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So near and yet so far in Geneva

[The original version of this article appears in Public-Private Partnerships (Volume 29.1), published 19 March 2009, and available from the Institute of Economic Affairs.]

This article, by Ronald Stewart-Brown, reflects on how close World Trade Organization members came to reaching agreement in Geneva last July on the key agricultural and industrial issues at the heart of the Doha Round. But since 6 November, when the text of this article was finalised, the global economy has been in continuing decline and there was insufficient convergence on outstanding issues to justify a new ministerial meeting tentatively planned for December. The prospects of completing the round by the end of 2009 have therefore weakened.

Introduction

Against a global background of deepening economic gloom, continuing financial uncertainty and mounting job losses the Doha Round of multilateral trade negotiations continues to progress. With growing pressures on governments everywhere to do all they can to protect employment it is a powerful testament to the strength and resilience of the multilateral trading system that the 153 countries that comprise the World Trade Organization (WTO) are still negotiating to lower tariffs and open their markets further to international competition.

Even more remarkably, the ‘mini- ministerial’ meeting at the WTO’s Geneva headquarters last July marked a far greater leap forward for the Doha Round than any previous meeting since its launch in November 2001. Provisional agreement was reached on most outstanding agricultural and industrial issues. Finally the talks broke down on just one item, the agricultural special safeguard mechanism, although other difficult issues remain unsettled.

Under the ‘Single Undertaking’ principle at the heart of the round nothing is agreed until everything is agreed. Therefore, any issue can be reopened before the talks are finally concluded. Yet there is a clear general wish to build on the consensus already established and, ostensibly at least, no country wishes to give up on the Doha Round. No trade round has failed since the multilateral trading system was originally established with the signing of the GATT (General Agreement on Tariffs and Trade) six decades ago. Perseverance is built into the system.

This article seeks to offer a more optimistic perspective than that of the many journalists who suggested the Doha Round and even the WTO itself might be in terminal crisis in the aftermath of the Geneva talks. Sooner or later the Doha stage of construction of the multilateral trading system ought to be completed.

Background

Established by the 23 countries which were founder signatories to the GATT in 1948, the multilateral trading system has been the foundation of the unprecedented advance in prosperity the world has seen over the last six decades. Through a total of eight trade rounds the average tariff1 on trade in industrial products between developed countries has been reduced from between 20% and 30% to less than 4% now.

The Doha Round (formally known as the Doha Development Agenda) is the most challenging trade round yet. Its terms of reference were defined by the WTO Ministerial Declaration that launched it in 2001. The core focus was on improving agricultural market access, reducing trade- distorting subsidies and reducing or eliminating industrial tariffs and non-tariff barriers. From the start it was agreed that less would be demanded of developing than developed countries in both agricultural and non-agricultural products. Other areas of negotiation would include trade in services, trade-related aspects of intellectual property rights (TRIPS), trade facilitation, dispute settlement and ‘rules’ relating to anti-dumping, subsidies and regional trade agreements.

Susan Schwab, the US Trade Representative at Geneva, is surely right to suspect that never in history has there been such a complicated international negotiation. Many believe it will be the last general trade round. Yet as evidence accumulates of the limited economic value of many preferential trade agreements2 no one should doubt that further strengthening of the multilateral trading system is the best hope we have for future prosperity and poverty alleviation in the world.

Overview of Geneva

Compared with full-scale Ministerial Conferences such as those at Cancún in 2003 and Hong Kong in 2005, the July 2008 'mini-ministerial' meeting in Geneva was a deliberately small-scale affair. Over the 12 months that preceded it, WTO Director General Pascal Lamy had worked energetically to build consensus amongst all the key players on the main outstanding issues, travelling the world tirelessly to promote the benefits of the Doha Round.

The principal aim was to agree modalities3 on the so-called ‘triangle’ of agricultural market access, agricultural subsidies and non-agricultural market access (NAMA) which has been the agreed prime focus of negotiation since Hong Kong. The starting point for negotiations was the so-called July 2008 package consisting of draft modalities documents for agriculture and NAMA (respectively, 116 pages and 100 pages in length).

The talks lasted nine days, often well into the night. The basic forum for negotiations was a Ministerial ‘Green Room’ in which the delegations from 35 leading WTO member countries were assembled. But Lamy, as Chairman of the Trade Negotiations Committee, soon decided to concentrate negotiations amongst a smaller group consisting of Australia, Brazil, China, the EU, India, Japan and the USA. These seven countries, referred to in this article as the WTO-G7, together represented some 50% of world merchandise exports and could be relied upon to represent most of the main different interest groups.4

'So near and yet so far' was the appropriate epitaph for Geneva. Agreement was reached on most of the 20 or so key issues on which the WTO-G7 determined to focus. But despite Lamy’s efforts to broker a deal, the gap between India and the USA on the agricultural special safeguard mechanism, as discussed below, proved unbridgeable. Other potential deal-breaking issues such as US cotton subsidies were never tackled, and much else remained to be settled at the detailed level. Then everything would still have needed to be agreed by the other Green Room countries and ultimately by the entire membership.

Summary of potential Doha Round benefits delayed or lost at Geneva

Estimates of the potential macroeconomic benefits of a successful Doha Round have been wide ranging. Some argue they would be materially less now than they were at the time of its launch in 2001 owing to the considerable amount of unilateral trade liberalisation and the proliferation of regional trade agreements that have since taken place, as well as the downgrading of the round’s original remit to exclude investment, competition and government procurement.

Nevertheless, Pascal Lamy has claimed that what was on the table at the end of Geneva was worth two or three times more than any previous trade round had achieved. By his estimate aggregate agriculture and NAMA tariff cuts alone would be worth US$150 billion, around 1.5% of the value of world merchandise trade, with developed countries contributing two-thirds and developing countries one-third.

The structural complexity of the deals struck so far on both agriculture and NAMA modalities defies simple description. The flexibilities they incorporated to reflect the varied interests of the different categories of developed and developing countries were ingenious and complex.

Agriculture

The agreed agricultural tariff cuts5 for developed countries would be major, with reductions ranging from 50% for tariffs below 20% up to 70% for tariffs above 75% and a minimum average cut of 54% over a five-year period. Cuts for developing countries would be set at two-thirds of those required for developed countries, phased in over eight years.

All countries would have the option of designating certain agricultural tariff lines6 as ‘sensitive products’ for which lower- than-formula tariff cuts would be permitted. Developed countries would have the right to designate either 4% or 6% of their tariff lines (or 8% in the case of Japan) as sensitive products, and the greater the deviation they wanted for an individual product from the formula tariff cut prescribed for it the more they would be required to expand their tariff quota7 for that product.

More permissive sensitive product provisions would apply for developing countries which, as a group, would also be permitted to exclude a second category of product from formula tariff cuts by designating them as ‘special products’ meriting special treatment given their role in rural development, food security and other development-related goals.

Maximum overall agricultural trade-distorting support (OTDS) would also be dramatically reduced over a five-year period for all developed countries, whilst agricultural export subsidies would be eliminated by 2013. For the EU, maximum OTDS would be reduced by 80% from an estimated $110.3 billion to $22.1 billion. For the USA, the maximum OTDS would be reduced by 70% from US$48.2 billion to US$14.5 billion which, whilst around twice current USA OTDS levels, is lower than actual USA OTDS spending in seven out of the last 10 years.

However, both the EU and the USA would be applying considerable ingenuity to minimising the impact of their Doha Round OTDS limits on their overall agricultural support programmes, either by shifting spending into the 'Green Box' category, which is deemed to be no more than minimally trade distorting and therefore falls outside the definition of OTDS, or, within the overall OTDS category, by shifting spending from the 'Amber Box' and 'de minimis' sub-categories of support to the less trade-distorting ‘Blue Box’ sub-category. (Ultimately, of course, all government support of any sector involved with trade is to some extent trade distorting.)

In the case of the EU much of this process is already in train under CAP reforms initiated in 2003, although the EU has made no detailed figures available. Nor is it publicly known how the reductions are being allocated internally, i.e. amongst the member states.

By contrast the US 2008 Farm Bill, which Congress overrode the Presidential veto to pass in May 2008, did nothing to reduce US agricultural subsidies and price supports. However, the US delegation in Geneva was confident that Congress would be willing to revise the bill to comply with its Doha Round commitments if other WTO members conceded sufficient new opening of their domestic markets.

Non-agricultural

Industrial and other non-agricultural tariffs would be reduced by application of the so-called ‘Swiss formula’8 with a coefficient of 8 for developed countries and therefore a maximum tariff rate of 8% with disproportionately sharp reductions of higher tariff rates. Developing countries would have a coefficient choice of 20, 22 or 25, with greater flexibility to shelter individual products from full tariff reductions the lower the coefficient chosen.

For example, EU bound tariff rates would fall from 10% to 4.4% for cars, 22% to 5.9% for trucks, 16% to 5.3% for buses, 5.5–6.5% to 3.3–3.6% for many chemicals, 13.9% to 5.1% for DVD players, 11.4% to 4.7% for hi-fi systems and 8–12% to 4.0–4.8% for textiles and clothing.

In addition, there could be agreements to further reduce or eliminate tariffs in sectors such as automotive parts, chemicals and industrial machinery and to eliminate the many ‘nuisance’ tariff rates currently applying in the 0–3% range. The least developed countries would obtain valuable new duty-free quota-free access for all their exports to developed countries.

Services and trade facilitation

The major benefits that could arise from agreements to open up service markets such as financial services, telecommunications, transport and professional services are incalculable but potentially very significant. A new trade facilitation agreement to speed up the movement of goods across borders by improving customs procedures and transparency, reducing unnecessary delays and cutting red tape could be of particular benefit to developing countries.

Reduction in scope for countries to increase actual tariff rates

Perhaps the biggest benefit of the Doha Round succeeding would be in its role as a ‘binding round’, as argued in an important new German Marshall Fund paper by Patrick Messerlin.9 His primary point is that whilst the actual tariff rates of the eight largest WTO members are now almost equal to their bound rates the actual applied NAMA tariff rates of the next 26 countries average 7.9% compared with an average bound rate of 27.6%, whilst their actual agricultural tariff rates average 19.0% compared with an average bound rate of 65.8%.

In consequence, a successful Doha Round would achieve real cuts in less than half such countries’ actual tariff rates, although it would sharply reduce their scope for raising them. But if the Doha Round failed and these 26 countries, which are mainly relatively fast-growing developing economies and together account for around a quarter of world merchandise trade, were to turn protectionist they could raise their average agricultural and NAMA tariffs by some 3.5 times with seriously adverse consequences for world trade.

Messerlin’s point applies equally well to developed country agricultural trade-distorting subsidies as to developing country tariffs. The binding effect of the Doha Round would impose an important constraint on the freedom of countries to act in the sort of unenlightened protectionist manner that made the 1930s so much worse than they would otherwise have been.

Agricultural special safeguard mechanism and cotton

One significant result of the collapse of the Ministerial Conference at Cancún in 2003 was the developed countries’ acceptance that developing countries should have the power to use import restrictions to protect their domestic agricultural markets at times of import surges and price declines by means of a new special safeguard mechanism (SSM). The key issues in Geneva were, first, what levels of import surge for a particular product category, if any, should trigger allowing a particular country to raise a tariff not only above the rate at which it would be bound following the Doha Round but also above the pre-Doha bound rate, and, secondly, the different levels of ‘trigger’ that should be set for given percentage tariff increases over pre-Doha bound rates.

India (with China and other G33 countries in support) and the USA were the chief protagonists. The US final position was that no tariff increase above the pre-Doha bound rate should be permitted for a particular product unless there had been at least a 40% import surge above the average level in a preceding three-year period. But India insisted it needed a threshold of 15% to safeguard the livelihood and security of its rural poor. The difference was far too wide to resolve at Geneva.

As the world’s largest cotton producer, the USA accepts its subsidy programme has a materially adverse effect on world market prices for cotton. This has long angered all cotton- producing developing countries, including Brazil, India, China and, in particular, the so-called Cotton-4 group of African countries (Benin, Burkina Faso, Chad and Mali) whose economies are heavily dependent on cotton. At Hong Kong the USA had already agreed in principle to bigger and faster subsidy reductions for cotton than other agricultural products. At Geneva it caused intense frustration that time ran out before the detail could be negotiated.

Mandelson and the EU at Geneva

In Geneva, Peter Mandelson succeeded in presenting himself as both Europe’s plenipotentiary for trade with a clear negotiating mandate from the EU Council of Ministers and as an international statesman and champion of the world’s poor passionately committed to the Doha Round’s success. His resignation in October was surely a most unpropitious development for the Doha Round.

The agriculture proposal for which Mandelson had won Council backing was, on the surface at least, a material improvement on the deal the EU had had on the table in Hong Kong. In return he and other developed countries were now negotiating to tighten up on the developing countries’ market access concessions, particularly in NAMA, and would do so later with regard to services. Another key Mandelson demand was for the same level of protection for European food products such as Parma ham and Roquefort and Stilton cheese as wines and spirits under the Geographical Indications (GIs) section of the TRIPS agreement.

Given the Byzantine complexity of the EU decision-making process it was well understood that he had no flexibility to improve the EU’s offer whilst at Geneva, and therefore no one saw any purpose in criticising him. From the impasse between the USA and India over the SSM he was able to stand deftly aside as he would no doubt also have been able to do over cotton.

In PR terms Mandelson’s performance at Geneva was a tour de force. Acting in tandem with Mariann Fischer Boel, the redoubtable EU Agriculture Commissioner, he smoothly brushed off the signs that all was not well in the EU camp. But precisely what was going on behind the scenes remains unclear.

On the French front President Sarkozy at one point openly threatened to block the deal unless its agricultural element was ‘modified’ in some unspecified manner. Later, Mandelson chose to ignore a demand from Sarkozy to appear in Paris to explain himself. At Geneva, in her capacity as President of the Council of Ministers for Trade, Anne Marie Idrac, the French trade minister, took a softer line, restricting herself to reminding Mandelson of the importance of negotiating toughly.

Sarkozy and Idrac were not alone in openly distrusting Mandelson’s negotiating determination. Late in the talks a new group of nine member states (France, Ireland, Italy, Poland, Cyprus, Greece, Hungary, Lithuania and Portugal), dubbed the Club of Volunteers and apparently orchestrated by Italy, emerged to call on Mandelson to take a firmer line to protect European farmers.

How the EU’s internal differences would have been resolved if agriculture and NAMA modalities had been agreed at Geneva is uncertain. At least theoretically, even under the Treaty of Lisbon, individual member states retained a power of veto over a Doha deal through the unanimity provisions applying for certain areas of trade in services and the commercial aspects of intellectual property. The Club of Volunteers could easily have marshalled a blocking vote on the Council of Ministers.

Emergence of the WTO-G7 at Geneva

The inclusion of China in the WTO-G7 heralds the emergence of a new world order in international trade negotiations. For the time being, however, the EU and the USA remain the most powerful two players in WTO affairs. Of these, the USA has always been the prime driving force behind the Doha Round.

Like Robert Zoellick and Rob Portman before her, Susan Schwab, the US Trade Representative since April 2006, came across as open, honest, pragmatic and tough. With a strong contingent of Washington politicians and farm groups present behind her in Geneva she was convincing in her insistence that the trade-off for new reductions in the US OTDS cap must be better access to developing country markets. Her final offer to reduce US OTDS limits by 70% to US$14.5 billion was a significant but predictable move from her opening position of a 66% reduction. Some think she could have gone still further to clinch an SSM deal with India and China.

Of the other WTO-G7 members Australia has long been a leading proponent of agricultural trade liberalisation in world trade negotiations. Brazil, under its able Foreign Minister Celso Amorim, came to prominence before Cancún in 2003 as a leading force in bringing together the G20 group of developing countries pressing for agricultural reform in developed countries. Japan remains the world’s fourth largest exporter of manufactured goods but has a highly protectionist agriculture policy with, for example, tariffs on rice imports approaching 800%.

India, under Kamal Nath, has been playing an increasingly powerful role in the Doha Round. In agriculture it combines a protectionist approach to its home market, as illustrated by its SSM stance, with seeking better access to third-country markets and sharp reductions in developed country subsidies. In services its prime concern is to open up new rights of commercial presence and work opportunities for Indian businesses and people in developed countries. But many in India are worried about Chinese competition, and some question how committed to a successful Doha Round India really is.

China is projected to shortly overtake Germany10 as the world’s leading merchandise exporter. Sooner or later it was inevitable that China should take its rightful place at the top table in WTO affairs. At Geneva it took a strong supporting line behind India on the SSM issue. Though its prime Doha Round aim is the reduction of developed country industrial tariffs, China reportedly fought hard to maintain import barriers relating to domestic markets in commodities such as cotton, sugar and rice and to limit new access to certain domestic industrial markets. Having had to make major market access ‘concessions’ when negotiating the terms of its WTO accession in 2001, China could anyhow reasonably contend that less should be demanded of it now in the Doha Round than of the other members – such is the language of world trade negotiations whereby allowing domestic consumers to buy from overseas markets is regarded as a ‘concession’.

The UK’s position within multilateral trade negotiations

Despite its importance for the future of the world economy few businessmen or politicians in the UK have any serious grasp of what the Doha Round is about. Economic statisticians may calculate, and politicians and journalists may claim, that the UK is still the fifth largest exporter of goods and services in the world. But in reality the UK has ceded to the EU control of most aspects of its trade relations with third countries apart from currency and export promotion. So far as international trade negotiations such as the Doha Round are concerned, the UK is no longer really a country at all.

In the early days of UK membership, when EEC decision- making on trade policy was primarily intergovernmental, the Department of Trade and Industry was a leading and respected player in EEC trade policy matters. And without question pooling its trade policy with the rest of the EEC/EU brought the UK real benefits. The UK was able to exercise constructive, liberal and anti-protectionist influence over both the EU’s external trade policy (the Common Commercial Policy) and its internal trade policy (the Single Market).

In the days when the EU and the USA dominated world trade negotiations the EU and the UK were stronger together than they could have been separately. Through Leon Brittan as EU Trade Commissioner, the UK was able to exercise a decisive influence in the final stages of the Uruguay Round (1986–94). And we may yet hope that Mandelson’s replacement, Baroness Ashton, will play a comparable role in the closing stages of the Doha Round.

But, unfortunately, in the present global economic crisis, the general mood in continental Europe seems likely to grow more protectionist and less amenable to UK free-trade thinking. There is now a serious possibility that the UK’s trade policy interests will start to diverge radically from those of the rest of the EU, as continental politicians see them. The friction during the Doha Round between Mandelson and certain EU member countries illustrates the problems that are emerging.

Outside the EU the UK would be free to improve its position as a nation open to trade in goods and services. It could remove Brussels-imposed restrictions on labour market flexibility such as the temporary agency workers directive, and the threatened loss of the UK’s individual opt-out from the working time directive could be resisted, as could new pressures to harmonise UK corporation tax with the rest of the EU. Tariffs on imports of goods such as textiles, clothing and those categories of agricultural produce, processed food and industrial product where there is no significant UK production to protect could be eliminated with little political cost. The UK could regain direct control of its trade relations with third countries, particularly the English-speaking ones.

No one should underestimate the challenges of re- establishing an independent trade policy capability in Whitehall. Over the last 15 years as EU trade policy decision-making has became increasingly supranational so DTI trade policy expertise has gravitated to the Commission in Brussels. It is no accident that the word ‘Trade’ was dropped from the department’s title last year when it was renamed as BERR (the Department of Business, Enterprise and Regulatory Reform).

However, for the present the UK business establishment seems unwilling to consider the possibility of life outside the Single Market for all its disadvantages. But, at least in order to strengthen our future negotiating position within the EU, there is now a cogent case for considering the alternatives.

The way forward and the future of the multilateral trading system

No doubt an opportune psychological moment for agreeing agriculture and NAMA modalities was missed in July. Just as the tragic events of the terrorist attacks on US soil on 11 September 2001 proved a good catalyst for the launch of the Doha Round later that year, so the darkening clouds hanging over the world economy in July could have provided the necessary impetus at Geneva. Yet, although the economic outlook has markedly worsened since as a result of the new global financial crisis, the fact is that all WTO member-state governments remain committed to the Doha Round.

Apart from the SSM and cotton, other major outstanding agriculture issues included tariff simplification, tariff quota creation, GIs and the erosion of some former colonies’ continuing tariff preferences. On NAMA the remaining issues look relatively minor, but all remain to be resolved. Line-by- line scheduling of how tariff and subsidy cuts and tariff quota expansions would be phased in could take as long as 12 months to negotiate after modalities had been settled, though the details ought not of themselves to give rise to any unresolvable differences. Talks on all these issues continue week by week at the sub-ministerial level in Geneva.

Conceivably one or more countries might make their agreement to the overall Doha package conditional upon other countries agreeing to open up particular service sectors to outside competition or to admit larger numbers of people for work purposes. But the most likely causes of failure now must lie in changing politics.

The USA

Like every US President since Franklin D. Roosevelt, Barack Obama seems committed to multilateral trade liberalisation. Whilst he campaigned on a protectionist platform, pledging to renegotiate the NAFTA and opposing new free-trade agreements with countries such as Colombia and South Korea, he has also recognised the importance of concluding the Doha Round. It is therefore reasonable to hope for a smooth handover to whomever he appoints to replace Susan Schwab as US Trade Representative.

The real danger for the Doha Round in the USA lies on Capitol Hill, where protectionism remains alive and well. With substantial Democrat majorities in both Houses of Congress, Obama will face a considerable leadership challenge to win the Trade Promotion Authority (TPA) renewal he would need to expedite the final stages of the Doha Round (TPA gives a US President the power to negotiate trade agreements and present them for approval or rejection en bloc rather than have to submit them for line-by-line debate).

The EU

The best guess is that Commissioners Mandelson and Fischer Boel would have been able to deliver on any modalities deal they might have struck for the EU at Geneva. But the protectionist camp will not give up easily, and deteriorating economic conditions can only serve to strengthen their hand on the Council of Ministers. With his relative mastery of the complex EU trade brief and the deep understanding of EU politics he had developed over four years in office, Mandelson would have had at least a reasonable prospect of holding the line. But, as a novice in this challenging role, Baroness Ashton appears less well placed.

It is possible her appointment will be extended beyond its initial term to September 2009. But if not, there are grounds for fearing that in order to generate maximum support for his reappointment as President of the Commission Jose-Manuel Barroso may pander to the more protectionist member state governments in the candidate he chooses to succeed her. That would not bode well for the Doha Round.

Rest of the world

The political consequences of deepening economic difficulties around the world are obviously unpredictable. Any new government of any country could theoretically stop the Doha Round. The 2009 elections in India are one particular source of uncertainty. No doubt there are others too.

*****

Over the coming months one certainty is that Pascal Lamy will be doing everything possible to get the basic structure of the Doha Round in place. Supported by the outstanding WTO Secretariat and a membership of whom a large majority see strengthening the multilateral trading system as a prime objective of their international economic policy, Lamy is uniquely equipped to complete the job. It is fervently to be hoped he succeeds in his application to be reappointed Director-General for a second four-year term starting in September 2009.

The worst that could happen is that at some point the Doha Round gets put into cold storage and all the potential benefits of the Doha Round discussed above are lost for the foreseeable future. In this case the multilateral trading system would continue at its existing stage of development, not perfect but better than anything the world has known since World War II.

Countries such as Brazil would no doubt resort increasingly to the WTO’s existing and well-tried dispute settlement system to tackle unfair trade-distorting subsidies and other trade policies that go against the letter of the WTO Agreements and jurisprudence. Preferential trade agreements would continue to proliferate, but that would be undesirable rather than disastrous. France and other EU member states may seek to pressure the EU to introduce new protectionist measures on spurious scientific or environmental grounds, but that would have happened anyhow. The greatest concern is surely the scope pinpointed by Patrick Messerlin for countries outside the top eight to raise both agricultural and industrial tariffs to bound limits.

Whatever happens, the pessimists should remember that the objectives of freer trade and non-discrimination are fundamental WTO principles. So long as the WTO continues to exist as a viable institution, optimism about the future of world trade should prevail.

Acknowledgement

This article is partly based on an earlier one in the October 2008 issue of The European Journal.

  1. WTO tariff negotiations relate to ‘bound’ or ceiling tariff rates. Whilst for most of the WTO’s largest members actual tariff rates are largely in line with bound rates, the actual tariff rates of many of the WTO’s medium-sized and smaller members are substantially below their bound rates, as described in the sub-section entitled ‘Reduction in Scope for Countries to Increase Actual Tariff Rates’.
  2. Sally (2008) singles out the EU, the North American Free Trade Agreement (NAFTA) and the Australia–New Zealand Closer Economic Relations Agreement (ANZCERTA) as the world’s only good examples of what he calls ‘strong, clean “WTO-plus” preferential trade agreements’. Critics of the political and regulatory dimensions of the EU’s trading arrangements may have reservations about its inclusion in this short list. Interestingly, he does not mention the European Free Trade Association (EFTA) or the European Economic Area (EEA) in this context.
  3. Modalities are the WTO term for the numerical work plans such as formulas and timetables to be agreed for cutting tariffs, reducing subsidies etc.
  4. Brazil, India and China are leading members of the ‘G20’ group of 22 developing countries formed to demand radical reforms of agriculture in developed countries with some flexibility for developing countries. India and China are also leading members of the ‘G33’ group of 46 developing countries which seek to concede only limited market opening in agriculture.
  5. Under the WTO Agriculture Agreement agricultural products include both semi-processed and processed food products. The EU’s average bound tariff for processed food products is 32.3%, considerably higher than its average rate of 24.3% for all agricultural products. Source: Professor Patrick Messerlin of the Institut d’Etudes Politiques de Paris, based on a concordance table originally established by the US Department of Agriculture.
  6. Tariff lines are the six- (or sometimes eight-) digit headings by which individual products are referred to by customs officers and trade officials, as laid down under the World Customs Organisation’s Harmonised System.
  7. Tariff quotas (or tariff-rate quotas) are the quotas up to which certain countries agreed under the Uruguay Round to import particular agricultural products at relatively low tariff rates with much higher and often prohibitive tariff rates applying to ‘out of quota’ imports.
  8. The Swiss formula is Z = AX/(A + X), where X is the initial tariff rate, Z is the final tariff rate that results, and A is the ‘coefficient’ to be applied (and the theoretical maximum tariff that could result).
  9. Messerlin (2008).
  10. Strictly speaking, Chinese exports should now only be compared with exports from the EU in total as in WTO terms the EU is now largely a single country. Germany’s WTO membership, like that of other EU members, is now in reality little more than nominal.

References

Messerlin, P. (2008) Walking a Tightrope: World Trade in Manufacturing and the Benefits of Binding, Brussels and Washington, DC: German Marshall Fund of the United States.

Sally, R. (2008) Trade Policy, New Century: The WTO, FTAs and Asia Rising, Hobart Paper 161, London: Institute of Economic Affairs.

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