US POSITION AT DOHA North American & Global Economy CPL2 - 561 - 781 Professor: Kenneth N. Matziorinis PRESENTED BY JING ZHAO GEORGE DOBRINESCU 260 195 799 260 198 216 Executive Summery Country profile US participation in the WTO The major issues at Doha and US position US strategy and options at Doha Conclusions COUNTRY PROFILE – BRIEF HISTORY 1776 - Britain's American colonies broke with the mother country. During the 19th and 20th centuries, 37 new states were added to the original 13. The two most traumatic experiences in the nation's history were the Civil War (1861 -1865) and the Great Depression of the 1930s. Buoyed by victories in World Wars I and II and the end of the Cold War in 1991, the US remains the world's most powerful nation state. COUNTRY PROFILE – POPULATION The United States is the third most populous country in the world following China and India. The U.S. population - currently more than 300 million (Nov. 2006 - 300,176,035). The population growth rate is 0.91% per year. Projections - U.S. population will grow to 394 million by the year 2050 COUNTRY PROFILE – POPULATION Ethnic groups: white 81.7%, black 12.9%, Asian 4.2%, Amerindian and Alaska native 1%, native Hawaiian and other Pacific islander 0.2% Religions: Protestant 52%, Roman Catholic 24%, Mormon 2%, Jewish 1%, Muslim 1%, other 10%, none 10% Languages: English 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific island 2.7%, other 0.7% COUNTRY PROFILE – GEOGRAPHY COUNTRY PROFILE – POLITICS The President of the United States is both head of state and head of government A two-party legislative: Senate and House of Representatives The Supreme Court balancing the rights of each Federal court system is based on English common law Each state has its own unique legal system, based on English common law COUNTRY PROFILE – ECONOMY GDP $13.3 trillion (September 2006) Annual GDP Growth 3.5% (2006) Inflation Rate 3.4% (September 2006) Labor force 151 million (includes unemployed) September 2006 Leading industrial power in the world, highly diversified and technologically advanced COUNTRY PROFILE – ECONOMY The USA achieves 30% of their external trade through NAFTA countries AND 20% through the European Union USA's top three export partners are: Canada 23.4%, Mexico 13.3% and Japan 6.1% Its top three import partners are: Canada 16.9%, China 15% and Mexico 10%. International Organizations Inter-American Development Bank (IADB) The European Bank for Reconstruction and Development (EBRD) The Group of 8 (G-8) The International Labor Organization (ILO) The International Monetary Fund (IMF) The North Atlantic Treaty Organization (NATO) The North American Free Trade Agreement (NAFTA) The Organization for the Prohibition of Chemical Weapons (OPCW) The Organization for Economic Cooperation and Development The United Nations (UN), The World Health Organization (WHO) The World Trade Organization (WTO). Global Rankings (2006) The United States ranks 8 in the Human development index 20 in the corruption index The 6th place for the global competitiveness index with a score of 5.61 after Singapore (5.63) The U.S. Position at Doha Round Background The WTO - principal international organization governing world trade. It has 150 members, over 95% of world trade. (last member Vietnam, January 11, 2007) It was established in 1995 as a successor of GATT. The US was an original signatory to the GATT and a leading proponent of the GATT’s free-market principles. Decisions in the WTO are by consensus, but US has a highly influential role in the WTO as the largest trader in the world. US TRADE POLICY GOALS Expand open market approaches to trade; Expand the scope of multilateral trade regimes and development of international rules and standards; Enforce rules and agreements to reduce and eliminate foreign trade barriers, increase transparency, and strengthen the rule of law; Combat foreign competitive practices that impede U.S. access to markets in areas such as standards, barriers related to animal or plant health, tied foreign aid, and corruption; US TRADE POLICY GOALS Expand business opportunities for U.S. agricultural producers and processors; Promote U.S. trade interests within the WTO and regional trade organizations Promote bilateral trade and resolve specific issues that impede such trade; Facilitate U.S. trade policy development US Participation in the WTO US is one of the key participants in all areas of WTO activity, including the launch of Doha Round in November 2001. The Doha Round aims to continue the liberalization of global trade with the purpose of increasing economic growth in the developing world. The most contentious issues : agricultural subsidies tariffs on non-agricultural products intellectual property protection the reform of the practice of anti-dumping STATE OF DISCUSSIONS In 2006, talks have stalled between the developed nations and the major developing countries. The Doha Round will be successful if reciprocal concessions are offered and accepted by all members. If the developed world fails to address agricultural subsidies in a way that satisfies the developing world, the Doha Round will fail. If the developing world does not make concessions on increasing access to its markets, then the Doha Round will fail. The success of the Doha Round should be an integral part of U.S. efforts to improve economic growth around the world, and also to reduce poverty, fight terrorism, and stem the spread of HIV/AIDS. The Major Issues at Doha Round The most contentious issues : agricultural subsidies tariffs on non-agricultural products (NAMA) intellectual property protection (TRIPS) the reform of the practice of anti-dumping Agricultural Subsidies Current export subsidies and domestic support for agricultural goods mainly in U.S. and EU, keep world agricultural prices low, preventing the developing world to compete on the world market. Reducing these subsidies will help developing countries gain access to the world market and sell their goods at higher prices, resulting in an increase of their economic well – being. Many developing countries have a comparative advantage in delivering farm goods to market, and seek a sharp reduction in rich-country trade barriers on agricultural goods. As part of a grand bargain, rich countries want to increase their access to non-agricultural manufacturing and service sectors in robust developing countries, especially to capitalize on their strong financial, transportation and telecommunications services. U.S. Proposals in Global Agriculture Trade Stage 1: Substantial reductions of trade-distorting support measures and tariffs, along with the elimination of export subsidies, in over a five year period. Stage 2: An additional five year period that delivers the elimination of remaining trade-distorting subsidies and tariffs in agriculture U.S. Position in Global Agriculture Trade The United States offered to cut its agricultural subsidies by more than 50% (on average), but conditioned the offer on major market-access from the EU and G-20. EU offered to cut its tariffs by an average of 40%, but it also wants to identify up to 160 of its agricultural products as “sensitive” and preserve tariff protections for them. The United States was under pressure from the EU and the G20 to improve its subsidy reduction offer (from $22bn to $17bn). EU countries must make cuts in their agricultural tariffs in the vicinity of 54%. U.S. Position in Global Agriculture Trade The United States insisted that it would not improve its offer on domestic subsidy reduction unless the EU improves considerably its market access offer and the G-20 countries show a willingness to open their markets both to agricultural and industrial products and services as well. But an open embrace from the developing world is highly unlikely if the United States refuses to give up its significant farm subsidies Another difficulty is “geographical indications,” or the protection of product names that reflect the original location of the product. (Ex. Bordeaux wine). The United States refuses to negotiate a mandatory list, but will accept a voluntary list with no enforcement power. The EU says it will not accept an agriculture agreement without a geographical registry. Non-Agricultural Market Access (NAMA ) The negotiations cover all goods not included in the Agreement on Agriculture. The products are primarily industrial although WTO members are also negotiating on natural resources, including fisheries, forests, gems and minerals. Negotiations The Swiss formula Special and differential treatment for developing countries Reducing the incidence of non-tariff barriers, such as import licensing and quotas The sectoral elimination of tariffs for specific groups Non-Agricultural Market Access (NAMA ) The Swiss formula will be used to reduce tariffs: Whereby T1 is the new bound tariff, To the initial bound rate and a, a coefficient to be determined. The coefficients for developed Members fall generally within the range of 5 to 10, and for developing Members within the range of 15 to 30. Pakistan formally presented a simple Swiss formula with coefficients of 6 for developed countries and 30 for developing countries. US complained that 30 was too high, and would not cut developing country tariffs steeply enough. Non-Agricultural Market Access (NAMA ) Special and Differential treatment for developing countries The possibility for developing countries to exempt a small number of tariff lines from reductions, or to make less than formula cuts on a higher number of products. Both the United States and the EU have favored using sectoral tariff elimination as an alterative modality for the NAMA negotiations. Negotiations have stalled on which products to cover and the extent of participation. Intellectual Property Rights Protection Protecting the copyrights and patents of U.S. companies has been an important component of previous U.S. stances on IPR and continues to be. In the case of patented medicines and treatments particularly HIV/AIDS, developing countries often are too poor to afford these patented products and/or lack the capacity to produce similar products domestically. Governments can grant compulsory licenses to sell the patented products at far lower cost. These compulsory licenses harm the financial welfare of the pharmaceutical companies, a strong presence in the U.S. As long as it is monitored effectively to prevent the re - exportation of these products by third parties: effective means of protecting U.S. pharmaceutical companies from piracy at the same time providing medical treatment to those who desperately need it. Reform of WTO Rules on Antidumping Objective - “clarifying and improving disciplines” The United States has primarily been on the defensive in the rules talks. Many countries have attacked the use of antidumping actions by the United States. However, many developing countries are now using antidumping actions themselves. Reform of WTO Rules on Antidumping The leading proponents of “clarifying and improving disciplines” have been a group of 15 developed and developing countries known as the “Friends of Antidumping”. In essence their proposals would reduce the incidence and amount of duties . Many of their proposals would require a change in U.S. laws. In the U.S., imposing anti-dumping duties is a favored and frequently used trade remedy for domestic import-competing interests. The United States has submitted proposals on subsidies, such as expanding a list of prohibited subsidies and imposing disciplines on support to sales of natural resources. Other Issues U.S. Seeks to Expand Trade in Services Liberalization across a broad range of service sectors, with a particular focus on key infrastructure services. These key services include, but are not limited to, financial, telecommunications, computer, express delivery, distribution and energy services. U.S. Seeks to Expand Trade in Services Currently, the United States covers more than 60 percent of services sectors while WTO members average 35 percent coverage. Other Issues Dispute Settlement The United States favored additional reforms that were not a part of the initial text. For example, the United States has called for open public access to proceedings. Environment The United States is pushing for rules on fisheries subsidies, and tariff reductions on environmental products. Beyond Trade: Additional U.S. Assistance to Developing Countries The United States nearly doubled its official development assistance to the world’s poor from $10 billion in 2000 to $19 billion in 2004. U.S. citizens give billions every year through charitable donations, and U.S. NGOs account for the vast majority (62%) of all private institutional grants from OECD countries. Debt relief is another area where the U.S. has taken the lead. The G-8 countries agreed to cancel 100% of the bilateral and multilateral debt for qualifying Heavily Indebted Poor Countries. U.S Strategy at Doha U.S. has a multilateral strategy to achieve its goals at the Doha Round. Well in advance of the official meetings, the U.S. needs to reach out to in order to developed (G8) countries, mid-level (G20) countries, and the least-developed (G90) countries learn what each bloc hopes to achieve in the round, build trust between the trade representatives of the U.S. and the other nations, gain support for the U.S. position. This engagement with other nations prior to meetings will: reduce uncertainty about other nations’ intentions decrease the likelihood of a setback U.S Strategy at Doha If the U.S. successfully at the Doha Round: the international community’s confidence in the U.S. as a multilateral actor will be increased some of the soft power the U.S. recently lost due to the conflict in Iraq will be restored. Any agreement that is reached at the Doha Round must be ratified by the Senate. It is imperative that the executive branch agencies work closely with their colleagues on the Hill to ensure Senate approval of the agreement. OPTIONS FOR U.S. POSITIONS AT DOHA ROUND Option 1: PROS: Reduce Agricultural Subsidies and Tariffs on Non-Agricultural Goods Maintain Status Quo on IPR and Anti-dumping. Addresses most immediate concern of developing world (subsidies) Opens foreign markets to U.S. exports Reciprocity leads to economic gains for both developing and developed nations Would remove subsidies from blocking progress on FTAA negotiations Domestic import-competing industries want to maintain anti-dumping as a tool CONS: Domestic agricultural interests will lose some economic benefits OPTIONS FOR U.S. POSITIONS AT DOHA ROUND Option 2: Reduce Agricultural Subsidies and Tariffs on Non-Agricultural Goods; Improve Monitoring of Compulsory Licenses to Protect IPR; Maintain Status Quo for Antidumping PROS: Same as Option 1 Improves access to patented medical treatment in the developing world CONS: Domestic agricultural interests and pharmaceutical companies will lose some economic benefits OPTIONS FOR U.S. POSITIONS AT DOHA ROUND Option 3: Reduce Agricultural Subsidies and Tariffs on Industrial Goods; Improve Monitoring of Compulsory Licenses to Protect IPR; Reform Anti-dumping Rules PROS: Same as Option 2 CONS: Domestic import-competing industries will not allow the Senate to pass an agreement with anti-dumping reform OPTIONS FOR U.S. POSITIONS AT DOHA ROUND Option 4: Maintain Status Quo on All Issues PROS: Domestic agricultural interests will continue to benefit from subsidies CONS: Doha Round will fail Inefficiencies in developed world will persist Developing world will continue to be unable to compete on the world market. Conclusions It is imperative that the position of the U.S. at the negotiations is one that can be passed in the Senate It must also be one that can be accepted by the international community in multilateral negotiations. The Option 2 is the most likely to be accepted on both the international and domestic level. It is also the best compromise between the desires of the developing and developed nations of the world. Conclusions It all depends upon the US – how far it would travel on cutting domestic farm subsidies. At present, the US is ready to freeze the total subsidy payment at US$19bn, which is marginally lower than US$21bn given in 2005. Peter Mandelson, Europe’s trade commissioner, believes that the way to unblock the round would be for the US to put a ceiling of US$15bn on subsidies, compared to the current spending of US$19bn. The developing countries– G-20 and G-33 – however, have demanded 75 percent cut in domestic subsidies by the US. To satisfy this demand, the US needs to prune down its domestic subsidies to around US$5bn. Conclusions The first three months of 2007 are extremely crucial for the Doha round. First, the US is likely to reveal their cards on what they have in mind about the upcoming review of US Farm Bill. Secondly, key WTO negotiators have already entered into a higher gear of talks at Geneva. THANK YOU!