Doha negotiating mandate), then a very strong qualified majority (⅔ of Members according to Article X of the Marakesh Agreement). Furthermore, a new rule adopted by a majority vote applies only to Members that accept it; unless a further another strong majority (¾ of Members) decides to expel any Member that does not accept the new rule.

Now think for a second or two what sort of mess a proposal to penalize persistent trade surpluses would create in WTO. Remember, we’re talking about an Organization that—for the present at least—can’t decide which way is up (in the Doha round), let alone what constitutes an “undervalued exchange rate”

Imagine, too, that horrible wrangle ending up in a majority vote on the new rule, which will inevitably be aimed at China and possibly Germany. But will also potentially hit a lot of others; Thailand and Vietnam, for example. What we have here is a recipe for a hecatomb of the WTO.

The IMF would continue to be the sole forum for broad exchange rate surveillance. But in those rare instances of substantial and persistent undervaluation, we envisage a more effective delineation of responsibility, with the IMF continuing to play a technical role in assessing when a country’s exchange rate was undervalued, and the WTO assuming the enforcement role.” Extract from FT.com / Comment / Opinion – The weak renminbi is not just America’s problem

Fat chance! Even if the IMF could actually discover the ‘correct’ international price of a currency, the WTO would break if tasked with enforcing it.

Are the BRICS ready to lead?

BRICS graphic from the FT

Reflecting on the greater influence of the BRICS, recently, in global forums, the always-interesting Alan Beattie asks:

“Is this a pivot point such as the second world war, where the confident, innovative US muscled aside the weakened, debt-laden economies of Europe and remade the global financial architecture? ” Extract from FT.com

His guess? “No, not yet”. He points out the BRICS are dominated by one country, China, that is still dependent on foreign demand for its economic strength rather than on its domestic resources.

“A decade of rapid growth is not enough for the Brics to seize the baton of global economic leadership from the US and western Europe. The grouping, or some of them, may have astonished the world with their progress over the past 10 years. But it will require a qualitative improvement as well as more growth to consolidate that shift of power.”

In an accompanying article he argues:

“…Aside from the long-running debate about giving developing countries more votes in the IMF, it has proved hard to hammer out a substantive set of subjects on which the disparate Bric countries have the same interests.” Extract from FT.com

Beattie points out that for all their capacity jointly to wield influence in global forums, the BRICS do not have much in common in their domestic policy approaches and few common external interests. This has been evident in the Doha negotiations where India and Brazil, especially, have opposing interests in matters such as agricultural trade liberalization, and at Copenhagen where China’s interests were not apparently those of many developing countries; effectivelly sui generis. Beattie concludes that:

“In diplomacy, as in economics, the power wielded by the Bric countries may end up being distinctly weighted towards the wishes of Beijing.”

I think all this is pretty sound. But…in my view we are witnessing, nonetheless, a secular change in global governance, to be marked by confusion, delay and irrelevance for global institutions such as WTO that cling to a mode of “explicit consensus” (as the Doha Declaration puts it) in decision-making. Such presumptive unanimity or compliance is no longer likely except where the decisions concerned are inescapable—like those on the global ‘stimulus’ (or otherwise trivial in a policy sense, such as humanitarian aid). The future seems, for now, to belong rather to plurilateral decision-making and institutions in different forms.

U.S. looks for a ‘critical mass’ climate deal

There is absolutely nothing new in U.S. exasperation with the United Nations and its overblown processes. This statement from the deputy U.S. climate envoy recalls the responses of thousands of technocrats exposed for the first time to the diplomatic morass; for decades, we’ve heard something similar from every new Administration.

“Pershing said the flaws in the UN process, which demands consensus among the international community, were exposed at Copenhagen. ‘The meeting itself was at best chaotic,’ he said, in a talk at the Centre for Strategic and International Studies in Washington. ‘We met mostly overnight. It seemed like we didn’t sleep for two weeks. It seemed a funny way to do things, and it showed.'” Extract from UN should be sidelined in future climate talks, says Obama official | The Guardian

What is new is that the so-called BASIC countries—giant, rapidly growing but poor economies—have become the necessary interlocutors of the USA and, perforce, for Europe, Japan and the rest of the twenty-something countries that have committed to sign the ‘pledge’ on emissions cuts by 31 January this year.

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p>Pershing goes on to say that he’s looking for a ‘critical mass’ alternative:

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“[He] indicated the focus would be narrower in scope than the UN’s all-inclusive approach. “We expect there will be significant actions recorded by major countries,” he said. “We are not really worried what Chad does. We are not really worried about what Haiti says it is going to do about greenhouse gas emissions. “