In this section we provide some snapshots on controversial
topics in trade today. These brief summaries include background on the issue and
positions taken by prominent voices in the international trade arena. Although we cannot cover all opinions on these issues, we have tried to
include those which have played an important role in giving shape to these
1. Is Trade a Substitute for Immigration?
2. The Politics of Trade: US Trade Policy
3. The Politics of Trade: Chinese Trade Policy and the US
4. Middle East Free Trade Area
5. Steel Tariffs, Again
7. War or Peace (Clause)?
8. A View From Davos NEW!
Start Trading People: There is much talk about trade in goods and services, but what about trade in people? Immigration, Lant Pritchett argues, has great potential to increase the welfare of the world's poor. 'There is no evidence,' he says, 'that trade is in fact an effective substitute for labor flows.' Moreover, some have estimated that the gains from immigration are likely to be much higher than the gains from increased trade liberalization. He believes that the WTO could play 'an integral role' in a new framework of increased but limited labour mobility around the world.
Lant Pritchett: Part 1, Part 2
A more technical version
Knock, Knock, Knocking on Heaven's Door: Joseph Chamie, Director of the UN Population Division, thinks an international consensus on international migration is unlikely in the near term. But given the pressures for it, he believes bilateral and regional agreements 'are perhaps the more likely course ahead for the coming years.'
Cowboy Capitalism: Current events, however, show that such policies would not be without their challenges. Tony Woodley, General Secretary of the UK's Transport and General Workers' Union, believes migrants working in the Britain today are exploited, as evidence recently by the deaths of 19 Chinese migrant workers. And, he says, the British labour movement should take up their cause.
Background: Many have attributed the failure of the WTO negotiations in Cancun at least partly to larger geopolitical turmoil in the world and American's unilateral pursuit of its interests. In March, WTO Director-General Supachai Panitchpakdi warned that the conflict in Iraq might harm the recent talks. But why, exactly, do people think that the non-trade aspects of American foreign policy have affected trade negotiations? How are the two linked?
Supachai: Doha round prospects dim in shadow of war; explosion of bilateral trade treaties a threat, ICTSD
Hypocritical Liberalization: Professor Daniel Drezner of the University of Chicago sees the Bush administration's trade policy as trying to balance two goals: reelection and national security. Conventional national security wisdom says that trade liberalization, insofar as it increases living standards, will tend to benefit the United States' security position, and that liberalization through the WTO should be pursued as a result. But there are domestic political pressures which lead the administration in the opposite direction. The result? "Hypocritical liberalization." This means proceeding with the Doha round, but taking advantage of every loophole and technicality possible to protect vital domestic interests.
Protection Racket, by Daniel W. Drezner (The New Republic)
Trade as a Carrot for US Allies: Sidney Weintraub says the US enters bilateral agreements for a variety of reasons: to increase access to potential partners' markets, to strengthen alliances in the Western hemisphere, global foreign policy strategy, or to reward supporters of US foreign policy. Weintraub believes the message being sent now by the US Trade Representative is that free trade agreements will depend heavily on support for American foreign policy.
The politics of US trade policy, by Sidney Weintraub (BBC News)
The new politics of trade, by Steve Schifferes (BBC News)
America Must Be First to Restart Trade Talks: Jeffrey J. Schott believes that the WTO talks in Cancun were tainted by various countries' geopolitical objectives. Nevertheless, he says, the United States must take the lead in starting talks again. Schott outlines three keys steps the country should take, but will it be in the country's interest to do so?
Unlocking the Benefits of World Trade, by Jeffrey J. Schott (The Economist/IIE)
Background: While China was part of the developing country bloc that contributed to the failure of talks in Cancun, its motives are perhaps more complex than most. China exports heavily (21% of its goods) to the United States, and has also been accused of keeping its currency undervalued. An undervalued currency tends to make a country's goods cheaper, causing its trading partners to import more than they would otherwise. Neither is popular with workers in the United States, as some worry they're jobs will be lost to Chinese workers as a result of China's export competitiveness.
China's pivotal position for the world economy, by Philip Bowring (IHT)
China trade deficit travail, by Bruce Bartlett (Washington Times)
Splitting the Tasks: Fred Bergsten finds that American economic and foreign policymakers are clashing over a variety of issues with China. Let those in charge of economics play tough but fair, he says. Rather than pushing for a floating rate, the Bush administration should allow the economic policymakers to push for a one-shot revaluation. The current trend towards more aggressive but unrealistic demands, he says, is likely to be less productive than the prudent but tough stance of the economic team.
Muzzling our Economic Negotiators, by C. Fred Bergsten (Washington Post/IIE)
Does China's Currency Act as a Subsidy? There are members of the US congress that believe that China's currency could be a WTO issue, since an undervalued currency might act as a subsidy to exporters. To challenge it successfully, the US would have to show that the Chinese currency fulfills all three of the WTO's criteria for a subsidy: the currency must grant benefits selectively to enterprises, act as a governmental financial contribution, and actually confer benefits. Marc Benitah, an international law professor at the University of Quebec, believes that challenging China's fixed exchange rate would not be easy, but it may nevertheless be possible.
China's Fixed Exchange Rate for the Yuan: Could the United States Challenge It in the WTO as a Subsidy? by Mark Benitah (American Society of International Law (ASIL) Insights)
China's Currency Not Undervalued: Despite all the recent debate, the IMF has found that "…that there is no clear evidence that the renminbi is substantially undervalued at this juncture." Directors also felt that a currency revaluation (i.e., allowing the currency to increase in value) would not by itself have a major impact on global current account imbalances-particularly given China's relatively small share in world trade." Is all of the debate mere politics without substance, or is there more to it?
IMF backs China on yuan's value, by Julie Ziegler (IHT, Bloomberg News)
IMF Concludes 2003 Article IV Consultation with the People's Republic of China, by IMF
President Bush's Plan for a new US-Middle East Trade Initiative:
Citing low standards of living as a factor leading to terrorist activities in that region, Bush pledged to help selected Middle Eastern nations develop economically by negotiating free trade agreements with each nation first on a bilateral basis, then ultimately combining these agreements into a multilateral agreement encompassing all the bilateral signatories by 2013. The plan has many skeptics who are wary both of the effectiveness of free trade in enriching the included nations, and of the US's motives.
USTR Resources: Middle East Trade Initiative
US Department of State: Details of Proposed Middle East Initiatives
The World Bank:
The World Bank would see the MEFTA as a catalyst for
positive change in the Middle East, as they prescribe increased trade and
openness to foreign investment as a solution to a predicted unemployment crisis
within the next few years. The
prediction is based upon their belief that the Middle Eastern economies are too
heavily concentrated in the oil sector, and that they tend to be driven
primarily by the public sector. They recommend diversifying
their economies into non-oil sectors, allowing market forces to play a larger
role in determining economic activity, and to promote exports rather than
pursue import-substitution policies.
Expanded Trade and Investment Holds Promise for Millions of Jobs In the Middle East.”
World Bank news release.
the World: Trade, Investment and Development in MENA.(Overview) World
Mixing Peace and Trade:
have noted that the Bush administration’s touting of the US-Jordanian bilateral
deal is more of an illusion than a miracle. Under the deal, the US does not apply duties or quotas in areas where
Jordanian goods contain at least 8% of inputs from Israel – and the increase in
Jordanian exports to the US has mainly been through this mechanism. Asian countries have also taken advantage of
this provision, funneling their inputs into Jordanian goods, and halting job
creation in these areas in Jordan. Without an Israeli-Palestinian settlement of some kind, it may be
difficult for the US to convince other Middle Eastern countries to accept a
deal with a similar provision.
Tries to Recycle Cold War-era Policy. Seattle
The Newest Jordan: Free Trade, Peace and an Ace in the Hole, (Middle East Report Online).
Background: In March 2002, the
US government placed tariffs of up to 30% on steel imports, arguing that the US
steel market was being flooded by cheaper steel imported from countries which
subsidize their steel industries. The US government cited section 201 of
the Fair Trade Law in support of the measure. However, the EU, Japan,
China, South Korea, Brazil, New Zealand, Switzerland, and Norway challenged the
ruling, calling on the WTO to investigate the tariffs. In May 2003, the
WTO ruled that the tariffs violate WTO rules. This ruling was recently upheld after an appeal by the US.
USTR to Review Final WTO Ruling Against U.S. Steel Duties, US Department of State Press Release
The reigning champions of free trade, by Robert Zoellick
The Bush Administration's Options: Regardless of the merits of the case, it looks like the Bush administration has to make some key political and economic decisions now that it has lost the appeal. Anticipating this eventuality, Gary Clude Hufbauer and Ben Goodrich outline the administration's options.
Next Move in Steel: Revocation or Retaliation? by Gary Clyde Hufbauer and Ben Goodrich (read pages 1-3, 13-14) (IIE)
American Steel Consumers: According to
the House Small Business Committee Chairman Don Manzullo and the Consuming
Industries Trade Action Coalition (CITAC), the steel tariff has brought many
unintended negative consequences to small business that outweigh any benefits
the policy may have yielded. Specifically, small businesses have had to
deal with higher prices for steel products and supply shortages after the policy
was implemented. Both urge President Bush to rescind the policy in the interest
of small businesses.
Tariff Exclusions Help Some Steel Consumers but Fail to Address Basic
Problem - Globally Competitive Prices CITAC press release
When the WTO added investment to the Doha Development Agenda, it sparked a contentious and complex debate. Members
who welcomed a multilateral agreement on investment asserted the benefits of greater transparency and well-defined investor rights,
while opponents voiced concerns that an agreement would curtail a country's ability to implement national development and environment
policies. Coming out of Cancun, there has been no consensus on investment. For now, countries will have to return to the drawing
board and figure out how to resolve the issue before the end of the Doha Round.
Investment Summary, Global Trade Negotiations Home Page
Investment, Doha and the WTO Background paper prepared for IISD and RIIA
Political Map of Country Positions on Investment Discussion at the WTO prepared by Oxfam and WWF
NGOs (Oxfam, Action Aid, Third World Network, World Wide Fund for Nature): Many organizations and members of civil society are strongly opposed to a WTO investment agreement. Many argue an investment
agreement would impinge upon a nation's right to intervene in the decisions that affect its economy and environment. Many NGOs also accuse the main demandeurs of investment negotiations of holding
out on agriculture concessions until they get an agreement on investment.
Investing in Destruction, Oxfam Briefing Paper, June 2003.
Third World Network
Action Aid Press Release: Poor countries must not be bulldozed
Main Demandeurs - European Union: The EU was the initial demandeur for the exploration
of the relationship of trade and investment within the WTO. European Commissioner Lamy adamantly
supports the WTO as the appropriate forum for a multilateral agreement on investment and insists that it is in the best interest
of developing countries to proceed with negotiations. An investment agreement, he asserts, will stimulate the economies of all WTO
members by stimulating investment flows to developing countries, and will make international investment easier and more transparent.
In an effort to apply pressure on developing countries, the EU has linked agricultural reforms to cooperation from developing
countries in getting investment negotiations underway.
European Parliament Resolution on Preparations for the 5th Ministerial Conference
Speech by Pascal Lamy regarding the collapse of the Cancun talks
European Commission Website
Main Opponent - India: Since they were first suggested, India has been a loud voice against
the inclusion of the four Singapore issues into the WTO negotiations. With regard to investment in particular, India argues
that the WTO would be overstepping its boundaries if it were to go ahead and establish multilateral rules. India maintains that the
WTO should concentrate on its core trade-related issues and avoid a dilution of focus.
India to oppose multilateral investment regime at WTO (The Hindu)
CII against talks on investment(Business Standard)
India's WTO Ambassador calls for investment to be dropped Third World Network info service
G-20+ Countries: (Argentina, Brazil, China, India, South Africa, as
well as Bolivia, Chile, Costa Rica, Cuba, Ecuador, Egypt, Guatemala, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, Thailand, Venezuela)
The G-20+ formed in the months leading up to the Cancun talks to counter-balance the negotiating power of the US and the EU. Their
main focus has been to attack the US/EU position on agriculture reforms. Because the EU has linked agriculture reforms to progress
on investments, the G-20+ has set itself in opposition to an investment agreement and the power of the EU and US to hold issues
G22 warms up for post-Cancun WTO talks InvestmentWatch
Investment Chair says no consensus on investment issue TWN News Service Article
World Bank The World Bank plays a role in lowering investment barriers internationally through its loan policies
and stringent requirements, and thus, implicitly supports a gradual opening of investment. It is unclear whether it views the WTO
as the appropriate forum for such an agreement or not.
Do bilateral investment treaties attract FDI? World Bank
Other topics- Trade and Investment (TRIMS), World Bank
Background: On January 1, 2004, the so-called "peace clause" expired at the WTO. The peace clause was an agreement that protected the US and EU from challenges to their agricultural subsidies under WTO rules. With the collapse of talks in Cancun in September 2003, the US and EU did not obtain the extension for which they had hoped. Since then, Brazil has pursued legal action initiated at the WTO in 2002, aimed at reducing America's cotton subsidies, claiming that they violated even the provisions for subsidies under the peace clause. American farmers say their livelihoods will be destroyed if the subsidies are removed. Brazilian farmers says their livelihoods have already been destroyed by the subsidies. All members of the WTO are watching the case closely.
Brazil case may break stalemate on trade, by Elizabeth Becker (IHT/NYT)
Brazil takes cotton war to US (BBC News)
Farm groups oppose Brazil WTO efforts, by Forrest Laws (Western Farm Press)
Agricultural Subsidies Are Vulnerable: In July 2003, Richard Steinberg at UCLA and Timothy Josling at Stanford predicted that many agricultural subsidies in both the EU and US would be vulnerable to legal challenges through the WTO. Consequently, they expected that poor countries would use this as a bargaining chip in Cancun. As the story above suggests, negotiations may take place with under the threat of extensive litigation through the WTO.
Give War a Chance, by Michael Standaert (Tech Central Station)
When the Peace Ends, by Richard H. Steingberg and Timothy E. Josling
Cotton Subsidies are Costly: Subsidies to cotton, like other agricultural products, have long been a source of tension in WTO talks. Yet the costs are real. A study conducted by the World Bank in 2002 found that cotton producers in developing countries experienced losses of $9.5 billion as a result of developed country subsidies.
Cotton producers face losses (World Bank, ICAC)
Background: Perhaps you had a scheduling conflict, or worse yet, weren't invited or couldn't afford to attend? Do not fear: you too can be privy to the discussions on trade at Davos. Below are various remarks from the often-praised and often-maligned conference held in Davos this past January. Read on for discussion of "dialectical moments" and "spaghetti bowls."
A Dialectical Moment: Yu Yongding, Director of China's Institute of World Economics and Politics believes a "dialectical moment" has been reached in the trade liberalization process, where developing countries must now make political sacrifices to move things ahead.
Setting the 2004 Agenda: Trade, World Economic Forum, January 21, 2004
A Spaghetti Bowl Outside the WTO: Supachai Panitchpakdi, Director-General of the WTO, calls the proliferation of bilateral trade agreements outside the WTO a "spaghetti bowl" of measures. He calls for a year-long suspension of work on such deals so that the multilateral WTO liberalization can be pushed ahead.
Will Proliferating Preferential Trade Agreements Weaken the Multilateral System? World Economic Forum, January 22, 2004
He Said, He Said: The rich countries don't want to deliver on the development round, says Ernesto Zedillo, former president of Mexico. Yes they do, say the US Undersecretary of Commerce for International Trade and the US Trade Representative. The Doha round, says Supachai, is still "alive and kicking." But kicking at what?
Can the WTO Ultimately Deliver the Goods? World Economic Forum, January 24, 2004
Robert Zoellick and South African Minister of Trade and Industry Alec Erwin, Transcript of Remarks, February 17, 2004