Trade: Doha, FTAs and WTO Vulnerability

1. Trade: Doha, FTAs and WTO Vulnerability Charles J. O’Mara, O’Mara & Associates

2. Contents • US Trade Agenda Going Forward • New Administration – new personalities • World Trade Organization Doha Development Agenda • Will there be an agreement or protectionism and trade litigation? • Sugar and Ethanol – are these programs vulnerable to challenge? • Devising a way forward to address international realities

3. US Trade Agenda: The Inner Circle • Important to separate the key members of the inner circle and identify their roles: • Mr. Ron Kirk nominated as USTR • Will be confirmed – has met with several former USTRs • Key negotiators: Amb. Peter Allegier and Dr. Joe Glauber will remain for time being – perhaps longer • Mr. Kirk has a reputation of supporting trade, and most significantly NAFTA • “The exciting thing for me is that the President very much sees a robust trade policy as part of his economic agenda. He understands that the United States can’t be protectionist, can’t step back from our trade relations.” -- Ron Kirk, Dallas Morning News

4. US Trade Agenda: The Inner Circle • With Kirk’s focus on negotiations and implementation, Larry Summers will be the one to develop the Administration’s vision on future trade issues • Larry Summers will take a central role in the formation of all domestic and international economic policy matters. • Will be an advocate for trade within the White House; experience with NAFTA and the Uruguay Round • Summers has written extensively on the need to refocus the globalization and trade debate to promote an aggressive trade policy, but with an element of focus on the impact on workers globally. • This will, in my judgment, assist in selling the benefits of trade, but it important to not go overboard.

5. US Trade Agenda: The Inner Circle • Larry Summers wrote on May 4, 2008 to the Financial Times: “The public policy response of withdrawing from the global economy, or reducing the pace of integration, is ultimately untenable. It would generate resentment abroad on a disastrous scale, hurt the economy as other countries retaliated, and make us less competitive as companies in rival countries continue to integrate their production lines with developing countries…” “The domestic component of a strategy to promote healthy globalization must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global corporations.”

6. US Trade Agenda: The Inner Circle • Looking from the outside in, with the chief architect being Larry Summers, it appears that the approach of the Obama Administration will be to engage in trade from a multilateral perspective, broadening its reach. • This increases, in my judgment, the likelihood of concluding the DDA sooner rather than later. • However, the global economic realities could very well slow the DDA – however substance, not deadlines will hopefully continue to drive the process.

7. DOHA DEVELOPMENT AGENDA • Last push made in December, several Members pressuring conclusion • However Director General Pascal Lamy made the right decision to not hold a Ministerial meeting at the end of December 2008 • DG Lamy will remain and Crawford Falconer, the Chair of the Agriculture Negotiations will also remain for the time being – both of these are important for leadership an continuity • Even though progress has been made, contention remains on a handful of very political issues: • SSM, SP, Cotton, TRQ creation, etc

8. DDA Continued • G-20 Meeting in April in London will be the indicator as to the likelihood of resuming substantive negotiations • G-20 meeting will foreshadow the prospects for a Ministerial this summer • Key sub-cabinet officials will most likely be in place this spring, allowing a period of transition and it will become clear whether people like Amb. Peter Allgeier and Dr. Joe Glauber will remain in high-level negotiating roles

9. Protectionism and Trade Disputes • Shifting focus to current trade rules, WTO Members must be wary of protectionist measures creeping into stimulus packages • Virtually every media story regarding protectionism raises the devastating effect of Smoot-Hawley • Pressure building in World’s most advanced economies to erect protectionism measures – “Buy American” • What is sure, if the US implements any protectionist measure – a global trade war will erupt • Therefore this, in my judgment will be the first test of President Obama’s trade agenda

10. Trade Disputes: US Vulnerability • Trade cases: • US-Cotton WTO Case process will soon be complete and Brazil will be authorized to retaliate • As a follow-up, Brazil launched in May 2008 a case focused on the US Aggregate Measurement of Support – claiming the US has breached its annual binding in every year between 1999-2004, except 2003. Currently this case is on hold, pending the progress on the DDA • Canada has also suspended its case against US implementation of Mandatory Country of Origin Labeling • Therefore a DDA would be the best way to ensure that US programs are not challenged

11. Trade Disputes: US Vulnerability • If DDA is not concluded within a reasonable time period, we do expect that WTO Members will resume cases and possible launch new ones • Ethanol: even though many do not agree – the extra duty and charge is a bound tariff, thus as a result of the DDA it will have to be reduced • Brazil made attempts to negotiate a specific market access agreement on ethanol, making progress in the EU, but not much for access to US • If DDA is not finished soon – chances are high that Brazil will initiate dispute settlement

12. Trade Disputes: US Vulnerability • Sugar: 2008 Farm Bill • Increased price supports for raw and refined sugar; • Mandated marketing allotments equal to 85% of human consumption • Diverts sugar to bio-energy producers when risk of forfeiture increases • Do these changes make the program more vulnerable? • Without question these changes further isolate the US sugar industry • US farm law has acknowledged the reality of NAFTA by increasing support rather than developing a consistent and transparent approach for reform

13. Trade Disputes: US Vulnerability • Sugar con’t • US Raw TRQ operated in such a way as to guarantee it will never be 100% filled. Several “supplying countries” no longer export sugar • US Refined TRQ, shortages have required US to increase the refined quota above and beyond minimum import requirement. Yet, Mexico continues to receive a large portion of the additional allocation • Both issues need to be revisited and updated – they can be challenged by WTO Members with success, but the best way to address these issues would be negotiation

14. Conclusion • DDA remains viable, despite the hyperbole of the media • Major progress made between 2007 and 2008, thus efforts will be made to continue that progress. • DDA, while improvements are necessary, is the only way to ensure against vulnerability • DDA offers the best means to developing a common-sense approach to renewable fuels policies.