NS3040 Fall Term 2018 WTO: Cancun Conundrum Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Cancun Conundrum I Robert Looney, The Cancun Conundrum: What Future for the World Trade Organization (WTO), Journal of Third World Studies, Fall 2004 Quotes following the conference: “I said in Seattle that the WTO is medieval, but I’s now wondering whether Neolithic isn’t a more appropriate term” – Pascal Lamy, European Union Trade Commissioner – later became head of the WTO “We are told that trade can provide a ladder to a better life and deliver us from poverty and despair…Sadly the reality of the international trading system does not match the rhetoric.” -- Kofi Annan, Secretary General, UN. “Many countries – developing and developed – were dismayed by the transformation of the WTO into a forum for the politics of protest.. The Key division at Cancun was between the can-do and the won’t do.” -- Robert Zollick, US Trade Representative

Cancun Conundrum II Quotes represent a growing disillusionment with the international trade system in general and the WTO in particular. WTO ministerial meeting in Cancun Mexico, September 2003 – delegates from 148 member countries Idea was to try and find a way to move forward in key areas: Tariff reduction on industrial products Agricultural reform Foreign investment rules, and Competition policies Meeting was part of new round of trade talks stemming from the agenda launched in Doha, Qatar in November 2001 Round collapsed because of fundamental differences between rich and poor nations

Cancun Conundrum III Stakes high Main issues: Agriculture World Bank estimate – agreement would produce $290-$520 billion annually for the world economy Income growth from agreement would lift approximately 144 million people out of poverty by 2015 Main issues: Agriculture Agricultural subsidies in advanced countries – more on market depress world prices for commodity exporters. Farm subsidies – industrialized world spends $1 billion a day on agricultural subsidies. In 2002 US farm support was 17.6% of total value of agricultural production, 36.5% in EU and 59% in Japan West African countries claim us cotton subsidies costing them over a billion $ a year.

Cancun Conundrum IV Issue: Non-Agricultural Market Access (NAMA) Developing countries claimed advanced country tariffs higher for non-agricultural products – mainly industrial goods Actuality for trade in manufacturers (excluding textiles and clothing) developing countries average tariffs 8% compared to 21% for developing countries Even in textiles and lowing developing country tariffs at 21% exceeded developed country tariffs at 8% Issue: Singapore Agenda from 1996 Ministerial meeting Trade facilitation Government procurement Competition rules Investment protection

Cancun Conundrum V Issue: Developing Country Issues After previous trade round, the Uruguay Round, this was supposed to be the developing country round – concessions given to developing countries – did not turn out that way Developing countries wanted to have access to more generic drugs Explanations for the Failed Talks Sluggish world economy US/EU Conflicts The Group of 21 (G21) led by China, India, Brazil, South Africa, Korea and Egypt Overloaded agenda Role of NGOs

Cancun Conundrum VI Future Scenarios: North/South Split Hard to form a consensus with very different environments, needs and view of how world works North mainly neo-liberal, free markets South mainly structuralism, development before trade North more inclined to focus on intellectual property, services South more included to want market assess in export markets South also concerned over commodity stabilization South the New International Economic Order (NIEO) good idea, North, bad economics

Cancun Conundrum VII NIEO (New International Economic Order) set of suggestions for altering the international trade system (United Nations 1974) Adoption of an integrated approach to price supports for major developing country commodity exports Official development assistance set at 0.7% advanced country GDP Linking of development aid to SDRs Redeployment of some developed country industries to developing countries Lowering of tariffs in advanced countries Development of an international food program Mechanisms for the transfer of technology to developing countries – Law of Sea

Cancun Conundrum VIII

Cancun Conundrum IX Future Scenarios (continued) EU Dominance/US Ambivalence Strengthening WTO Financially Strengthening and Restructuring the WTO out of Necessity – needed to continue globalization

Cancun Conundrum X Future Scenarios (contd.) Enlightened Unilateralism – US goes to free trade Change voting procedures – just let the major trading countries vote and grant privileges to the rest Top 20 importers (with EU counting for one) account for 80% of world merchandise exports and the top 50 for 92% Makes no sense for a country with 0.1% of trade having the ability to block the whole process Problem –need unanimous vote to change voting procedure WTO becomes a debating club – trade dispute settlement – countries pursue regional agreements