Predictions for 2006
Some of my guesses for trade and public policy outcomes next year
A few predictions for 2006
- The WTO negotiations will conclude in Geneva in the third quarter, barely leaving time to create and verify a hundred-thousand pages of commitment schedules before the US negotiating authority expires. After five years of talks, the end will come in a rush bringing confusion for many including the Pacific Islands, most of Africa and even some ASEANs.
- The overall shape of the WTO deals on agriculture and services will not change much: but there’ll be a lot of obscure bargains made to control imports in ‘sensitive’ and ‘special’ markets in both sectors. Industries that start early in 2006 to identify traps and loopholes in the all-important schedules will have the advantage.
- Food health and safety (quarantine) barriers will loom larger than ever in world trade thanks to fears about the spread of epizootic disease (including ‘bird flu’). These barriers represent an enormous threat to to markets because few governments manage them in a rational way based on a cost-benefit assessment of risk mitigation strategies.
- Trade friction with the USA will grow, but China is still likely to jump to second on the trade ranks because the resurgent Japanese economy will spur continuing growth—as well as offering renewed opportunities for Australia. The Australian ‘FTA feasiblilty’ study with Japan won’t lead to an FTA but will identify several ways to expand investment and the composition of our trade including in services and food.
- Indonesia has new, competent economic management to go with the strongest real GDP growth outlook in ASEAN; inflation threatens, but corruption appears less and the government is managing security problems more adroitly. Domestic confidence will visibly improve. It’s time to reconsider Indonesian market strategies.
- Governments will stumble badly in the “new” climate change debate over the question of what are we willing to pay for the benefits of adaption to higher temperatures and reduction of greenhouse gas emissions. Some will again endorse mitigation plans that cost much more than they are worth; others will take a bet, at very long odds, that a market price (for carbon emissions) will be sufficient incentive for a technological solution.
Tags for this entry: trade A great report from Alan Beattie of the frustrations of Dipak Patel, the Zambian Minister for Trade, trying to manage the interests of a least-developed African economy in the global trading system Beattie’ report is full of accurately observed detail, not just about the sarcastic Patel’s desperate lack of resources but also about the hopelessly thin, often in appropriate assistance that donors offer. The reason that NGO’s—often hostile to markets—have a bigger sway on LDC trade policy is that they’re better at mobilizing and delivering support. It is late at night in a bar by the Zambezi river when Dipak Patel, trade minister from the impoverished southern African state of Zambia, finds the perfect way to illustrate how hard his job is. “So how many people does the Financial Times have covering trade?” he says. Well, I say, there’s me (the world trade editor), a reporter in Geneva who spends most of her time on trade, someone in Brussels, someone in Washington, and of course our bureau chiefs and reporters around the world spend a fair amount of their time writing about it. “God,” Patel says, contemplating the rows of luxury cognac bottles behind the bar, waiting for the rich tourists. “The FT has more capacity to do trade policy than we do.”“Financial Times”:http://news.ft.com/cms/s/53fcfb32-65fe-11da-8f40-0000779e2340.html The whole report is well worth reading. My favorite part is Beattie’s account—deadly accurate, in my experience—of an LDC Ministerial Meeting in which the participants, all on a donor-funded junket, compete to waste time on semantics or resign responsibility for decision making rather than enter the lists of unending, sterile, political debate. There is a short debate about including commas around the expression ‘inter alia’. Because of the francophone African countries present, the communique is translated into French and there is a discussion about whether the correct interpretation of ‘market access’ is “acces sur le marché” or “acces au marché”. Tags for this entry: trade My book, commissioned by WTO for their 10th anniversary, is now available from Cambridge University Press From the blurb “This book was commissioned by the World Trade Organization (WTO) as a factual account of the first decade of its existence. It aims to cover the principal activities of the WTO as the successor to GATT and the steps taken to establish a global trading system. Peter Gallagher, the author, is an independent trade analyst and consultant, who records what might be regarded as the WTO’s main achievements as well as describing the controversies that have arisen in its first ten years. A useful reference book for policy makers, journalists, members of trade delegations and for everyone who requires a detailed understanding of the workings of the WTO.” Tags for this entry: trade I had a meeting yesterday with a senior EC Commission official—a former member of Pascal Lamy’s staff when he was Trade Commissioner—who insisted that there’s no ‘wriggle-room’ in the EC’s offer on Agriculture of 28 October: Mandelson had laid out the whole package. I recently speculated that there was more to come at Hong Kong, but the issue is now probably moot. The new, informal but bankable, timetable for the negotiations means that there will be more posturing than squirming at the Hong Kong meeting. The ‘new quad’ (USA, EC, Brazil, India—and sometimes one or two others, just to confuse the arithmetic; in this case, Japan) have apparently decided that the next WTO General Council meeting in March 2006 is a more likely timeframe for agreement on the ‘modalities‘—that is the ‘headline numbers‘—on agriculture, NAMA, services etc. Lamy and others will be pressing Ministers at Hong Kong for more ‘conditional’ offers, as my friend from Brussels put it, like the EC offer to eliminate export subsidies, conditional on balancing offers from others. But the new timetable means no one will be under pressure at Hong Kong to make any conditional offers final. “We want Hong Kong to be more than just a simple stock-taking exercise,” said Rob Portman, the US trade representative. Peter Mandelson, the EU trade commissioner, agreed: “We want Hong Kong to be more than treading water. It should lock in the progress made … and put in place, as far as possible, a springboard for advance in 2006.” (Financial Times) So Hong Kong is likely to become a ‘beauty parade’, where each of the main contenders will try to portray its conditional offers as most encouraging to rapid progress early next year. In fact, all of the offers on agriculture summarized in the Agriculture Negotiating Group Chairman’s report earlier this week (available here) are conditional. The EC, like everyone else, has the option to amend its position and to extend its offers at any time before the end, if they think there is an advantage in doing so. The negotiations are not over until the ink is dry on the signature. But my friend from the Commission insisted that Mandelson could not extend his agricultural market access offer which is already at the frontier of Europe’s agricultural reform policies. But I’m still not entirely convinced that flexibility on market access is exhausted. The CAP reform packages of 2003 contain no provisions on the levels of access to the European market. This is a matter of management of the internal “supply balances” that Commission officials (advised by a powerful committee of Member state representatives) watch closely, on a weekly or daily basis if necessary. Supply is only one side of the market balance equation and supply itself has both domestic and import components. The connection between a CAP reform target—expressed as a domestic supply balance at a particular price level—and import access volumes is an articulated link that the Commission controls. For the negotiators from other WTO members, t’s a matter of discovering Europe’s price on a management strategy that prioritizes imports. It would help if European consumers were more keenly aware of the price—e.g. in terms of employment—of the current supply management bias towards domestic production. I’m en-route to Pakistan where I’ll be for a few days later this week, talking to officials and business leaders about public-private consultations on trade policy. I’ll try to keep up with the preparations for Hong Kong, but it may be next week before I can post again. Tags for this entry: trade Can you believe it? Government members of the world’s most unsuccessful regional ‘free trade’ agreement—the Asia Pacific Economic Cooperation (that’s it … there’s no noun)—meeting in Busan, Korea, have criticized regional agreements as a threat to trade! Yet every one of this group is negotiating, or trying to negotiate at least one and probably a handful of regional agreements as they issue this press release. What a bunch of wankers! Here’s the FT’s quote from the statement. “Criticised by business leaders and alarmed by the possible failure of next month’s world trade talks in Hong Kong, Asia-Pacific governments are acknowledging for the first time the dangers of the tangled “spaghetti bowl” of bilateral trade deals they have spawned in the past few years. “We’re hearing from our business community that with all these different FTAs [free trade agreements] in the region, it’s getting hard for them to do business,” said a senior trade negotiator attending this week’s annual meeting of the Asia-Pacific Economic Co-operation forum (Apec).”(FT) Of course, this is right, in principle. It is likely that business finds the maze of regional agreements creates new transaction costs. Multi-national businesses, some of them only SME’s at most, in fact have to integrate this confusing mess in their supply chains. That’s one of the themes of my book Global Trade Advocate But there are commercial techniques for managing these costs. Also, there are often some offsetting benefits from regional agreements that could be augmented if all such agreements complied with “gold standard” practices (e.g. the Australia-US Free Trade Agreement or the Australia-Singapore and US-Singapore agreements). Collective adherence to best practice will minimize the transaction costs due to even overlapping rules of origin and reduce the potential for trade diversion. Governments in the APEC region must strike a balance between the costs and the benefits of regional agreements, with the assistance of business, and not content themselves with this hypocritical moralizing by press release that is, at best, a rotten deception when their current trade negotiating programs are considered. Tags for this entry: australia 
climate policy china ideas quarantine indonesia 2006
WTO seen from the banks of the Zambezi
wto developing africa
“WTO: The First Ten Years”
wto resources book gatt
The Hong Kong beauty parade
wto agriculture usa subsidies people negotiations services lamy brazil
Crocodile tears on regional free trade
multilateralism regional fta apec roo singapore
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Amusing, anecdotal, accurate 
Is it my imagination, or is his NYT portrait looking a little crazed these days? 