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2013-11-22 09:05:26
Negotiations for a global trade deal run into last-minute problems
DEADLINES are a mixed blessing. A ticking clock can focus minds, but it may
also leave too little time to resolve hard choices. Either outcome is possible
as negotiations on several big trade deals reach their final weeks.
The good news is that there is lots of activity. In February America announced
plans for an ambitious Trans-Atlantic Trade and Investment Partnership (TTIP)
with Europe. Its name is an echo of the Trans-Pacific Partnership (TPP), a
planned tie-up among Pacific-rim economies that grew in importance when Japan
joined the talks in March. More encouraging still was the revival of the Doha
round of multilateral trade talks at the World Trade Organisation (WTO). These
had collapsed in 2008 but resumed last year with an eye towards completion of a
deal this year.
The bad news is that many of these negotiations have hit rough patches. That is
partly a function of deadlines: both TPP and Doha are due to conclude next
month, so the trickiest details can no longer be put off. Yet recent glitches
also suggest that politicians overestimated political support for big new
deals.
The threat of failure in the Doha round is most serious. The WTO s members have
not agreed on any broad cuts to tariffs or in other trade barriers since its
inception in 1994, despite repeated attempts. In early December trade ministers
will meet in Bali, Indonesia, in theory to sign a deal. Yet negotiators are
still at loggerheads.
Simplicity is the watchword of the revived talks. The single undertaking
approach, in which no issue could be considered settled until an entire deal
was worked out, has been scrapped. Instead negotiators are aiming to take what
they can get and leave the rest for later. At the heart of the Bali package is
a pact on trade facilitation , measures to reduce the cost of trade through
investment in infrastructure and alignment of customs rules. It is hard to
imagine who could object to that. Yet some developing countries worry that they
may be unable to overhaul their customs regimes on the required schedule.
Agriculture, as ever, is a problem: food security is the biggest stumbling
block. After recent rises in food prices many developing countries adopted new
agricultural subsidies to encourage farmers to grow more. Such arrangements are
likely to break WTO rules, which specify that subsidies should not exceed 10%
of the total value of production.
A group of developing countries led by India wants to amend the rules. One
option, a peace clause , would prevent challenges to such subsidies within the
WTO s dispute-resolution mechanism. Rich countries have balked. America, in
particular, is worried about the effect the subsidies might have if the
resulting grain ends up on world markets.
A temporary fix could defuse the conflict. Rich countries could consent to a
peace clause lasting three or four years, rather than the indefinite waiver the
Indians would prefer. The hope is that India s government might be more
malleable after elections scheduled for May next year. But such a cop-out would
reinforce the impression that the WTO cannot get substantive deals done.
As The Economist went to press, negotiators haggling at the WTO s headquarters
in Geneva still seemed hopeful that an agreement would be reached. Yet the risk
that it will be a hollow one is high. Given Doha s tortured history and its now
limited agenda, failure would probably mean a total loss of credibility for the
WTO as a forum for multilateral trade negotiations. That, in turn, would make
it more likely that regional or bilateral deals lead to Balkanisation of the
global trade system.
Regional deals, however, face problems of their own. As the TPP deadline
approaches its opponents are mobilising in America. The administration of
Barack Obama had hoped that Congress would grant it trade-promotion authority
this year. That would guarantee any trade agreement it negotiates an
amendment-free vote in Congress, giving trading partners confidence that deals
struck in talks will not later be undone by the legislature. Congress has not
handed out this fast-track favour since 2007, however, and looks unlikely to do
so this year.
Worse, the foot-dragging seems to be at least partly the result of misgivings
about free trade, rather than political horse-trading or a busy legislative
schedule. Nearly half of the members of the House of Representatives have
signalled reluctance to grant trade-promotion authority without various
assurances. Many on the left, for example, are calling for an extension of
trade-adjustment assistance , which provides funding for training and
relocation to workers harmed by trade. These measures are scheduled to expire
at the end of next year.
Democrats and Republicans alike also want to include restrictions on currency
manipulation in any new deal (though they do not agree on what such rules would
look like). Some legislators have expressed frustration with the secretive way
in which TPP is being negotiated. That concern was exacerbated when WikiLeaks,
a whistle-blowing website, published a draft TPP chapter that seemed to reveal
a push to disseminate America s onerous copyright rules.
Another deal to have hit an unexpected snag involves a subset of WTO members
seeking to liberalise trade in information technology. Chinese objections
brought the proceedings to a halt in July. A few weeks ago China agreed to
resume talks, only to stay away on the appointed date. The world of trade
negotiations, alas, is forever full of obstacles.