Washington Trade Daily
Volume 21, Number 21 Monday, January 30, 2012
Trade Reports International Group
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An Inconclusive Discussion on Trade
Davos – Trade ministers from 21 countries met informally here on Saturday and reiterated their commitment to build “trust and confidence” by taking small steps both in the Doha Development Agenda trade negotiations and non-Doha areas this year to enhance the “credibility” of the multilateral trading system – including the World Trade Organization (WTD, 1/27/12).
The ministers reached a broad consensus over the need to deliver on least-developed country issues – including duty-free/quota-free market access, “cotton” and special procedures for LDC acceding countries.
US Trade Ambassador Ron Kirk said Washington is ready to move forward on the LDC issues and is willing to talk to anyone if it would strengthen the WTO, according to sources present at the meeting.
But sharp differences over “plurilateral” approaches and whether they are compatible with multilateral negotiations in the Doha round came to the fore between the industrialized countries – led by the United States and Australia – and major developing countries, like India, South Africa and Brazil.
Discussions revolved around the fate of Doha – focusing on the growing public perception that the round is dead and whether important countries are shying away from demonstrating leadership because of political problems at home, said several trade ministers and officials who took part in the meeting.
Strengthen Multilateralism
The European Union issued a strong message about the need to strengthen multilateralism and warning of the inherent dangers to the global trading system due to non-conclusion of the negotiations.
The 21 ministers met on the sidelines of this year’s annual World Economic Forum meeting.
The informal ministerial did not produce any roadmap for moving Doha forward, however.
In his concluding statement, Swiss economy minister Johann N Schneider-Ammann – who chaired the meeting – said members “should be pragmatic and realistic and the process should be bottom-up” in the pursuit of a revived Doha negotiation. He also suggested that ambassadors should explore alternative approaches in parallel with the chair-driven process and should keep open minds in the months ahead. He said priority should be given for concluding the negotiations this year.
According to one trade official at the meeting, WTO Director General Pascal Lamy told the ministers there is “room for pragmatic progress. .... Members are ready to test approaches without any preconditions where progress could be made.” They should do so without any provisional list of issues or sequence of what the final package should look like, he said.
Mr. Lamy alluded to a consensus on LDC issues. He told the ministers it was necessary to deliver some short-term results to resolve doubts about the credibility of the world trade body.
Ahead of the meeting, trade ministers from India, Brazil and South Africa issued a declaration opposing plurilateral approaches to negotiations on the grounds that they “go against the fundamental principles of transparency, inclusiveness and multilateralism.”
“These initiatives weaken the resolve of WTO members to overcome substantive gaps that exist among them and also fail to address the development deficit inherited from previous negotiating rounds,” the three countries said in a statement.
During his intervention at the meeting, Ambassador Kirk said members need to be pragmatic and flexible. No red-lines should be put down at this point and “lanes on the highway” should remain open, he said according to sources.
The USTR said he shared the disappointment expressed by India, Brazil and South Africa over the lack of progress in the Doha negotiations. He added that Washington continues to attach importance to the development dimension of Doha. He admitted disappointment with the statement portraying plurilateral and regional initiatives as going against the multilateral trading system. Plurilateral and regional initiatives only add to the multilateral system, he maintained.
Australia trade minister Craig Emerson insisted members must concentrate on new negotiating pathways. He spoke about addressing trade facilitation and services through a new route, sources told WTD.
India
India trade minister Anand Sharma responded that the statement on plurilaterals was made in the context of the WTO and in the Doha negotiations. He said India – as are South Africa and Brazil – is aware that such approaches can be adopted outside of the WTO, but they would likely destroy the Doha round.
European Union trade commissioner Karel De Gucht issued a strong message on multilateralism and protectionism saying that the WTO’s credibility is at stake. “We would be making a grave mistake by not concluding DDA and we would be destroying a credible international system,” he said. “The non-conclusion of DDA is because of our political problems.”
The EU trade commissioner hinted at the lack of leadership from some key member countries, saying “we have to overcome political problems and come back to the multilateral system.”
Brussels wants to focus on the LDC package now along with other issues – relating to export competition, fisheries subsidies and trade facilitation.
Around the Globe
US trade representative, Ron Kirk, has warned the US public increasingly feels global trade costs jobs, making it hard to sell any new world deal, the BBC reported (see related report this issue). “More and more Americans... believe that we have swapped jobs for cheaper T-shirts and iPads,” he said. Europe and the US have increasingly turned to bilateral trade agreements.
However World Trade Organisation chief Pascal Lamy told a Davos meeting that said bilateral agreements could damage the world economy. The WTO talks have been stalled for more than a decade because of differences between developed nations and fast-growing economies such as China, Brazil and India. Mr Kirk said compromise at those talks – where developed and developing countries are arguing over the levels of trade tariffs – would only be possible if the public supported world trade.
“The principles on which the statement ‘trade is good for the world’ have not been visited for some time,” he told a session at the World Economic Forum gathering in Switzerland. Unless politicians around the world explained why they thought trade would bring jobs and help consumers fight rising prices, then a global agreement could not be reached, he said. “Than it becomes easier, frankly, to just do something practical [and make bilateral agreements]... rather than continue adding to our balance of trade by signing onto agreements to which the American public believes there’s no benefits for us.”
But the comments appeared to attract criticism from the director-general of the WTO who said such country-to-country deals could be damaging. He said that in such negotiations the “balance of forces” would lie with the major powers, such as the US, EU and China. In addition, bilateral trade deals that set special standards – such as vehicle emissions – could fragment the global market, driving up the cost of trade and hurting the economy, he argued. “At the end of the day, you will scatter the market place with bilateral regulatory regimes which business will not like because its dis-economies of scale, so this is where the problem lies.”
European representative Karel De Gucht told the Davos meeting that the problem was that Europe was increasingly competing with countries such as Brazil, India and China on trade. “If it were possible to negotiate an agreement between the major developed economies and the Brics, we would get to something, but at this moment in time it cannot be bridged,” he said.
The U.N. trade chief urged global leaders Saturday to focus much more on reducing growing inequalities around the world than constantly looking to appease financial markets, which largely benefits the rich, the Associated Press reported. Supachai Panitchpakdi pointed to protests around the world from countries that launched the Arab Spring to the Occupy Wall Street movement in the U.S. that demonstrate the growing disparity between frustrated unemployed young people who have no voice and the financiers who reap huge salaries from dealings that don’t promote real economic growth.
U.S. Treasury Secretary Timothy Geithner sharply criticized China’s state-led economic system on Friday, the latest salvo in an escalating trade conflict between the two countries, the Wall Street Journal reported from Davos (WTD, 1/26/12). “China does present a really unique challenge to the global trading system, because the structure of its economy, even though it has more of a market economy now, is overwhelmingly dominated by the state,” he said at a public forum in Davos, Switzerland, during the World Economic Forum.
Chinese policies, including subsidized prices for energy and land and preferential access to capital, have been “very damaging” to trade partners, he said. “That’s why it’s very important that we get China to move comprehensively not just on the exchange rate but on dialing back its subsidies and distortions.” On the issue of the Chinese currency, Mr. Geithner argued that though the yuan has appreciated, it remains undervalued and is “still below almost all measures of fundamentals.” The yuan should rise not just against the U.S. dollar but also against the euro and the yen, he added.
A new team of U.S. trade enforcers will make countries think twice about putting up unfair barriers to American exports, President Barack Obama’s top trade official said according to a Reuters news service report from Davos (WTD, 1/25/12). U.S. Trade Representative Ron Kirk told Reuters that the team, announced by Obama last week, will include intelligence officials as well as representatives of other agencies in order to beef up U.S. resources and crack open markets.
“We want to make sure we aren’t resource-constrained. Other countries know our budget and our resources ... and so they’ll game the system because they know that we’re very discriminating on which cases we make,” Kirk said in an interview. “We don’t want them to make ... that bet that we don’t have the resources to come after them if they’re intentionally and unfairly discriminating against American exporters,” Kirk said, speaking on the sidelines of the World Economic Forum in Davos, Switzerland.
Kirk’s office negotiates and enforces trade deals. But it has only about 250 employees, which could tempt countries to think they can flout world trade rules, Kirk said. “This (the new unit) will provide a much better tool basket and put more bodies in terms of being able to develop some of these cases and gather the intelligence that is necessary to take some of these complex matters before the World Trade Organization,” he said. “There will be additional people, some additional resources,” Kirk said without providing details of any extra funding for the unit.
Obama announced the team during his Jan. 24 State of the Union speech in which he said the United States needs to do more to tackle unfair foreign trade practices and rebuild American manufacturing. As well as officials with the Commerce Department, which Obama is proposing to close as part of a government streamlining, customs personnel will also work with the unit, Kirk said. “Even some of the intelligence agencies will be working collaboratively together” on the project, Kirk said.
Kirk told Reuters in the interview, which was conducted on Thursday, that his office would lead the team.
Campaign 2012
GOP presidential candidate Mitt Romney told participants at the Hispanic Leadership Network conference in Miami Friday that as president he would protect and expand legal immigration that conforms to the needs of the business community (WTD, 1/9/12). Like Gingrich earlier in the day, Romney outlined the importance of Latin America, where there are “huge economic, political and military opportunities” for American foreign policy.
He said that economic ties with Latin America “are not charitable” ties, adding that in the first 100 days of his administration, he “will draw” the U.S. and Latin American business community together because there is a great opportunity “in our self-interest,” and that free trade raises up both partners.
Romney said there are four competing models to lead the world: the U.S., which embodies free trade and freedom; China, which, like the U.S. has a capitalist economy but is authoritarian; resurgent Russia; and the jihadists, whose model is showing up “right here in this hemisphere.” Under the current administration, Romney said, the U.S. is watching when what the U.S. needs to do is recognize the forces of evil. He added the United States needs to promote freedom and democracy for the entire world, something he will do, as opposed to Obama, who delayed the Colombia Free Trade Agreement.
Fresh off his first trip to Cuba, U.S. Sen. Dick Durbin is calling for more constructive engagement with the nation that has been under an American trade embargo for more than half a century - something that could bring big benefits to Illinois agriculture and manufacturing, GateHouse news service reported from Peoria (WTD, 1/9/12). “New diplomacy with Cuba is long overdue,” the Illinois Democrat said in a phone interview Wednesday from Capitol Hill. “We felt with our old foreign policy that we could oust Fidel Castro. It turned out that old age ousted Fidel Castro, not our foreign policy.”
Rejecting “the totalitarian government of Cuba,” Durbin said increased engagement in communications and trade would give ordinary Cubans “a chance to see what life in the West and life in America is all about.” That, in turn, means “an economic benefit here as we increase trade to Cuba,” from grain to machines produced by companies like Peoria-based Caterpillar Inc.
Because Cuba is expanding its offshore oil drilling efforts, it stands to become a “major player in the Western Hemisphere” as well, Durbin said, with access potentially to between 5 billion and 20 billion barrels of oil, in some cases within 45 miles of the coast of Florida.
Hundreds of Poles have demonstrated in Warsaw against a copyright treaty that Poland signed this week, continuing days of protests over an issue that has sparked social anger, the Associated Press news service reported from Warsaw (WTD, 12/15/11). Just last week most Poles had never heard of the treaty in question, the Anti-Counterfeiting Trade Agreement, or ACTA.
Since Sunday it has become the most-discussed problem in the country. It has sparked street protests in many cities nationwide and prompted attacks on government websites that left several paralyzed earlier in the week. On Friday evening about 1,000 gathered in front of the presidential palace in Warsaw, shouting “Democracy!” and “No to ACTA!” The agreement aims to protect intellectual property rights. Opponents say it will lead to online censorship.
A top Burmese official is promising the international community that his country’s military-backed government is not done implementing democratic reforms, the Voice of America reported (WTD, 1/27/12). Trade Minister U Soe Thane told Reuters Saturday the process of reform “is not finished yet.” He said Burma’s government is still looking at additional political changes as well as reforms in the economic sector.
U Soe Thane made the comments in Davos, Switzerland where he is leading Burma’s first official delegation to the World Economic Forum. He said Burma is trying to create an investment friendly environment and attract interest from some of its neighbors, like Thailand, Bangladesh, India and Laos, in addition to China, the United States and the European Union. Nobel Peace Prize winner and Burmese opposition leader Aung San Suu Kyi has also made an appearance at the conference, addressing delegates by video. She called U Soe Thane’s presence in Davos a sign of positive changes. But she also warned that Burma has not yet reached a point of “great transformation.”
A proposed European Union concession to help put an end to the 20-year hormone beef trade war with the USA and Canada was unanimously endorsed by the International Trade Committee of the European Parliament on Thursday (WTD, 5/30/11). The proposal, which would raise the EU import quota for beef from animals not treated with hormones, will be put to a vote by Parliament as a whole on March 13.
If approved by the full Parliament, the regulation will allow third countries to sell the EU 48,200 tonnes of duty-free high-quality beef from animals not treated with growth-promoting hormones. The EU import quota increase was agreed in bilateral conciliation talks and memoranda of understanding already concluded with the US and Canada. In exchange, the US and Canada have already suspended import duties, amounting to almost $130 million, imposed on “blacklisted” EU farm produce. The new import tariff quota will take effect as of August 2012.
The proposed free trade agreement between India and the European Union has hit another snag with both the law and home ministries ruling out opening up the legal sector to foreign players, the Indian Express reported (WTD, 1/27/12). While a political framework for an agreement is likely during the annual summit beginning February 10, a formal signing of the pact is not on the agenda.
The Bar Council of India, a statutory body that regulates and represents the legal fraternity, has also thrown its weight behind the two departments, official sources told The Indian Express. The 27-member European Union is keen to explore the services market in India. The country offers huge business opportunities in legal, accounting, banking, insurance and retail services. India, on the other hand, is looking forward to mainly harnessing the potential in the IT and STEs sector. It also is keen to send its doctors, nurses and chefs to the European countries.
The average bribe in Russia surged 3.5 times in 2011 in comparison to 2010, a spokesman for the Russian Interior Ministry’s Main Economic Security Department told Interfax. Critics see government anti-corruption efforts in 2011 as half-hearted. “The average bribe paid to a government or corporate official grew more than 3.5 times to 236,000 rubles,” the Interior Ministry official said, according to Interfax. The amount of damage compensation for crimes committed went up more than 50%.
Russia switched May 2011 to a controversial system of fining bribe-takers up to 100 times the bribe they have taken, instead of jailing them. According to Vedomosti, the largest fine so far imposed has been a $10 million fine imposed on the head of a Tatarstan district, which comprised 60 times the bribe he accepted. However, critics say it is too easy for offenders to move their assets to relatives or otherwise hide assets, and then declare themselves unable to pay the fine. Critics also say that government anti-corruption efforts focus on small fry rather than the big fish in top government positions.
Chinese exports to India continue to surge crossing the $50 billion mark, the Press Trust of India reported. The exports logged $50.04 billion registering a growth of 23.51 per cent over 2010. India-China bilateral trade hit a record $73.9 billion last year, but the ballooning trade deficit in Beijing’s favour rose to over $27 billion, raising concern among Indian authorities. The bilateral trade registered a $12.2 billion increase in 2011, taking the total to $73.9 billion as against $61.7 billion in 2010, according to official trade figures for the last year. The trade deficit in 2011, however, piled up to $27.07 billion even though Indian exports to China went up to $23.4 billion registering a growth of almost 12.26 per cent compared to the same period in year 2010.
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On the Web......
Agriculture
Canada
Foreign Investment. Canadian government statement on foreign investment in Canada. (available at: http://www.international.gc.ca/media_commerce/comm/news-communiques/2012/01/27a.aspx?view=d ) issued: 1/27/12.
Competitiveness
Report. Report of the Council on Competitiveness. (available at: http://www.compete.org/news/entry/2073/council-on-competitiveness-releases-u.s.-manufacturing-strategy-at-landmark-summit/ ) issued: 12/11/11.
Ecuador
Trade Policy. World Trade Organization trade policy review of Ecuador. (available at: http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/TPR/M254A2.doc ) issued: 1/26/12.
European Union
US Relations. TransAtlantic Business Dialogue statement on US-European Union relations. (available at: http://www.tabd.com ) issued: 1/27/12.
Export Controls
Syria. Text of S 2034 introduced by Sen. Gillibrand January 24 to impose sanctions against Syria. (available at: http://thomas.loc.gov )
Turbine Engines. Public comments to the Commerce Department on export control reforms for turbine engines. (available at: http://efoia.bis.doc.gov/pubcomm/revision_to_ear/public_comments_gas_turbines_engines.pdf ) issued: 1/27/12.
Intellectual Property Rights
ACTA. Knowledge Ecology International letter to the Senate Judiciary Committee on the Anticounterfeiting Trade Agreement. (available at: http://keionline.org/node/1349 ) issued: 1/27/12.
Japan
US Relations. US Trade Representative’s office statement on US-Japan economic harmonization initiative. (available at: http://www.ustr.gov/about-us/press-office/press-releases/2012/january/us-trade-representative-ron-kirk-announces-progres ) issued: 1/27/12.
Manufacturing
US. Commerce Department statement on US manufacturing. (available at: http://www.commerce.gov/blog/2012/01/27/commerce-secretary-john-bryson-visits-manufacturing-facility-columbus-ohio ) issued: 1/27/12.
Middle East
Services
Steel
Syria
Sanctions. Text of S 2034 introduced by Sen. Gillibrand January 24 to impose sanctions against Syria. (available at: http://thomas.loc.gov )
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