Shrinking the Gap: Potential Roles of the WTO & Trade Agreements Parr Rosson, Professor & Director Center for North American Studies Department of Agricultural Economics Texas A&M University C NAS

US Trade Strategy Multilateral Trade Negotiations  World Trade Organization Regional Trade Agreements  Central American Free Trade Agreement Bilateral Trade Agreements  US-Australia Trade Agreement

Australia ‘04 Bahrain ‘04 CAFTA ‘04 Chile ‘04 FTAA ‘06 Morocco ‘04 Southern African Customs Union ‘05 Singapore ‘03 Jordan ‘03 U.S. Trade Agreements-3d Largest Market NAFTA ‘94 Israel ‘85 CUSTA, ‘89 Andean FTA ‘05 Panama ‘05 Thailand ‘05

Why Regional Agreements? 2d Best Solution After MTN  Slow Progress in WTO  Cancun Ministerial Derailed Progress  FTAA ‘Lite’ Not As Appealing Economic Incentives  Open Markets  Create Economies of Scale  Increase Business Efficiency

Strategic Considerations Stem Illegal Immigration Secure Strategic Materials  Oil/Natural Gas  Fertilizer Create Buffer Against Terrorism  ‘Seam State’ Argument, Thomas Barnett, U.S. Naval War College (New Rule Sets Project2000)

F2005F2010F2015F NAWEI. ASIAEE/FSUD. ASIA MEAFRCSATOTAL Billions 6,310 7,570 Ind. + 8%, Dev. + 31%

GDP, Trillion 1997 Dollars Ind. + 64%, Developing + 140%

MEAFRCSA Quad. Btu Ind. + 28%, Developing + 69% ( )

Million Barrels/Day

Million Barrels/Day (Avg.) NAFTA NAFTANon-OPEC (Ex. NAFTA)OPEC Million Barrels/Day

U.S. Crude Oil Imports by Country, 2002 Source: Energy Situation Analysis Report South America Saudi Arabia Mexico Canada North Sea Nigeria Iraq Other Persian Gulf Other Million Barrels/Day

CanadaW. EuropeROW Million Metric Tons

U.S. Fertilizer Imports from ROW, Russia/Belarus Trinidad/Tobago Saudi Arabia Qatar Bahrain Venezuela Egypt Lithuania Morocco Kuwait ,000 Metric Tons

Background The Pentagon’s New Map & Esquire March 2003 Security in a Post Cold War Era  New Operating Environment Post September 11, 2001 World  Role of Security in Global Age Global Disconnect: Gap Between Functioning Core & Nonintegrating Gap Nations

Globalization: What Does It Mean? Integration of Economies & Societies Global Rule Set Democracy Transparency & Rule of Law Free Trade

Globalization & Development Does Globalization Have Binary Outcomes?  Great, Everyone Better Off  Horrid, Failing Humanity Neither, But In Between? Where Has Globalization Worked?  China, India, 22 Others, + 5% PCI, 3 Billion People Where Has It Not Worked?  Sub-Saharan Africa, Middle East, Former Soviet Union, Declining PCI, 2 Billion People Source: World Development Report, 2001

Globalization & Security New Security Paradigm: Disconnectedness Defines Danger Outlaw Regimes Disconnected from Globalizing World  Few or No Rules  Different Societal Norms  Lack Ties of Mutual Dependence

Assumptions: Old & New US Military Capable of Handling Threat from Great Power Can Handle Threat from Minor Conflicts in LDCs September 11 Redefined Perception of the Threat US Military Response Inversely Related to a Country’s Global Connectedness

Conditions in The Functioning Core Free Media & Press Open Financial Transactions Collective Security Stable Governments Rising Living Standards More Deaths by Suicide than Murder

Conditions in The Non-integrating Gap Politically Repressive Regimes Poverty, Hunger & Disease Routine Mass Murder Young Population Chronic Conflicts, Spawning Next Generation of Terrorists

Implications Global Disconnect Means Foes Not Near Peer, Not Even a Nation  ‘Super Empowered Individuals’ They Are Products of ‘The Gap’ To Thwart Threat, ‘Seam States’ are Critically Important  Mexico, Central America, Brazil, Thailand, Malaysia Seam States Are the “Firewall”

Implications Shrinking the ‘Gap’ is Crucial Middle East Is the Starting Point Policy Goals and Role of Trade?  Security-within nations  Increased Aid (Military, Food, Infrastructure, Development)  Democracy  Freer Trade  Rule of Law  Education (Human Capital)

The Doha Work Program

U.S. Average Tariff, Statistical Abstract of the United States Percent Tariff of Abominations, 1828 Morrill Act, 1861 Smoot-Hawley Tariff, 1930 Generalized System of Preferences, 1968 Fordney-McCumber Tariff, 1922 GATT, 1947 WTO,

World Average Agricultural Tariffs, South Asia Caribbean Islands Central America South America European Union North America United States Bound Average World Average 62% Percent

Doha Development Agenda Economic Development Issues Affecting Less Developed and Developing Countries at Forefront of Negotiations Agriculture Negotiations Began in 2000  Uruguay Round Agreement on Agriculture After Setback in Cancun-September 2003, Consensus Reached on Work Program, July 31, 2004

Doha Work Program (DWP) Provides Framework for Negotiations to Proceed Modalities To Be Negotiated  Procedure & Degree of Trade Liberalization For Agriculture, Negotiations Center on DDA Reform of the Three Pillars  Market Access  Export Competition  Domestic Support

Market Access Tiered Approach  High Tariffs Reduced the Most Tariff Reductions from Bound Rates  Harbinson 2d Draft Likely Starting Point Designation of Sensitive Products Special & Differential Treatment for LDCs & Developing Countries  Longer Time Frame, Less Reduction

Export Competition Reduce & Phase Out Export Subsidies by Date Certain  Export Credit Guarantees > 180 Days  $4.7 Billion/year in Recent Years  t.b.n. Interest Rates, Premiums, Payment Eliminate Trade Distorting Practices of State Traders, such as Canadian Wheat Board  Subsidies, Govt. Financing, Loss Coverage Food Aid that Displaces Commercial Sales to Be Eliminated

Domestic Support Biggest Spenders Take Biggest Cuts  Tiered Formula Using Total AMS  EU ($71 Billion), Japan, US ($49 Billion) 20% Reduction in Allowable Trade Distorting Support in Year 1  Amber Box + De Minimis + Blue Box = $49 Billion  $9.8 Billion Reduction for US  No Impacts on US Farm Program Spending at Current Levels ($23 Billion/Year)  If Prices Fall & Spending Exceeds $39.2 Billion, then Program Impacts

Domestic Support Blue Box: Direct Payments, Production Limiting Programs or Decoupled Payments  Direct Payments, Fixed Area & Yield Base or 85% of Fixed Base  Create a ‘New’ Category (Shelter CCPs)  Other Changes t.b.n. Green Box: Minimally Trade Distorting  Criteria Reviewed & Clarified  Ensure Only Minimally Trade Distorting Policies Included  Likely Remain a Shelter for Non-trade Concerns (Multifunctionality, etc.)

Issues Are More Trade Agreements a Desirable Outcome? Without Trade Agreements, U.S. Market Access Limited  With Agreements, No Guarantee of Market Growth Investment & Economic Development Crucial for Central America & Many Other Trading Partners

Conclusions U.S. Market Much More Open than Others With Trade Agreements, Tariffs Will Fall, U.S. Access to Foreign Markets Will Increase Opportunity for Input On Agreements

Thank You! Informed Decisions for Global Change” Parr Rosson Ph: Center for North American Studies Video of WTO & Trade Agreements