The Custom-House

What does it take to make $230 million in 15 minutes?

Brad DeLong explains Alamedia of "Unfogged" Is Puzzled by Investment Banker Compensation Levels .

Looks Like it's Lamy

Bradley Klapper reports for the AP, that: "Pascal Lamy Wins Race to Lead the WTO" (via Washington Post, May 13). 

Pascal Lamy of France has won the race to lead the World Trade Organization and should be appointed later this month, the head of the selection panel said Friday.

Kenyan Ambassador Amina C. Mohamed told delegations at the 148-member WTO that she would recommend the governing General Council appoint Lamy as director-general starting Sept. 1...

"The preferences and the breadth of support provided a very clear picture of the will of the members in this final round of the selection process," Mohamed said, adding that Lamy is the candidate most likely to attract consensus...

Elisabeth Perennou, his assistant at the Our Europe think tank, said Lamy told her Friday that he will only comment after the General Council makes its formal decision May 26.

In an earlier story today, Klapper reported that Carlos Perez del Castillo had withdrawn from the WTO Director-General race, after a briefing (before the news was released to the WTO membership later in the day) on the results of the consultation from the head of the selection committee.

He said he had learned from Guillermo Valles Galmez, the Uruguayan ambassador to the Geneva-based WTO, that Lamy had the strongest support among the 148 members of the body that supervises global trade.

Valles Galmez had just met Kenyan Ambassador Amina C. Mohamed to learn the results of the polling she has been conducting as head of a three-member panel at the center of the selection process.

"Uruguayan Candidate Yields to Lamy on WTO", (via Washington Post, May 13.)

A Klapper story on Saturday quoted former WTO Director-General candidate Jaya Krishna Cuttaree of Mauritius, raising concerns about the lack of information provided during the selection process.  Klapper reports that (among other comments) "...Cuttaree criticized the selection process that chose Lamy because the panel keeps its criteria secret." ("Pascal Lamy Wins Race to Lead the WTO" (May 14).   

Note that no tabulations of survey information on national preferences is released during the selection process. While the selection committee polled the member nations to learn their preferences, they don't use a known formula for aggregating the information, and they do not release information about the numbers of countries supporting the candidates. The Brazilians raised concerns about this after the first round.

Richard Waddington reports for Reuters: "Lamy set for top WTO job, rival pulls out" (via Washington Post, May 13).  Waddington noted that this is, technically, not the end of the selection process:

"The recommendation of the three-person panel, led by Kenya's ambassador Amina Mohamed, will be announced to trade ambassadors at 1500 GMT. But a formal decision on whether to give the job to Lamy will only be taken on May 26...

Although theoretically some states could attempt to block a consensus decision to support Lamy at the council meeting in two weeks' time, diplomats said this was unlikely."

Elizabeth Becker reports for the New York Times: "Europe's Ex-Trade Commissioner Is Picked to Lead W.T.O.".

Alan Beattie and Frances Williams reported in the Financial Times: "Lamy's last rival for WTO post withdraws" (May 13).

Mr Lamy's strongest opponents - Latin American banana-growing countries such as Costa Rica, which suspect he favours their Caribbean competitors - signalled they would drop their objections. Barring a last-minute hitch, Mr Lamy will be confirmed within two weeks and will replace Supachai Panitchpakdi, the incumbent, in September.

Why did India back Lamy? India's Financial Express explains: "Not India’s first choice".

India supported Pascal Lamy in the last round of the race as opposed to Uruguay’s candidate Perez Del Castillo. However, New Delhi would have been much more comfortable with either Jaya Krishna Cuttaree from Mauritius or Luiz Felipe de Seixas Correa from Brazil at the DG’s post. India supported Mauritius in the first round, but shifted support shifted to Brazil in the second round when Mauritius got eliminated.

Government managers here say that the decision to support Lamy was taken because with the exit of Cuttaree and Correa, the fight ceased to be between developed and developing countries. Castillo’s strong right-wing credentials, seen in Cancun ministerial, also weighed on India.

A DG from a developing country that is sensitive to the needs of India would have been particularly helpful especially when members are trying their best to conclude the on-going Doha development round by the end of 2006.

India’s slight discomfort with Lamy as the future WTO DG is due to the fact that India was engaged in a number of bitter trade disputes with EU during Lamy’s tenure as the EU trade commissioner...

Here are some more stories about Lamy:  Paul Blustein "Frenchman Set to Assume WTO Leadership " (Washington Post, May 14); Alan Beattie, Raphael Minder, and Frances Williams report for the: "Lamy to head WTO as rival withdraws" ( Financial Times, May 14);  Ambrose Evans-Pritchard : "Champion of EU superstate nears finish line for world trade job" (Telegraph, May 14); Evelyn Iritani "European Chosen to Head WTO"

Revised during the course of May 13, 14, 16.

WTO Race Winds Down

The third and final round of WTO Director-General consultations ends today (May 12).

The three news stories that I've seen point to a Lamy victory.

India's Financial Express reports "Lamy hot favourite for WTO post " (May 13). The Express reports that both India and China have chosen to back Lamy rather than his opponent, Carlos Perez del Castillo (who is from a developing country).

Former EU Trade Commissioner Pascal Lamy is emerging as a favourite for the post of the director general (DG) of the World Trade Organisation (WTO) with both India and China backing him instead of the developing country candidate Perez Del Castillo from Uruguay.

Speaking to FE, commerce ministry officials said that with India’s favourites Jaya Krishna Cuttaree from Mauritius and Luiz Felipe de Seixas Correa from Brazil dropping out of the race, the contest for the DG’s post had ceased to be one between developed and developing countries. "Uruguay is not the kind of developing country which can relate to the concerns of developing countries and LDCs in other parts of the world. So, it makes no sense for us to back it just because it is a developing country," an official said.

This is a short, but interesting story.

Australia's Melbourne Herald Sun reports that "Lamy leads WTO race".

Richard Waddington reports for Reuters that "Lamy battles to retain lead as WTO race nears end". Waddington points out that this decision is not made by a majority vote, but by consensus:

Lamy, a French socialist, took first place in both of the first two rounds of soundings. But despite this advantage, some developing state diplomats said the battle was far from over.

The successful candidate had to be the one most likely to get "consensus," meaning objections also had to be taken into account, they said.

"It will not be a simple decision; there are objections to one of the candidates," said a diplomat from a developing country opposed to Lamy. "It is not just a matter of who has most votes. There are members that will have very serious difficulties in joining a consensus (on Lamy)," he added.

Alan Beattie points out that although the consultation is ending, "The result...may still not be conclusive if there are strong objections from countries to one candidate...: "Fresh Doha debate looms for new WTO head" (Financial Times, May 13).

Zee News: " End in sight for WTO leadership duel " (India, May 13)

Why is it so hard to reduce trade barriers?

If reducing barriers to trade is such a good thing, why are the members of the WTO having such a hard time doing it?

Aaditya Mattoo and Arvind Subramanian explain, in "Why Prospects for Trade Talks are Not Bright" (March 2005 issue of the IMF magazine, Finance & Development).

In the past, "multilateral trade liberalization has been driven by corporate interests..."  However, these interests have not been energized for the current round. Part of the reason is that they have weak incentives to pursue market openings in other countries.

• Many developing countries have been reducing trade barriers unilaterally under the influence of the "Washington Consensus", and of World Bank and IMF prodding. Barriers have also been dropping because of regional and bilateral trade agreements. With trade barriers in developing countries dropping as for these reasons, corporations in developed countries have less incentive to pursue agreements through the WTO.
• Barriers have also been dropping because of regional and bilateral trade agreements.
• Developed countries have a lot to gain by reductions in barriers to trade in services.  However, countries are often reluctant to make the "deep [domestic - Ben] legislative and regulatory changes needed to open services markets"  "More importantly, scope for reciprocity within service sectors has been drastically curtailed by industrial countries’ unwillingness to consider greater openness where developing countries have a comparative advantage—notably, in the supply of services through the movement of persons."
• Corporate interests find the multilateral approach slow compared to alternative approaches ("Nongovernmental routes to securing market access and standard setting - as well as the call of regional intergovernmental sirens...")
• Many corporate goals with respect to intellectual property were accomplished in the Uruguay Round, or are being obtained through regional or bilateral agreements.

On the other hand, were the corporate interests fully engaged, they would have little to offer in exchange for concessions by developing countries.  The developing countries would like "market access in four areas: agriculture, textiles, labor mobility, and cross-border supply of services.", but

• Vested developed country agriculture and textile interests are politically powerful, and won't give up their trade privileges easily.
• "In negotiations on services, labor mobility has always been a difficult issue... Notwithstanding the large mutual gains that would be derived from allowing greater labor mobility, immigration policy has yielded only grudging concessions so far. And with traditional political difficulties compounded by a new fear of terrorism, greater openness seems elusive."
• "Industrial countries account for over three-fourths of all cross-border trade in services. But Brazil, Costa Rica, India, and Israel are among the 20 developing countries whose exports of business services have grown by more than 15 percent annually in the last decade. This growth and the outsourcing of service jobs have provoked deep concerns in many industrial countries—obscuring their own comparative advantage in services. A fuller reckoning of the forgone benefits by the United States and other countries might still occur in the future, leading to a more enlightened strategy. But for the moment, industrial countries, far from seeking greater openness abroad, seem reluctant to lock in current openness of cross-border trade."

Progress

The weary old world makes progress, maybe slowly.  Case in point: U.S. tariffs on magic tricks and practical joke articles have fallen from 70% in 1930, to zero today. 

The Progressive Policy Institute (PPI) reports in its "Trade Fact of the Week": "Tariffs on Cars Are 2.5 Percent, But on Pickup Trucks 25 Percent"

Seventy years later, almost all American tariffs are lower than the ones Roosevelt inherited. The Hoover-era tariff on karate uniforms, for example, was 90 percent and the modern karate-uniform tariff is 9 percent. Tariffs on crabmeat have also fallen (though not as steeply) from 15 percent to 7.5 percent. Other examples: beach umbrella tariffs are down from 60 percent to 12 percent; howitzers and grenade launchers, from 27.5 percent to zero; Mother's Day roses, from 40 percent to 7.5 percent (and zero if they are from Colombia, Ecuador, Kenya, or other flower-growing beneficiaries of special duty-free programs); on helicopters from 30 percent to nothing; and on joy buzzers, exploding cigars, marked cards, and other "magic tricks and practical joke articles" from 70 percent to zero.

This PPI product looks interesting as well:

PPI explains America's odd tariff system, how it works, and why it is toughest on single mothers and least-developed countries in Asia: http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=108 &subsecid=900010&contentid=253112

Waiting, waiting....

While we're waiting for the WTO facilitators to finish the third round of Director-General consultations:

EUbusiness provides a short story on the status of the race: "EU's WTO candidate Lamy puts Doha talks as top priority: interview" (May 11).

At a summit in Brasilia, 34 Arab and South American countries endorse Carlos Perez del Castillo: Invertia " South America, Arabs, back Uruguayan WTO candidate " (May 11).

The Thai Commerce Minister announced that Thailand supports Pascal Lamy of France for Director-General of the WTO. The AP reports via Business Week: "Thailand supports Lamy for WTO chief".

Mercosur says "Uruguayan feels he may have the edge".

"Canada picks its choice for WTO Directorship". They just won't say who yet.

The facilitators should finish the consultations on Thursday, May 12, and announce the results shortly after.

A step forward on Doha Round agriculture negotiations

Last week trade ministers for WTO member nations reached an important compromise on a technical issue that had held up the agricultural negotiations.

The Economist reports here: "Progress at last".

...On May 4th, negotiators from America, the European Union, Brazil, India and Australia hammered out a formula for converting specific tariffs on agricultural goods, such as 10 cents per pound in weight, into percentage (or so-called ad valorem) tariffs.

Measuring all tariffs as a percentage of the goods’ value is a prerequisite for further progress in talks about reducing trade barriers for agricultural goods. Under the broad outline for the farm-trade talks agreed last summer, countries pledged to divide their tariff barriers into different tiers. Higher tariffs will be cut more than lower ones. Not surprisingly, those countries that protect their farmers most wanted a conversion formula that translated specific tariffs into lower percentages, as that would imply smaller cuts down the road. In the end, the deal was based on a compromise proposal made by the European Union...

EUbusiness describes the negotiations leading to the compromise, here: "WTO makes progress in agriculture talks".

Bridges Weekly Trade Digest has the story here: "Agriculture: Key Trade Ministers Strike AVE Deal In Paris". This negotiation took place in the course of a "mini-ministerial" meeting of some 30 WTO member trade ministers in Paris. Bridges has the story on the overall mini-ministerial here: "Paris Mini-Ministerial Revives Optimism About July 'Approximations'". (both stories from the May 11 issue).

Peter Gallagher provides a very helpful explanation of the details: The breakthrough on agriculture. 

Revised May 12

Should we be worried about Chinese economic competition?

George Gilboy thinks not: The Myth Behind China's Miracle (Foreign Affairs, July/August, 2004).

In summary:

Washington need not worry about China's economic boom, much less respond with protectionism. Although China controls more of the world's exports than ever before, its high-return high-tech industries are dominated by foreign companies. And Chinese firms will not displace them any time soon: Beijing's one-party politics have bred a timid business culture that prevents domestic firms from developing key technologies and keeps them dependent on the West.

Who is Gilboy?

George J. Gilboy is a senior manager at a major multinational firm in Beijing, where he has been working since 1995, and a research affiliate at the Center for International Studies at the Massachusetts Institute of Technology.

The last round of the WTO DG race starts today

The third and final round of the WTO Director-General selection process began today. The last round pits Pascal Lamy of France against Carlos Perez del Castillo of Uruguay.

The consultations should end this coming Thursday (May 12), with the results announced in the next few days. The Associated Press reports ("WTO Chief Negotiations Said to End Soon ") via Forbes.

See also this report from Agence France-Presse via EUbusiness: "World trade body leadership contest enters final round"

Lamy, of France, formally has the support of the 25 EU member states.

Paris has pressed francophone African countries to swing behind him, according to diplomats, and he is set to tour the continent this week.

Perez del Castillo is formally backed by most Latin American countries and members of the Cairns Group of major farm exporters, including Australia and New.

Richard Waddington reports for Reuters (via Toronto Metronews): "Race for top WTO job enters last lap".

Medical tourism

The CBS News 60 Minutes program reports on the offshore outsourcing of medical services from the U.S. to India and Thailand: "Vacation, Adventure And Surgery?".

A quintuple bypass surgery for $12,000 instead of over $100,000, a state-of-the-art facility, first class nursing care, and a vacation in Thailand. 

Prices, for comparable levels of care, are generally even lower in India.

Anne Bell works at the British High Commission in New Delhi. She just had a baby and says she’s glad she was here, and not in England: "There’s been no pressure to go home after the delivery. We’ve been welcomed to stay as long as we want. They’re looking after the baby. They’re looking after me, giving me enough time to get settled and get confident enough to go back home. Often in the UK, you might be out of the hospital within five hours if you’ve had a normal delivery."

And in the UK, she wouldn’t have had a private room and a private bath. Not to mention massages, and yoga, too. And the doctors? Indian doctors are known worldwide, they speak English, and they’re often the very same doctors you may have had in Europe or America, where many of them practiced before returning to India.

The downside?  "Don't forget: It's at least a 20-hour trip, there is malaria in parts of India, patients have complained of intestinal disorders - and if something goes wrong, you could end up suing for malpractice in an Indian court."

via Alex Tabarrok at Marginal Revolution: "Outsourcing People", who points out

"Many of the doctors interviewed by 60 Minutes worked in the United States before they returned to their home country.  Ten years ago these same doctors would not have left the United States.  These doctors are returning to their home countries precisely because they now have the opportunity to work in spanking-new hospitals with the latest technology..."