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][1], 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.

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

[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. ”