The Obama administration has launched a “21st Century” trade negotiation with a number of pacific-rim nations referred to as the Trans-Pacific Partnership (TPP). While the full details of the proposed treaty are yet to be made public, early estimates show that the economic benefits of the agreement will be relatively small and the regulatory costs could be significantly high—especially for the emerging market and developing countries engaged in the negotiations.
The gains of the agreement may be a mere $20 billion, or just over one percent of GDP on average for the nations involved. To get those small gains nations will have to trade away the ability to use measures to prevent and mitigate financial crises, to develop a growth-based innovation system, to protect public health and the environment, and more.
The concept of competitiveness has attracted a lot of attention by scholars, policy makers and international economic institutions in recent decades. But it suffers from some misconception when applied to developing countries. In a forthcoming book, Competitiveness and Development: Myth and Realities(Anthem Press),I have explained that developed countries have been concerned with competitiveness at the high level of development by undertaking, inter alia, technological development and upgrading of their industrial and service activities. Yet, they have been imposing competitiveness at the low level of development on developing countries. They have been doing so, by advocating neo-liberal views, e.g. through Washington Consensus, and imposing across-the-board and universal trade liberalization on developing countries through International Financial Institutions (IFIs) and WTO, and regional and bilateral trade agreements.
The World Trade Organisation’s Ministerial Conference was held in a calm and relaxed atmosphere in Geneva last week.
Past WTO ministerials had been tension-filled, with some Ministers (usually from developed countries) often aided by the Secretariat, trying to push for mandates to launch talks on new rules or treaties, and Ministers of developing countries resisting.
The decisions would be made by a small group of 20, usually selected by the Secretariat or the host Minister, and there would then be great tension to as to whether the whole membership would agree to what the small group of 20 had decided. Sometimes the small group could not agree among themselves.
Thus, WTO ministerial, or more recently “mini-Ministerials” of 30 or so members, could end in induced success or inglorious failures, with the failures exceeding the successes.
The WTO ministerial meeting in Geneva last week failed to take any decisions on the question of food security. Indeed, we knew this would be the outcome even before the meeting began. As the ICTSD reported, two proposals on food security – both calling for exemptions from export restrictions for the world’s least developed and net food importing developing countries and for humanitarian food purchases by the World Food Programme – did not gain sufficient support at the WTO General Council meeting in late November to make the Ministerial agenda.
The fact that WTO members could not even support discussion of these specific measures does not bode well for the adoption of a broader and more comprehensive food security agenda at the WTO. The disagreements over rules on export restrictions have in fact served as a distraction from the broader food security issues that the WTO is already supposed to be working on.
Signs of a New World Order are everywhere here in the French Riviera, as the elite city of Cannes hosts the G20, the ultimate elite club. The local business rag, the Riviera Times, trumpets a recovery of the tourism business during the 2011 summer season – thanks to a 50 percent increase in visitors from China.
In my hotel lobby there are stacks of China Daily, but no such freebies from the newspapers of the Old World Order powers. Walking by the kiosks, though, I see European headlines rejoicing at the likelihood that China will aid in the Greek bailout. The head of the European Financial Stability Facility, the pot set up to rescue basket case countries, traveled to Beijing last week and rattled a tin cup for donations from China’s $3 trillion reserve fund. This comes amid news that Chinese investors have acquired distressed Swedish carmaker Saab. (They already own Volvo.)
How will China’s juggernaut status affect the G20’s agenda? In both positive and negative ways, in my view. On the positive side, they could hold some of the other governments’ most extreme free market tendencies in check. Take, for example, some of the positions the Obama administration is pushing in bilateral and regional free trade agreements. In the recently signed treaties with Panama and Colombia, they pushed through new rules that ban the use of capital controls, despite the fact that many countries are using these policy tools to combat financial volatility and the International Monetary Fund is recommending them in certain circumstances. The Chinese government, a capital controls user, would never go along with it if the Obama administration tried to push such nonsense at the global level.
Researchers at the Osgoode Hall Law School of York University have launched a new website, International Investment Arbitration + Public Policy. This website, www.iiapp.org, launched last month, aims to showcase research on international investment arbitration in a way that is accessible, independent, and relevant. It was motivated by past questions from governments, businesses, NGOs, and the media related to the rise in so-called investor-state disputes allowed by some trade and investment agreements.
Its purposes are to:
provide open access to research on investment arbitration;
identify options for governments in responding to investor lawsuits;
shed light on the role of investment arbitrators in policy-making; and
highlight the case for more openness, independence, and public accountability in the system.
As the U.S. Congress prepares to vote Wednesday, October 12, on free trade agreements with Korea, Colombia, and Panama, Triple Crisis notes below several important critiques from bloggers. All point to the limited reforms to the “NAFTA template” made by the Obama Administration. The scheduling of the votes on the anniversary of Columbus’s “discovery” of the Americas is an irony apparently lost on congressional leaders.
Since the early 1990s Latin American nations have been signing trade treaties with the United States that have brought small gains and high costs. Pending deals between the United States and Colombia and the United States and Panama are no different. Each is based on the same template that has been the cornerstone of US trade policy since the North American Free Trade Agreement (NAFTA).
In a new paper I review estimates of the gains from trade from numerous Latin American-US free trade agreements (FTAs) from the 1990s to the present, and juxtapose such gains with the fiscal and regulatory costs associated with those treaties. The analysis shows that Latin American nations are signing deals where the net benefits are ambiguous at best. Indeed, estimates show that the US-Colombia trade treaty pending in the US Congress would yield negative net welfare benefits for Colombia, cost the Colombian government $633 million in tariff revenue, and force Colombia to deregulate its financial sector, and choke its policies for innovation and productive development.
Is the governance of global economy conducive to growth, development and stability?
Would the coming G20 and WTO ministerial meetings remedy the systemic deficiencies? I doubt so.
A series of crises have hit the world economy during the last few years. There is a deadlock in the negotiations in the Doha Round. In fact, there is a lack of confidence in the governance of the global economy in general, reflected in the jump in the price of gold by over 100% between November 2008 and July 2011. Although the current economic recession is not as severe as that of the 1930s, it is the worse since then. Had the international community agreed on the proposals made by Keynes on the governance of the world economy and the establishment of International Trade Organization (ITO), the situation would have been different.