The Custom-House

Do you want that with

Do you want that with fries?

John Palmer (the Eccentric Econoclast) points to an example of the substitution North Dakota minimum wage labor (and a little capital) for Oregon minimum wage labor: "Capital-Labour Substitution in Fast Foods"

What does the Director-General of the WTO do?

What does the Director-General of the WTO do?

The World Trade Organization (WTO) is in the process of selecting a Director General (DG) for the next four years. The WTO DG is responsible for running the WTO's 600 person secretariat in Geneva. The DG is not a decision maker with respect to the details of trade agreements; the WTO members take the member-driven nature of the organization seriously. But the DG can play an important role in the negotiations. The size of the role depends on the DG's initiative and character.

During his speech to the World Trade Organization's General Council on January 26, WTO Director-General (DG) candidate Pascal Lamy described how he saw the role of the WTO DG:

"...I think that the role of the DG is threefold: he is a manager; he is an advocate; and he is a honest-broker...

Why a manager? Because he is responsible for the activities of the Secretariat, for the conduct of WTO operations, for the management of WTO personnel. He must fix objectives, and evaluate performance. And because he is given this job, he is himself responsible for his own performance before the members who vote the budget. He must manage, and in order to manage, he must motivate, lead, and reform if necessary, notably in the direction of transparency...

Why an advocate? Because the DG is spokesman for the organization and the goals defined by the members of the organization. In Geneva and in national capitals, where he must be capable of opening doors. In the media. In debate, notably with those who criticise us, sometimes fairly, but also with those who have even more fundamental objections. To do so, the DG must be able to speak several languages. The language of our WTO agreements, in which we are of course all masters of its sometimes obscure (at least for the non-initiated) complexities. But also the simple language of international public opinion. A Director General must convince. And to do that, he must be convinced. For example, on the priority of multilateralism over bilateral agreements, whatever their virtues...

Why an honest broker? Because the members of the organization have different positions, sometimes conflictual, and these differences are if anything growing as our membership grows. The solution remains in the art of compromise between sovereign nations. The DG must therefore be able to facilitate, he must be considered by the members as an objective interlocutor, an intermediary in whom everybody has confidence, capable of reducing disagreement, mistrust, and prejudice. He must be ready to make a contribution as a catalyst in this peculiar chemistry set of consensus, in full co-operation with those to whom you have conferred responsibilities as chairmen of different councils and committees. He must be both engineer and mechanic, with the WTO agreements as his technical manual. He must be ready to stand aside when necessary. And to be available when necessary.

The sheer complexity and necessity of this role is not, I fully recognise, precisely defined by the texts which govern this organization. The DG of the WTO has no �powers� of this kind. Because the organization remains member driven, he has no right to such a role, he must earn it. And in what currency is this role earned? In trust. The DG must construct a trust-fund with a revenue stream based on respect for his role. Not to save it. But to spend it, in the service of the organization."

On the Road to Hong

On the Road to Hong Kong

The Trade Ministers of the members of the World Trade Organization (WTO) meet every two years. This "Ministerial Conference" is the highest level decision-making body in the WTO.

They met in 1999 in Seattle, in 2001 in Doha, Qatar, and in 2003 in Canc�n, Mexico. Their next meeting will take place this December 13-18 in Hong Kong. There is no chance that they will complete the current Doha Round negotiations at this meeting. Their meeting may propel those negotiations into their final phase, with completion in 2006.

Gustavo Capdevila reports that a meeting of ministers from a number of WTO member nations at Davos, Switzerland last week is expected to give Doha Round negotiations a boost ("Davos meet recharges Doha Round of WTO talks", Asia Times Online 2-1-05).

"The World Economic Forum's 2005 meeting will be remembered more for having served as the scenario for the reinvigoration of the Doha Round of trade talks than for the statesmen and celebrities who visited this Swiss mountain resort last week...

Swiss Economy Minister Joseph Deiss, who hosted the ministerial meeting in Davos, said the ministers must go to Hong Kong with "concrete progress" on modalities in agriculture and industrial goods as well as a "critical mass" of progress on services and trade facilitation. The draft agreements, he said, should also include a "proper reflection of the development dimension" - a reference to the assymetries between nations that put developing countries at a disadvantage.

The key issues in the run-up to Hong Kong will be discussed in a new ministerial meeting to take place in Kenya in early March. The ministers stated that the draft texts of the agreements - the "approximation of the kind of modalities we will like to see", in Supachai's words - should be ready by August. If there is no outline of the modalities by then, it will be very difficult to reach an agreement next December, said Alfredo Chiarad�a, Argentina's secretary of foreign trade.

Deiss said the negotiators must reduce their differences and that only a few major political questions should be left pending by the time the ministers meet in Hong Kong. "

Gary Duncan and Robert Thomson report on current Director-General Supachai's vision of the road to Hong Kong ("WTO chief sees light at the end of trade talks", TimesOnline 2-1-05):

"In an effort to keep the process on track, Dr Supachai, along with senior negotiators such as Mr Mandelson and his outgoing US counterpart, Robert Zoellick, pinpoint July as a crunch moment. By then, the Director-General wants to ensure that agreement has been reached on details about what will be negotiated at Hong Kong�s ministerial meeting five months later. He wants no repeat of the Canc�n fiasco: �That�s why I have been floating the idea that we make use of the July benchmark to do a stock-taking or reality check to see how far we have got and what we have done,� he says. �By July we should have this assessment, and not in October or November � it will be too late. If they (the ministers) want to do it � it�s July.� "

Anti-globalization workshops and demonstrations require advance planning, just as a ministerial meeting does. Alexandra Harney reports that planning for demonstrations at the Hong Kong meetings has already begun: "Protesters meet in HK ahead of WTO gathering".

"More than 10 months before Hong Kong hosts the World Trade Organisation's next ministerial meeting, non-governmental organisations are planning their own talks to craft a strategy for protests and other activities.

Hong Kong NGOs, union leaders and other groups have scheduled a meeting for February 26-27 in the former British colony "to map out the plan of action both during and leading up to" the December 13-18 meeting, said Rey Asis, regional secretary of the Asian Students Association, one of the organisers..."

Friends of Anti-dumping Negotiations One

Friends of Anti-dumping Negotiations

One of the groups organized to push a point of view in the current WTO negotiations is the "Friends of Anti-dumping Negotiations."

Firms are said to "dump" goods when they sell them in a foreign country for less than they sell them in their own. The U.S., and increasingly other countries, have "anti-dumping" legislation to prevent this.

Anti-dumping is ripe for abuse. Dan Ikenson of the CATO Institute discussed the U.S. statute, here: "Antidumping: The Unfair, Unfair Trade Law":

"The antidumping law, perhaps the most arbitrary and disruptive U.S. trade barrier, is defended as a means of ensuring �fair� trade and maintaining a �level playing field� for domestic producers. Tough antidumping rules, its defenders claim, facilitate freer trade by providing assurances that �unfair� trade will be punished and thus deterred.

But that dubious justification is a smokescreen, pure and simple. The fact is that the antidumping law is protectionist, contradictory and unfair. Its overzealous application routinely punishes U.S. importers and foreign exporters who transact fairly, and ultimately undermines the administration�s broader trade agenda.

The Import Administration (IA) is part of the U.S. Department of Commerce. According to its Web site, the IA �[e]nforces laws and agreements to prevent unfairly traded imports and to safeguard jobs and the competitive strength of American industry.� It is a classic case of the fox watching over the henhouse. The IA�s concern for American industry extends only to those industries seeking to squelch foreign competition. The consequences for downstream producers and U.S. exporters are systematically ignored.

The IA�s methods of determining dumping are rigged in favor of protectionist outcomes, but are insulated from popular scrutiny by arcane and highly technical procedures. Indeed, most defenders of the law have no idea how it works in practice, but are simply attracted to its appealing rhetoric of �fair trade� and �level playing fields.� If it sounds good, it must be good.

Dumping is said to occur when an exporter�s prices in the United States are lower than those it charges for similar merchandise in its home market. Procedures for determining these price differences are not straightforward. They are subject to curious conditions and indefensible calculations, which are strictly the domain of the Import Administration."

For example,

"In virtually every case, all of the exporter�s U.S. sales are compared to only a higher-priced subset of its home-market sales (sales in its own country). Home-market sales priced below the average cost of production are simply disregarded. If an exporter sells five widgets in both the U.S. and the home-markets at prices of $1, $2, $3, $4, and $5, the average price in both markets is $3. No dumping, right? Wrong! If it costs $2.50 to produce these widgets, the home-market sales at $1 and $2 are dropped, causing the average home-market price to rise to $4 and generating a dumping margin of $1, or 33 percent. A tax of 33 percent would be slapped on future U.S. sales from that exporter. This procedure alone accounts for a significant portion of most dumping margins �calculated� by IA across industries, across countries, and over time. Yet, not a single antidumping defender could reasonably justify this so-called �cost test.�

Ikenson's column links to a more detailed report he co-authored, with Brink Lindsey, on the U.S. anti-dumping law and practice: "Antidumping 101: The Devilish Details of "Unfair Trade" Law". If you really want to get into the weeds, get Lindsey and Ikenson's Antidumping Exposed. The Devilish Details of Unfair Trade Law the book version of "Antidumping 101."

The WTO has rules (the Anti-dumping Agreement") on how countries can respond to instances of dumping. These rules are on the table during the current, Doha, round of negotiations.

The "Friends of Anti-dumping Negotiations" would like to see more controls introduced on anti-dumping legislation. The "Friends" includes Brazil, Canada, Japan, South Korea, Taiwan, Thailand, Singapore, Hong Kong, Mexico, Chile, Costa Rica, Israel, Norway, Switzerland, India and Columbia. (Bridges)

The United States is not one of the "Friends", and "remains in the opposite camp, considering the right to use anti-dumping measures to be a high priority in ongoing talks." (Bridges)

The "Friends" met in Geneva on January 18-20 to think through their negotiating plans for the coming year. The anti-dumping rule negoitiations are taking place within the WTO's "Negotiating Group on Rules". The next meeting of this negotiating group is on February 21-23. (Bridges)

Source: International Centre for Trade and Sustainable Development. " 'Friends' Group Meets on Anti-dumping to Prepare for Rules Talks." Bridges Weekly Trade News Digest January 26, 2005. Pages 10-11.

Wolf on Rich Country Agricultural Subsidies

Wolf on Rich Country Agricultural Subsidies

In a recent issue of the Financial Times, Alan Beattie explains the tradeoff "at the heart" of the current world trade negotiations (in the �Doha Round�):

"At the heart of any final deal is likely to be a bargain between the rich trading blocs, the European Union, US and Japan, and big emerging market countries such as India, Brazil and South Africa.

The deal would see the rich nations cut subsidies and tariff protection on agriculture in return for better access for their goods and services exports to those emerging markets."

("Doha round faces long and winding road", Financial Times) .  US, EU, and Japanese subsidies to agricultural producers could be an important part of the tradeoff.

Martin Wolf spoke to these subsidies in his recent book, Why Globalization Works. Rich country subsidies to agricultural producers poison the competitive environment for developing countries in an area that might otherwise be a strength for them:

��perhaps the greatest of all the scandals [Wolf charges that for various reasons, including the subsidies, rich country treatment of the developing countries is hypocritical � hence the term �scandals� - Ben] remains the treatment of agriculture. In this area, one of comparative advantage for many developing countries, they have hardly managed to raise their share of world exports. This is so even though agriculture is, for the high-income countries, of trivial economic importance in terms of GDP, employment and trade. What stops the developing countries is the staggering scale of rich-country subsidies.

Rich country spending priorities are wrong:

�According to the Organization for Economic Co-operation and Development, total assistance to rich country farmers was $311 billion in 2001, six times as much as all development assistance, indeed more than the GDP of sub-Saharan Africans. In 2000, the EU provided $913 for each cow and $8 to each sub-Saharan African. The Japanese, more generous still, though only to cows, provided $2,700 for each one and just $1.47 to each African. Not to be outdone, the $US spent $10.7 million a day on cotton and $3.1 million a day on all aid to sub-Saharan Africa.

The subsidies are counter-productive, even for the rich countries themselves:

�The priorities shown here are obscene. In order to justify the grotesquerie of its agricultural policy regime, the common agricultural policy, the EU has started to apply the notion of �multi-functionality�. By this it means that agricultural supports are justified by their ability not only to support farm incomes, but to protect the environment, food security and rural life. The EU is right about the multi-functionality of the CAP, just wrong about the functions its policies serve. The CAP is regressive (since it provides 50 per cent of its benefits to the 17 per cent biggest farmers, who need this help least), wasteful (since it still consumes almost half of the EU�s budget), environmentally damaging (since it encourages needless intensification of agricultural production) and harmful to developing countries (since it deprives them of markets and undermines the competitiveness of their farmers with its dumping of subsidized surpluses). This is multi-functionality with a vengeance. The picture is little different in the US: only 16 per cent of the support goes to the 80 per cent of the farmers who operate on a relatively small scale."

These subsidies damage developing countries in a variety of ways:

"Unfortunately, while the Uruguay round brought a little discipline to this sector, it was grossly inadequate. [Prior to the Uruguay Round of trade negotiations, negotiations to reduce trade barriers had not focused on agriculture. The Uruguay Round, completed in 1994, took first steps to address barriers to agricultural trade. Agriculture is supposed to be a central element of the current �Doha Round� of negotiations - Ben] Agricultural support in the EU and US was higher in the late 1990s, as measured by the OECD�s Producer Support Estimates, than between 1986 and 1988, the base years for the Uruguay Round agreements. Much of the support is still output related. [output related support may encourage additional, hurtful, production - better to "decouple" support from output - Ben] Moreover, many of the subsidies that are supposed not to affect production do so. Because farm supports are anti-cyclical, they increase the instability of residual world markets, with devastating effects on exporters from developing countries. Moreover, subsidized surpluses are still being dumped on world markets. The US and EU account for around half of all world wheat exports, with prices 46 and 34 per cent respectively below the costs of production. In 1998, subsidized exports made up a quarter of global exporters. The EU is the world�s largest exporter of skimmed-milk powder, at half the costs of production. It is also the largest exporter of white sugar, at a quarter of the costs of production. Some argue that such dumping can be beneficial to developing countries that are net food importers. With very few exceptions, this is not so. In most developing countries, farmers are not just the majority of the population, but the overwhelming majority of the poor. Thus the dumped products benefit an urban minority at the expense of the rural majority. Often the subsidized food has turned countries into net importers. Without it, they would both be net exporters and possess far healthier rural economies. While the transition to a world of higher international food prices needs to be handled carefully � and food aid needs to be available to help food importing countries and those vulnerable to harvest failure � it is virtually certain that developing countries would gain hugely from the elimination of current farm policies in the high-income countries. The World Bank has estimated the annual welfare losses to developing countries at $20 billion a year � close to 40 per cent of all development assistance.�

Source: Martin Wolf. Why Globalization Works.. Yale University Press. New Haven: 2004. pages 213-214.

Newsweek Interviews Pascal Lamy Newsweek

Newsweek Interviews Pascal Lamy

Newsweek reporter Karen Lowry Miller interviewed Pascal Lamy for the February 7 issue: "There Is No Trade King"

Why does he want to be WTO Director-General?

"Why do you want to head an institution you once called medieval?

Twice, in Seattle and in Cancun. I was terribly frustrated at the way ministerial conferences are structured, or unstructured. Only a miracle could have saved Seattle or Cancun. When taking the right decisions depends on a miracle, we are back to the Middle Ages. We need to improve many things, such as the roles of the host minister and the chief of the negotiating council, how do we decide when topics need facilitators, and so on. We need more transparency.

So what would you do as king of the WTO?

There is no king. You've got to be recognized as a broker, and you have to earn your respect every day.

In this climate, doesn't the director-general have to be able to knock heads together?

There is a leadership challenge now. But the same people who insist on leadership are the same who insist on the fact that we are a member-driven organization. [As the director-general] you don't have any power. You have to build a capital of trust across the board, among all the members, which they accept you might try spending from time to time."

Which Candidate Will the Australian's Choose?

Which Candidate Will the Australian's Choose?

Australians export wheat. Wheat prices are down. The EU has just approved export subsidies for wheat. The Australians are unhappy; they think the EU is going back on subsidy reduction commitments made last summer.

David Uren reports that among other responses, the Australians are reminding the EU that they haven't decided on whether or not to support the EU candidate for Director-General of the WTO ("The Australian: Fury over wheat subsidy about-face" from The Australian):

"Trade Minister Mark Vaile said yesterday the new European subsidies were contrary to a commitment made last July to eliminate export subsidies from agricultural exports as part of the Doha round of world trade talks...

The Trade Minister said he would register Australia's serious concern with the new European Union trade commissioner, Peter Mandelson, at the World Economic Forum in Davos later this week. Mr Vaile was known to be sympathetic to the claims of Mr Mandelson's predecessor, Pascal Lamy, to take up the position of WTO director-general, which falls vacant at the end of August.

Mr Lamy and Mr Vaile have a good personal relationship, and Australia recognised his toughness in persuading the EU to agree last July to abolish agricultural subsidies.

Mr Lamy's key rival for the job, Uruguay's Carlos Perez del Castillo, also has a strong claim on Australian support, as Uruguay was a foundation member of the Cairns Group of agricultural exporters.""

P�rez del Castillo has already visited Australia looking for support. A post on the earlier visit is here: "What Will Australia Do?".

Doha Round Prospects Alan Beattie

Doha Round Prospects

Alan Beattie explains the key tradeoff in a Doha Round trade agreement:

"At the heart of any final deal is likely to be a bargain between the rich trading blocs, the European Union, US and Japan, and big emerging market countries such as India, Brazil and South Africa.

The deal would see the rich nations cut subsidies and tariff protection on agriculture in return for better access for their goods and services exports to those emerging markets."

("Doha round faces long and winding road", Financial Times)

Beattie points out that there are several external events this year that may create challenges for the negotiators. One is the possibility that the current race for WTO Director-General may get out of hand:

"The first is the competition to replace Supachai Panitchpakdi as director-general of the WTO when he steps down in August...

Member countries say they are desperate to avoid a repeat of the bitter stalemate that characterised the previous competition...

However, with some poor countries affronted that the EU has put forward Pascal Lamy for a post they think should be reserved for a candidate from the developing world, there is potential for a prolonged and debilitating fight that will halt progress on the Doha talks."

Then, there are the increase in Chinese competition in textiles and clothing and the falling U.S. dollar:

"China is another worry...

The end of the global textile quotas at the beginning of this year provides a test case for how quickly China can seize market share in an industry in which it indisputably has a strong competitive advantage.

Textile producers in developing countries that benefited from the quota system, including Mauritius and Bangladesh, as well as the familiar textile lobby in the US and the EU, will be trying to use every conceivable form of safeguard and anti-dumping mechanism to protect themselves from the onslaught of cheap Chinese imports. This does not bode well for enthusiasm for liberalisation...

The final wild card is the dollar, which has fallen to levels that are causing European exporters to squeal with pain...

The sight of the dollar bloc gaining competitive advantage while the Bush administration stands by will do little for the rest of the world's affection for free trade and open markets..."

Paul Blustein's new book (on

Paul Blustein's new book (on the Argentine crisis)

Paul Blustein, the Washington Post international economics reporter, has a new book coming out on the Argentine financial crisis of 2001: "And The Money Kept Rolling In (And Out)"

Blustein was the author of The Chastening, a history of the East Asian financial crisis. He describes the new book as somewhat different:

"A previous book, The Chastening, had covered the crashes of economies in Asia, Russia and Brazil in the late 1990s. But this is a different kind of book. Most important, it has what I would call a high indignation quotient. The more I delved into the story, the more people I interviewed, and the more documents I obtained, the more appalled I became about the part the international community had played in pumping up Argentina's economy to dangerously vulnerable levels and then letting the country down badly when the bubble burst. The book reflects my disgust with a system that so woefully fails the people of countries seeking to claw their way into the First World. For people who believe in the power of globalization to raise living standards in the developing world � and I count myself among them � the story of the most spectacular national bust of recent times is a sobering drama of immense significance for us all."

Here are some other articles on Argentina by, or with contributions by, Blustein:

"Argentina Didn't Fall on Its Own. Wall Street Pushed Debt Till the Last ";

"IMF Says Its Policies Crippled Argentina: Internal Audit Finds Warnings Were Ignored";

"A Social Contract Abrogated: Argentina's Economic Crisis".

WTO DG Candidates Address the General Council

WTO DG Candidates Address the General Council

The four candidates for Director-General of the WTO addressed the WTO's General Council today, in what is being billed as the start of the campaign. Later in the day, three of them attended a "public hearing" sponsored by NGOs.

Candidates were given a chance to address the General Council and the Council was given a chance to ask them questions. Each had an hour to an hour and a quarter.

The WTO has posted a new web page dealing with the Director-General (DG) selection process. The page has detailed biographies, and copies of the statements the four candidates made to the Council: WTO | Director-General: Selection Process The Bridges Weekly Trade Digest summarized the candidates remarks: "DG Candidates Meet With General Council".

This story by Richard Waddington of Reuters is a good one: "Candidates Make Pitch for Top World Trade Job". Here's where we are:

"Wednesday's presentation of the candidacies marks the formal launch of campaigning, which will run until the end of March.

Then the head of the General Council, on which all states sit, will sound out members in a bid to cut the field, first to two and then just to one before the end of May."

The candidates have different strengths and weaknesses:

"Lamy's greater international renown may have made him an obvious early favorite, but Geneva diplomats warn that he is far from being a shoo-in to a job which carries much prestige but little in the way of real power.

Perez del Castillo is considered to have been highly effective as council chairman and is well respected in Geneva. Brazil carries much weight in world trade politics, while the Mauritian minister comes with the backing of African states."

This Agence France Presse is also good, providing more information on the arguments the candidates are making: "Four trade diplomats battle to win top job at WTO" (via TurkishPress.com).

The Uruguayan, Mauritian, and Brazilian candidates are pressing the claims of the developing world to a leadership position during the "development round" of trade negotiations:

"With much at stake, the candidates from Mauritius, Brazil and Uruguay pressed the need for developing countries, which form a majority at the WTO, to have a greater influence on the negotiations.

"We are in the middle of a development round, developing countries have a major stake in this round, therefore it is advisable in my view ... to have a developing country at the helm," Seixas Correa, Brazil's ambassador to the WTO, told reporters.

For his part, Cuttaree, who is currently the foreign minister of Mauritius, insisted that poor nations had the know-how to head the organisation.

"I don't think it would be proper to assume that if you want to have a competent person to run the WTO, that this person necessarily has to come from a developed country," he told a separate news conference."

This AP story ("4 Candidates Compete for WTO Leadership " (via Forbes) reports that, in certain circles, P�rez del Castillo is the current favorite:

"Ladbrokes, the world's biggest bookmaker, currently has Perez del Castillo as the 5-to-4 favorite. It did not provide odds for the other candidates.

Perez del Castillo laughed when told by the AP that he was the British firm's top tip.

"I certainly think I have good chances, otherwise I wouldn't be running," he said. He said he has solid support in Latin America, aside from Brazil. He also is believed so far to have backing from several African and Asian nations."

Frances Williams reports in the Financial Times that France's Lamy and Uruguay's P�rez del Castillo may be the front runners:

" Still, the consultations aim to test not only the strength of support for each candidate but also its breadth and diversity and the degree of opposition. This, say some trade diplomats, should ensure a strong showing for Mr Lamy who, apart from EU support, is thought likely to receive backing from the US, Japan and a number of African, Caribbean countries with EU ties.

His main rival is seen as Mr P�rez del Castillo, a respected WTO �insider� whom supporters believe can attract the desired consensus. He claimed yesterday to have the �overwhelming� support of Latin American countries, as well as backing from other regions.

Trade envoys say Mr Cuttaree, in spite of his formal endorsement by the African Caribbean Pacific group, may be the first to drop out of the race, because he is opposed by countries that fear he would not fight for freer trade. Mr Seixas Corr�a has struggled to make headway both in his own region and elsewhere."

("Race for leadership of WTO heats up".

Later in the day, three of the candidates, Lamy, Seixas Corr�a, and Cuttaree attended a question and answer session sponsored by several NGOs: the Institute for Agriculture and Trade Policy, Oxfam, and "3D: Trade-Human Rights-Equitable Economy". The session was webcast live, and a video of the session has been promised by around January 31: Institute for Agriculture and Trade Policy. The Bridges Weekly Trade Digest reported on the session: "DG Candidates Follow Up GC Hearing With Civil Society Meeting".

Revised January 27