House of Paine

Stigasaurus swings his tail

 BUT way
         too slowly 
                  to gore  anyone 


  but hey i like this 
        sheep headed brainy guy anyhow  


Whatever face-saving measures are taken,
 the meeting in Hong Kong in mid-December
 to wrap up the current development round
 of world trade talks
 will almost surely fail the only test that matters:
 whether such an agreement promotes 
the poorest countries’ development. 

Cynics will say that the advanced countries,
 in the tradition of previous trade deals, 
intended to provide only the bare minimum 
in the way of concessions,
 while generating the full maximum 
in the way of “spin,” 
to get the developing countries on board. 

What has happened since the beginning
 of the development round at Doha 
in November 2001
 has been a huge disappointment for me.

 As chief economist of the World Bank,
 I reviewed the Uruguay round of 1994 
and concluded that both its agenda and outcomes 
discriminated against developing countries.

 In March 1999, I went to the headquarters
 of the World Trade Organization in Geneva 
to call for a development round 
to redress these imbalances.
 For a moment, I thought my call had been heeded. 

Two years ago, I was asked by the Commonwealth,
 a diverse group of mostly ex-British colonies—countries
 from both the North and the South—
to prepare a study of what a true development round
 would look like.

 This month, Oxford University Press 
is publishing an expanded version of that report,
 called Fair Trade for All: 
How Trade can Promote Development.  

Both as it was conceived, and even more as it has evolved,
 today’s development round
 does not deserve its name. 

Many of the issues that it has addressed 
should never have been on the agenda 
of a genuine development round,
 and many issues that should have been
 on the agenda are not. 

Agriculture is not the only
—or even the most important—trade issue,
 though it is understandable why it has become pivotal.

 When the Uruguay round began,
 there was a "Grand Bargain"
 to expand the trade agenda 
to include services and intellectual property rights—
two issues of particular concern to developed countries.

 In return, developed countries were to make major concessions 
on agriculture—
the livelihood of the vast majority of people
 in developing countries—
and textile quotas, 
the only trade area (besides sugar) 
in which quantitative restrictions persist. 

In the end, developed countries
got what they wanted,
 and developing countries were told to be patient:

 Eventually, the developed countries 
would fulfill their part of the deal.
 Even as the rich countries 
urged developing countries
 to make quick adjustments,
 they claimed that they needed a decade 
to make the transition to a quota-free textile regime.


 In truth, they were just buying time;
 they did nothing for a decade, 
and when the quotas finally ended last January,
 they pleaded that they were still not prepared,
 and thus negotiated a three-year extension with China. 

What happened in agriculture was even worse.
 While the understanding was that rich countries’
 enormous subsidies and restrictions would be reduced,
 the United States almost doubled its subsidies.

 But, like any sharp negotiator,
 the U.S. claimed that at worst 
it had violated the spirit, 
not the letter, of the agreement.

To be sure, the U.S. had inserted fine print
 that created a category of allowed agricultural subsidies
—those that didn’t distort trade—
and all of its increases were of this kind.

 But America evidently believed
 that virtually anything it did
 was non-trade distorting.
 (By contrast, everything Europe did
 was trade-distorting. 
Indeed, one of America ’s great achievements 
in trade during the past decade
 was to portray Europe as the culprit.) 

America ’s claims were not based on economic analysis
—as the WTO concluded
 when it ruled on America ’s cotton subsidies.

 A subsidy distorts trade 
if it increases production 
(unless magically, it raises consumption by the same amount.) 

America ’s agricultural subsidies do just that. 
Those in the developing world
 who believe that there has been 
a history of bargaining in bad faith 
 have a strong case.

That leaves developing countries
 facing a hard choice:
Will they be better off accepting 
the crumbs being offered to them? 
Indeed, this may be harder today 
than ever before: 
with so many developing countries
 becoming vibrant democracies,
 electorates may punish governments 
that accept what is widely viewed 
as another unfair trade agreement.

Unsurprisingly, the rich countries’ negotiators
 throw around big numbers 
when describing the gains from even an imperfect agreement.
 But they did the same thing last time, too.
 Developing countries soon discovered 
that their gains were far less than advertised,
 and the poorest countries found,
 to their dismay, that they were actually worse off
. Simply put, the advanced countries 
have lost their credibility. 

To be sure, 
the great achievement of the 1994 Uruguay round 
was the establishment of a basic rule of law 
in international trade.

 Even the most powerful country,
 the U.S., has reluctantly yielded to its finding,
 for instance, that its steel tariffs 
violated international trade law.
 Presumably, the same will eventually happen 
with America's cotton subsidies,
 illegal dumping provisions 
and tax subsidies to exporters. 
A rule of law, even if unfair,
 is better than no rule of law.

But with that goal reached,
developing countries today
 need to take a hard look 
at the details of what is being offered.
 Will the benefits—increased access 
to international markets—be greater
 than the costs of meeting rich countries’ demands?
 Many developing countries are likely to come
 to the conclusion 
that no agreement is better than a bad agreement
, particularly one as unfair as the last.