Groupe d'Economie Mondiale What should have been done and what to do now Patrick A. Messerlin Groupe d’Economie Mondiale at Sciences Po (GEM) What world leaders must do to halt the spread of protectionism? A BERR-CEPR Conference London, December 18, 2008

Groupe d'Economie Mondiale Overview  Two perspectives: What world leaders should have done. What to do now?  Five points: NAMA: more realism Agriculture: more transparency Contingent protection: more consistency Services: more creativity Conclusion: strategy vs. tactics

Groupe d'Economie Mondiale NAMA: more realism  The value of binding The cost of a non-Doha agreement (Bouet & Laborde, IFPRI): From USD 130 billions (back to 13 years ago) to USD 350 billions (back to bound tariffs). Question: how plausible is the danger (Achard, Rupp & Jomini, GEM)?  Concentrated on 30 products (cars, electronics),  big enough to attract attention (33 USD billions). Today situation: worrisome.  What should have been done: focus on consolidation Industrialized countries: ask for lower tariff cuts (focusing on tariff bindings) Developing countries: ask for less exceptions.  What to do now Standstill, monitoring, notification (WTO) Civil society: coalition of “domestic observers” => require in-depth knowledge of the country because “behind-the-border” instruments (subsidies federal in the US, but already at the Member State level in the EC0.

Groupe d'Economie Mondiale The value of binding (1)

Groupe d'Economie Mondiale The value of binding (2)

Groupe d'Economie Mondiale Agriculture: more transparency  The results of negotiations: not so bad (caveat: exceptions) no more export subsidies, average tariff more acceptable (EC<15%) average production subsidy rate more acceptable (EC, US~15%).  What should have been done: focus on transparency Declare victory But reveal that agriculture is a misnomer  Farm vs. food products: roughly 700 vs tariff lines, food much more protected (average 19% vs. 33% in EC).  Crucial to reveal this ambiguity (Momagri)  What to do now: Publicize the current results separately for food/farm goods. Focus on the losers from a non-Doha situation. Focus on the US domestic reforms: US President plus Congress well elected, favorable to capping subsidies. Count on the impact of public subsidies in the EC. Count on competition for subsidies (bankers, farmers, carmakers, etc.).

Groupe d'Economie Mondiale Shift the focus on non-Doha losers

Groupe d'Economie Mondiale Contingent protection: more consistency  Current situation: Antidumping current practices: antidumping measures are, on average, 3 to 4 times the existing bound rates. Complete mismanagement at the Doha Round Use an emerging (?) symmetry  India: likes/will dislike(?) AD, likes agricultural safeguard  US: still likes AD, dislikes agricultural safeguard.  What should have been done: more consistency Make similar rules for similar instruments (antidumping and safeguard). Promote a few simple points: import share in domestic consumption.  What to do now: monitoring by independent observers: AD: light bulbs (coalition with environmentalists) Subsidies: virtual or real?

Groupe d'Economie Mondiale Services: more creativity  The current situation: Subsidies in cars: very old-minded. Subsidies in banking: a puzzling mix of competition and cooperation.  No beggar-thy-neighbor (few casualties: Iceland),  No nationalization—so far.  Principle of country of origin and regulatory competition for the best.  What should have been done: instruct to move ahead on services widest range possible: avoid “early harvest” as much as possible  What to do now: move ahead (outside the WTO) Use other fora to prepare a deal in WTO: the “Istanbul” process in airlines (+5 to 12%, Jomini & al., GEM). Trade facilitation: the “development” dimension of the services issues.

Groupe d'Economie Mondiale Conclusion: Strategy vs. tactic  Stop “rambo-ing” in Geneva.  Be on alert: “powder + matches” Powder: protectionist sentiment in the air (O’Rourke) Matches: emotional standard (Hufbauer & Schott). Be prepared to put cold water:  For every (alleged) breach of standard by imports, require the country to test its own producers (Chinese toys, food cases, etc.).

Groupe d'Economie Mondiale Thank You for Your Attention