Trade Diversion: WTO Archives

May 02, 2008

Zeroing loses again

A method known as “zeroing” used by the US in anti-dumping investigations and reviews was slapped down on Wednesday by the top court of the World Trade Organisation.
In a case brought by Mexico against punitive US duties on imports of Mexican steel, the WTO’s appellate body ruled that zeroing was illegal in all types of anti-dumping action. It was the latest in a series of similar rulings against Washington.

The issue has set the US against the rest of the 151-strong WTO membership in the Doha global trade talks, where Washington is pushing for zeroing to be legitimised in changes to anti-dumping rules.

It has also sparked a debate over the role of the appellate body, which the US claims is making rather than interpreting WTO rules. Thus the dispute panel that first considered Mexico’s complaint argued that current rules did permit zeroing in some circumstances, flouting an earlier appeals ruling. The panel’s decision has now been struck down.

Washington on Tuesday responded angrily, accusing the appellate body of over-reach “by inventing new obligations” and of undermining the proper functioning of the dispute settlement system.

Posted by Dingel at 11:44 AM | TrackBack

April 01, 2008

Disputes as a sign of success?

Why does Charles Rangel think that the number of complaints filed at the WTO is a good measure of the quality of our trade policy?

Posted by Dingel at 02:06 PM | Comments (0)

February 27, 2008

Can the WTO "transform nations"?

Former GATT DG Peter Sutherland says that the WTO has transformative powers:

The power of the WTO to aid national transformation is easily forgotten. All too often, many developing countries measure their success in the WTO's Doha Round of trade negotiations by the extent to which they avoid obligations to open up their economies. And in polite conversations in Geneva, the potential of WTO disciplines to encourage radical market, institutional, and regulatory reform is a politically incorrect topic. It is the countries that have joined the WTO over the past decade that have drawn the most benefit from global trade rules. Older members, which did not need to negotiate their entry, have probably gained the least.
The WTO has changed the world in the past decade by welcoming China. And if it has changed national fortunes, in Cambodia and Saudi Arabia, for example, it is thanks to its accession procedures. Compared with the terms of bilateral free-trade areas, the terms of WTO membership amount to a revolution. The process is now lengthier than ever. China applied to the WTO's predecessor (the General Agreement on Tariffs and Trade, or GATT) in 1986 and joined the WTO in 2001, Cambodia applied in 1994 and joined in 2003, and Saudi Arabia joined in 2005 after 12 years of preparation and negotiation.

Why do governments put themselves through such trials to enter what was once tagged a rich man's club? The answer might simply be to get rich. This is trite, and it cannot explain the efforts by China or Saudi Arabia, where the opportunities for getting rich have long existed. In fact, a better explanation is that at a certain point political leaders understand that fundamental change is necessary, or unavoidable, and that it cannot be achieved without support from the outside. They need a catalyst; the WTO provides it. Change often means confronting vested interests, reducing the role of the state, reforming institutions, and taking on corruption. Change also means shaking up the private sector by encouraging competition, setting entrepreneurs free from government controls, and ensuring efficient and affordable services. In an era of broadening and deepening globalization, small or struggling economies thrive only in an environment that generates opportunity and supports entrepreneurship. Much of what the WTO does is, in fact, about helping achieve good or better governance.

Nowhere is the WTO's power to transform nations more evident than in its accession process.

Posted by Dingel at 05:53 PM | Comments (0)

January 21, 2008

How many pirated movies is $21 million worth?

If Antigua imposes its retaliatory damages against the United States for banning internet gambling, it's going to get really messy. Cato's Sallie James explains:

Antigua has strongly rejected the WTO arbitrators’ decision about the level of damages — a decision that is made especially controversial given that one of the three panelists dissented from the opinion, a rare occurrence in WTO jurisprudence, and by their own admission that they were on “shaky grounds” in determining the level of damages. According to Antigua, by basing their analysis on the “most likely scenario of compliance” by the United States rather than the export opportunities foregone, the arbitrators were showing unfair sympathy to the American case. The Americans were pleased that the $21 million in annual damages was well below the figure sought by Antigua ($3.4 billion), but expressed concern over the form of retaliation authorized. The United States had originally argued that their restrictions were worth only $500,000 in damages.
Notwithstanding the back-and-forth over the amount of sanctions, a couple of problems remain. First, who is to say how much it is worth to, say, download illegally a new CD or movie. Is it equivalent to the market value of buying a legal copy of the material? Or is it worth the cost of the download itself (less than a penny, I imagine). That is important because the WTO would limit Antigua to $21 million fairly strictly, and the U.S., under instruction from Hollywood and the software industry, would be expected to pounce if they saw the limit violated. There is also the question of whether Antigua would be able to export the fruits of its copyright violation to other countries and “earn” the $21 million that way.

Previous coverage of this case: background, the ruling, WTO credibility

Posted by Dingel at 02:24 PM | Comments (1)

December 22, 2007

The WTO is less than amazing

Dani Rodrik says the WTO is amazing because it forces the United States to eventually act on cotton subsidies. Ben Muse reminds him that the recent WTO ruling was criticizing the United States for its failure to comply. It's interesting that the WTO has enough institutional legitimacy and clout to eventually force the United States to give in, but keep in mind that this dispute has been ongoing for years.

Posted by Dingel at 04:48 PM | Comments (0)

December 19, 2007

US cutting gambling deals

The United States is moving towards negotiated settlements with Europe, Japan, and Canada over internet gambling to keep its markets closed, but Antigua and Barbuda may still pursue its complaint.

Posted by Dingel at 05:59 AM | Comments (0)

September 20, 2007

Canada and Brazil team up against United States

Canada and Brazil are working to get a World Trade Organization dispute panel to hear their respective complaints about American agricultural subsidies at the same time.

Posted by Dingel at 08:21 PM | Comments (0)

August 29, 2007

High-stakes gambling

The Newsday editorial board describes what's on the line in the Antigua gambling case:

The organization's credibility is on the line. It can't risk the rap that it aggressively enforces trade rules against small nations but timidly allows the world's economic powerhouse to skate. The integrity of the United States is also at issue. This country can't respect trade rules that benefit us and ignore those that don't without undermining valuable free trade agreements.

Posted by Dingel at 09:34 PM | Comments (0)

August 23, 2007

Rodrik is wrong about the WTO's gambling decision

The WTO has ruled in favor of Antigua and Barbados again and again at the WTO, declaring that if the United States allows some forms of online gambling within its borders, then it must allow its citizens to gamble online across borders. This makes Dani Rodrik uncomfortable, but I don't understand why.

Rodrik argues that the WTO is infringing upon US domestic policy space by interpreting "recreational services" to include online gambling, when "U.S. did not originally intend to include online gambling when it opened its market to similar services." If that wasn't the intention, then the WTO ruling is a power grab by the international body:

So the question is precisely who gets allocated the residual rights [to policy-making] in this instance: the international trading regime, or the domestic polity?
This leaves the WTO in a bind. For taking these rules at face value results in decisions such as these that are deeply counterintuitive. As the Harvard law professor Charles Nesson puts it, "people [at the WTO] must be scared out of their wits at the prospects of enforcing a ruling that would instantly galvanize public opinion in the United States against the W.T.O.”

To me, this is another example of how existing WTO practices are leading to the narrowing of policy space to the detriment of legitimacy (and economic logic). When the system serves to enforce new restrictions on domestic policy autonomy that would be wildly unpopular at home, it is time to rethink the system.

I disagree with Professor Rodrik on three issues: (1) the factual claim that gambling wasn't originally part of the Uruguay Round deal (2) the theoretical claim that the ruling is contrary to economic logic, and (3) the impact claim that Americans will be enraged by this infringement upon their "policy space."

First, the factual claim. The US should have seen this coming. Other countries did, and specifically excluded gambling from the recreational services provision. Professor I. Nelson Rose of the Whittier Law School writes:

The United States had indeed (accidentally) agreed to let in all forms of gambling when, in 1994, it signed the General Agreement on Trade in Services (GATS). It did this by agreeing to let in all “Recreational, Cultural & Sporting Services” . . . “except sporting.” Other countries put “gambling” on their lists of excluded services; the United States did not.

Perhaps it was an accidental inclusion, but then this is the fault of the USTR for being asleep at the wheel, not the WTO for enforcing its agreement. Other countries were apparently more competent.

Second, the economic logic. What is "deeply counterintuitive" about the decision that a country may not discriminate against economic activities along national borders? Perhaps the WTO could have ruled more narrowly, so that Antigua would merely have the right to sell "lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing," rather than all forms of online gambling, but that's arguing about the proper scope of the discrimination in question, not the principle itself. I think it's logical to believe that, as Sallie James puts it, "if the United States finds online gambling offensive, it must be consistent in its restrictions and apply them equally to domestic and foreign providers."

Third, the American anger at the decision. Rodrik's post makes it appear that Americans are so fond of sovereign "policy space" that they will be quite upset by the WTO's infringement upon it, but Professor Nesson was explaining that the WTO must be reluctant to enforce its decision because Antigua, aware that, absent transferrable retaliatory rights, a few tariffs upon US exports would provide it negligible leverage, requested an awesome penalty:

Mr. Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the American government refuses to accept the ruling: permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others.

Dean Baker rightfully highlighted this clever tactic, but Rodrik omitted it. Whether it is pragmatically wise for Antigua and the WTO to entangle themselves in such a high-stakes showdown is a completely valid question, but I don't think the ruling lacks economic or legal merits. So why is Dani Rodrik so skeptical of the decision?

Posted by Dingel at 07:44 PM | Comments (3)

August 16, 2007

Self-enforcing agreements

Dani Rodrik, surrounded by anarcho-sympathizing libertarians at Cato Unbound, thoughtfully discusses the limits of self-enforcing agreements. In response to Peter Leeson's claim that we don't see "shriveling international commerce in the absence of supranational commercial law," Rodrik writes:

It may be objected that the operation of the global economy is proof in itself that a high level of economic activity can be maintained without political institutions... But Leeson is overlooking several things. First, there is in fact a significant global institutional architecture that supports the international economy: globalization would not have reached this far in the absence of the WTO, IMF, World Bank and a host of regional supranational institutions. The global public sector is not non-existent.

Now the World Bank and IMF cannot claim credit for inducing developed countries to liberalize their trade policies, nor do they get much credit for Indian or Chinese policy shifts, so it seems that the bulk of responsibility for the relatively open global trading system would fall upon the WTO. But even those (Subramanian & Wei) claiming that the WTO promotes trade concede that it doesn't force countries to liberalize, which is why developing countries remain relatively closed and sensitive sectors "did not witness liberalization." The WTO is not an effective supranational institution if that term means enforcing policies contrary to participants' wishes.

In fact, a leading theoretical explanation for the WTO is that it is a successful self-enforcing agreement! Bagwell & Staiger:

[T]he optimal unilateral tariff for a national-income maximizing government of a large country is positive. If both governments behave this way and set positive import tariffs, a Prisoners’ Dilemma situation is created. In the Nash equilibrium, tariffs are too high and trade volumes are too low; hence, a trade agreement that facilitates a reciprocal reduction in tariffs could be mutually beneficial...
The terms-of-trade theory is easily generalized to include political considerations, and it may be directly interpreted in the context of the market-access language that trade-policy negotiators use. This theoretical perspective offers a means by which to interpret the rules of GATT/WTO. For instance, it suggests that a government may hesitate to liberalize unilaterally, since it does not want to face the terms-of-trade loss that such behavior would imply...

Likewise, a government would hesitate to liberalize as part of a reciprocal negotiation, if it were concerned that its negotiating partner might later “cheat” and raise its tariff. We argue that the GATT/WTO enforcement provisions can be interpreted in this light...

As there are no GATT/WTO police, agreements between governments achieved through GATT/WTO negotiations must be self-enforcing. Indeed, the rules of GATT/WTO may be interpreted as a codification of supergame strategies.

Rodrik may be right about the limits of self-enforcing agreements in most circumstances, but the liberalization of international trade seems to be a counterexample to his generalization.

[Of course, Rodrik is also writing about the protection of property rights and enforcement of contracts across national borders, which may indeed depend upon states making legal arrangements, but that's not the role of the IMF, WB, nor WTO.]

Posted by Dingel at 08:42 PM | Comments (3)

Transferrable retaliatory rights at the WTO

A neat idea I first read about in Fair Trade For All apparently has both a longer history and a richer theoretical exposition than I realized.

In 2002, Mexico proposed that the WTO make retaliatory tariff rights tradable, so that countries that would only hurt themsleves by imposing sanctions might still pose a punitive threat to the subject of complaints at the trade body's dispute settlement mechanism. This sounds like a great idea to me.

Bagwell, Mavroidis & Staiger have an academic paper on the subject: The Case for Auctioning Countermeasures in the WTO. Their result is a bit surprising:

We then consider an extended auction, in which the home country is also allowed to bid to retire the right of retaliation. The extended auction is again characterized by positive externalities between foreign countries. But the extended auction also features negative externalities, since the home country experiences a negative externality whenever a foreign country wins. In the extended auction, we find that auction failure does not occur; in fact, the home country always wins and the retaliation right is therefore always retired.

It's an odd outcome, but instituting the auction does result in the violator paying compensation, so it sounds better than the status quo. But Bagwell is cautious (pdf) in making a policy recommendation:

[Bagwell, Mavroidis & Staiger] do not claim to answer this question, though, since a system with tradable retaliation rights would generate additional costs and benefits that are not included in their formal analysis. One un-modeled benefit is that the prospect of auction revenue might enable a small and developing country to attract private legal support for WTO legal actions that it would not otherwise be able to afford. Under the heading of un-modeled costs, it is important to list the possibility that the revenue generated by auctions could result in nuisance cases and excessive use of the WTO dispute settlement system. Another potential cost is that a system of tradable retaliation rights might cause bilateral trade tensions to grow into multilateral tensions. Acrimony across governments could grow, and future negotiations could be undermined...
The costs of a system with tradable retaliation rights could well exceed the benefits. At this stage, I therefore caution against any explicit change in the DSU to accommodate tradable retaliation rights.

True, there are many costs and benefits not examined by a formal auction model, but how does one research the likelihood of nuisance cases or acrimony? I don't we're likely to see significant academic progress on whether auctioning countermeasures would be net beneficial, so policymakers ought to start discussing it seriously.

[The general merits of making tort claims transferrable will be familiar to those who have read David Friedman's Law's Order.]

Posted by Dingel at 06:18 PM | Comments (0)

May 11, 2007

WTO needs bigger HQ

I have no idea if these rumors are credible:

The head of the World Trade Organization, WTO, confirmed Wednesday that the group was looking for bigger headquarters but refused to comment on rumours that this could be outside Geneva or even Switzerland...
'Above all we need to be under the same roof,' added Lamy who refused to be drawn on claims that the WTO had been approached by Hong Kong and Singapore with a view to moving the operation there. He said he would not fall into a trap of negotiating in public.

AP story.

Posted by Dingel at 09:19 PM | Comments (1)

April 21, 2007

Is the MFN principle obsolete?

FT:

Stuart Eizenstat, a former undersecretary of commerce in the Clinton administration, said... whether the current Doha trade round yielded an agreement or not, it should be the last of its kind. “The world is moving too fast for this kind of consensus-driven, five, six, seven, eight-year rounds.”

What aspects of the world now move so quickly that multilateral negotiations are obsolete? The argument is not obvious to me.

April 11, 2007

US bows to WTO decision

The Commerce Department has yielded to the WTO's ruling on zeroing in the calculation of anti-dumping duties. Though the United States has shown a tendency to initially resist WTO rulings against it, it usually concedes, albeit after waiting a number of months or losing an additional ruling. This strikes me as (somehwat) promising for building up the WTO's institutional credibility

Posted by Dingel at 09:52 AM | Comments (0)

April 09, 2007

Happy Birthday, GATT!

Doug Irwin celebrates the GATT's 60th birthday (ungated version):

Sixty years ago this week (April 10, 1947) at the Palais des Nations in Geneva, Switzerland, representatives from 23 nations opened a conference that attracted little attention at the time, but had far-reaching consequences for the world economy. The conferees met to negotiate tariff reductions and finalize the text of a General Agreement on Tariffs and Trade (GATT)...
The origins of the GATT can be found in the economic disaster of the interwar period... Although the world economy recovered slowly from the depression, the spread of high tariffs, import quotas, discriminatory practices and foreign exchange restrictions meant that world trade remained stagnant and compartmentalized throughout the 1930s.

The tragic economic and political consequences of that "low dishonest decade" spurred some officials to think about a new economic framework. Marked by the bitter experience after World War I, Cordell Hull -- FDR's Secretary of State -- came to believe that "unhampered trade dovetail[s] with peace; high tariffs, trade barriers and unfair economic competition, with war."...

[In the 1947 GATT meetings, the] U.S. insisted that the most-favored nation (MFN) clause -- ensuring nondiscrimination in trade -- be the Article I cornerstone of the GATT because it wanted to prevent the spread of Imperial preferences that discriminated against its exports. Fearful of its postwar financial situation, Britain demanded large American tariff cuts in exchange for a reduction in preferences and wanted the freedom to impose quantitative restrictions on imports in case of balance of payments difficulties, something that became Article XII of the GATT...

Over its 60-year history, the GATT has had many shortcomings. Agricultural trade has largely eluded liberalization. The current spread of preferential trade arrangements... have reintroduced discriminatory trade practices...

Despite these shortcomings and difficulties, the GATT framework has survived as a durable code of conduct for commercial policy and dispute resolution...

The prosperity of the world economy over the past half century owes a great deal to the growth of world trade which, in turn, is partly the result of farsighted officials who created the GATT. They established a set of procedures giving stability to the trade-policy environment and thereby facilitating the rapid growth of world trade. With the long run in view, the original GATT conferees helped put the world economy on a sound foundation and thereby improved the livelihood of hundreds of millions of people around the world.

The task for statesmen today is to look beyond short-term political considerations, arising from the complaints of special interests that fear market competition and the parsing of subsidies, and bring the ongoing Doha Round to a successful conclusion. If immediate steps cannot be taken to liberalize trade, then the phasing in of reforms and the phasing out of subsidies over many years is perfectly consistent with the long-term objectives of the GATT. We should remind ourselves how much poorer the world would be today without the politically courageous decisions made by visionary diplomats meeting in Geneva 60 years ago this month.

This is the appropriate occasion to call for good trade policymaking, but I won't hold my breath.

Posted by Dingel at 08:23 AM | Comments (0)

April 05, 2007

Daniel Altman confuses me

Daniel Altman explains global economic governance by grouping together the IMF-WB-WTO trio and extending the "chairs and shares" IMF story to apply to the WTO in an IHT article. The result is nonsense:

The World Bank, the International Monetary Fund, the World Trade Organization - the United States manages to dominate all three groups and more, thanks to its economic might, or at least the economic might it had when those organizations were conceived. But how much of that power will it have to cede to China when that country outweighs U.S. productive capacity?...
In September, China was granted a quarter more votes in the IMF as an acknowledgment of its growing economic importance...

The World Trade Organization is an even tougher nut to crack, since it works on a consensus system; each member has a veto. Still, the United States has found other ways to dominate its operation, for example by initiating more trade disputes (and being the respondent in more trade disputes) than any other member. And only the United States and the European Union participated in the backroom negotiations at both the Uruguay round of trade talks in the 1990s and the Doha round that is currently under way.

Being the respondent in WTO dispute cases is a sign of dominance?!? Hats off to the US for ruling the globe by losing cases to Antigua and Brazil. I suppose China ought to welcome a flurry of cases against it.

Similarly, Altman's characterization of trade negotiations is misleading. First, the green room meetings of the 1990s often included 25-30 participants, not merely the US and EU. Second, the US failure to enter into productive dialogue with important trading nations is a sign of its incompetence and inability to complete the Doha round, not dominance. Third, the EU and US have sought to increase Chinese participation in the Doha round of negotiations, but China has been satisfied to rest on the laurels of its 2001 accession.

Altman is a solid journalist and very smart guy, but I think he has mischaracterized the American and Chinese roles in the WTO.

Posted by Dingel at 12:15 AM | Comments (0)

March 23, 2007

Trade litigation

Can the WTO's dispute settlement panel bear its increasing load of contentious cases?

Alan Beattie voices concern:

WTO panels comprise three from a roster of part-time panellists that includes trade officials, diplomats and academics. Some, oddly, are moonlighting from day jobs as national ambassadors to the WTO, meaning they are negotiating over trade deals one day and ruling on their meaning the next. They do not have to be lawyers, though there is a separate appellate body whose members must have legal expertise. Panels rely heavily on advice from the WTO's small secretariat to interpret legal questions.
It is hard completely to dismiss the contention that law affecting thousands of businesses, millions of workers and billions of dollars is being determined by panels of part-time amateurs making it up as they go along.

Peter Gallagher is happier:

Governments are to blame for every one of the legal entanglements that Mr Beattie mentions... The WTO's appellate body now interprets trade agreements in precisely the same way as every other treaty using standards of jurisprudence that citizens - even lawyers - everywhere demand in municipal courts. Governments that accept the WTO agreements must, as a consequence, now say what they mean and do as they say they will do. Is this a bad thing?

Posted by Dingel at 06:32 PM | Comments (0)

February 21, 2007

Is the WTO Dispute Settlement System Fair?

In case you haven't already learned so from another trade blog, Daniel Ikenson and Robert Lighthizer are debating the fairness of the WTO's dispute settlement system at the CFR's website.

Posted by Dingel at 09:07 AM | Comments (0)

February 07, 2007

What completed the Uruguay Round?

Former Director-General of the GATT and WTO Peter Sutherland spoke yesterday about challenges to the multilateral trading system. A few highlights amongst Mr. Sutherland's comments:

- He believes that TPA renewal under the Democratic Congress is unlikely, but an outline of a Doha round agreement must be on the table within two months for reauthorization to have any chance.
- Doha failure will accelerate bilateralism in trade, which has historically resulted in trade deals that benefit rich countries and harm poor countries.
- Bilateralism is useless to multinational corporations with supply chains spanning many countries.
- One source of Doha's trouble is the ill-conceived launch as a "development round" with unrealistic expectations. The WTO is not a development institution, and although its mission is to create a favorable and open global trading system that is conducive to development, "trade deals can't deliver development." Trade liberalization favors those who trade - the rich countries.
- In regards to the WTO's ability to do research and advocate on behalf of global trade: "The WTO's staff is one-quarter of the World Wildlife Fund's."
- "Neither the outcome nor the path to it has been satisfactory." Sutherland echoed the message of the 2005 WTO report he chaired, criticizing the Doha round approach of announcing formulaic headline goals attenuated by numerous details and caveats. He characterized the Uruguay Round as involving more pragmatic give-and-take. Sutherland defended the "green room" sessions as a means of hammering out a consensus amongst key players who could serve as "honest brokers," arguing that LDCs' interests largely align with those participating in the green room.
- Similarly, Sutherland emphasized the importance of senior-level negotiators doing the heavy lifting. He noted that when he became Director-General, the Uruguay Round had already suffered two near-catastrophic ministerial meetings, and that the deal was completed six months later without a ministerial meeting. Marrakesh was a coming out party.
- Sutherland also noted that trade preferences can drive countries to specialize in commodity exports in which they don't have a comparative advantage. His example was Caribbean nations growing bananas thanks to the EU's ACP preferences, despite Central America's productive superiority.

During the Q&A, I asked Mr. Sutherland to identify the forces he thinks were responsible for the Uruguay Round's successful completion. I noted that competing interpretations of that negotiating history motivate current strategies for Doha:

Some in Washington claim the strategy helped break a deadlock in the Uruguay round after the EU balked at opening its protected agricultural market. They say by threatening to turn Apec from a loose grouping of Pacific Rim economies into a rival trade bloc, the US forced the EU back to the bargaining table. Others, however, think such claims exaggerated. Not only have Apec's efforts to free regional trade achieved little but, they argue, the EU softened its position on farm trade in the Uruguay round only because mounting costs made reform of its common agricultural policy unavoidable.

Sutherland acknowledged that both of those forces may have played some role (EU internal politics more than the threat of APEC), but argued that individual people matter far more in the actual negotiations. He characterized the APEC narrative as "ex post facto theorizing" rather than a compelling explanation.

Sutherland's story emphasized the role of particular negotiators and national leaders in building a consensus and hammering out controversies. Particularly amusing was a tale of fervent discussions at 2am in the green room shortly before the completion of the round, in which negotiators debated whether the word "unfair" carried appropriate legal import to be included in a paragraph on anti-dumping. The next morning, shortly before Sutherland was due to announce the round completed, the Japanese representative informed him that the ministry of foreign affairs and MITI disagreed about the text. The ensuing brinksmanship (as narrated by Sutherland) was quite entertaining (in retrospect), and thank goodness it worked out for the best, as Japan raised no objection when Sutherland gaveled the round to a close.

Sutherland's story of the Uruguay Round's completion was both amusing and insightful. I hope he someday puts it into print.

Posted by Dingel at 10:36 AM | Comments (1)

January 10, 2007

Developing country WTO dispute participation

I'll be reading this pdf during one of my flights today:

In a new ECIPE paper, Roderick Abbott presents new analysis on the participation of developing countries in WTOs dispute settlement mechanism. Abbott finds that around 80-90 developing countries have had no dispute participation at all and discusses the reasons for that passive attitude. Abbott concludes that there seems to be little in the WTO system in itself that needs correcting; it is rather problems of internal governance in developing countries, and a choice in favour of a bilateral approach, that explains their relative absence in dispute settlement.

Posted by Dingel at 11:12 AM | Comments (0)

January 01, 2007

Antigua gambling case info

I just noticed that the Antigua Offshore Gaming Association has a website for its WTO case against US antigambling laws. Maybe it will have more impact than if the island of 70,000 sanctioned the United States for noncompliance, though that's not saying much.

Posted by Dingel at 09:22 AM | Comments (1)

October 18, 2006

Latest WTO Membership News

Russia:

A Moscow-based Web site that the U.S. Commerce Department has branded as the world's highest- volume online seller of pirated music announced plans Tuesday to release hundreds of thousands of albums free... The U.S. trade representative, Susan Schwab, has warned that continued operation of the site signals a lack of respect for intellectual property law that could jeopardize Russia's long-sought entry into the World Trade Organization. [IHT]

Vietnam:

The World Trade Organization is expected to approve Vietnam's entry into the world trade body in early November, ending more than 10 years of tough negotiations, state media reported Monday.

Posted by Dingel at 11:25 AM | Comments (0)

October 07, 2006

WTO rules on GMOs

Can the WTO rule on biotechnology issues like genetically modified foods without experiencing "mission creep" and becoming a judge of scientific debates? Ross Korves, who says that three decisions released at the end of last month "are critical for the WTO in establishing a rules-based system for handling trade disputes on biotech crops," suggests that the WTO pulled it off:

The WTO panel made clear in its ruling that it was not the panel’s task to determine whether biotech crops are generally safe or if they were “like” their conventional counterparts. They also did not consider whether the EU’s product-by-product procedures for considering the safety of biotech crops were appropriate or judge the conclusions reached by various EU scientific committees as part of the approval process. The panel did seek advice from six scientific experts who submitted hundreds of pages of materials and spent two days with the panel and representatives of the two sides.
The WTO is not a standards setting body for biotech crops or any other products. That is left to groups like Codex. It also does not try to second guess the fine points of science and risk assessment. It focuses on how member countries follow the rules as set out in WTO agreements.

As trade talks increasingly concern non-tariff barriers, it's important that the WTO be able to address their abuse without becoming a global regulatory agency. Korves' article suggests that it is successfully doing so.

Posted by Dingel at 03:40 PM | Comments (1)

September 10, 2006

DeLong on Wade

Adopting the 1:3:2 framework, Brad DeLong argues that the existing international economic institutional framework is likely to last:

The current neoliberal rules of engagement make it difficult for the rich post-industrial core to succumb to protectionist and nativist pressures that would slow growth for the three billion significantly. And the current neoliberal rules of engagement give the largely-kleptocratic rulers of the two billion nice lives as well.

Posted by Dingel at 08:02 PM | Comments (0)

August 21, 2006

The Origins of Article XXIV

I just stumbled across an article by Kerry Chase of Tufts that describes what he calls the "mysterious origins" of GATT Article XXIV. It appeared in World Trade Review in March 2006. The abstract:

The GATT treaty’s loophole for free trade areas in Article XXIV has puzzled and deceived prominent scholars, who trace its postwar origins to US aspirations to promote European integration and efforts to persuade developing countries to endorse the Havana Charter. Drawing from archival records, this article shows that in fact US policymakers crafted the controversial provisions of Article XXIV to accommodate a trade treaty they had secretly reached with Canada. As a result, the free trade area exemption was embedded in the GATT-WTO regime, even though neither the Havana Charter nor the US-Canada free trade agreement was ever ratified.

Intriguing. Anyone familiar with this claim?

[The author's book on the political economy of trading blocs also looks interesting.]
[Table 1 summarizes what Ben discussed here. The WTO has not adopted a single report on FTAs or CUs.]

Posted by Dingel at 05:31 PM | Comments (2)

July 21, 2006

Does Doha's collapse mean a resurgence of protectionism?

The Doha round is likely to stall out by the end of the summer. In that light, this FT piece by Alan Beattie from last summer is relevant:

The Doha round of multilateral liberalisation talks is behind schedule and in trouble. Prospects for trade seem bleak.
But are they? In practice, according to many trade officials, experts and practitioners, the World Trade Organisation system has so far done a good job of holding protectionist sentiment in check. Some warn that the system will start to give way, or at least that further liberalisation is in jeopardy. Yet, in spite of the stress induced by rapid change in the global economy, there is little sign that the gains from previous advances are being lost.

The bare statistics do not support the idea that a wave of protectionism has swept over the global economy. There has been no rise in the use of "anti-dumping" or "safeguards" actions - emergency limits used by countries to prevent surges in imports. The most recent figures from the WTO, for the second half of last year, showed new anti-dumping actions falling to 103 from 135 a year earlier.

Experts attribute much of the gap between protectionist rhetoric and (generally) laisser-faire practice to the rules of WTO agreements and particularly the judgments of its disputes settlements mechanism, involving three-person panels sitting in Geneva...

Peter Mandelson... believes in the power of global trade rules. "The barriers against protectionism we have put in place over the past decade are strong enough to stand immense pressures and indeed ratchet up liberalisation."...

Given the slowness of the negotiations so far, it would be a brave observer who bet on rapid progress. But at a time when the world economy is coping with stalling jobs growth in some of the richest nations, colossal global current account imbalances and the emergence of China as a fearsomely huge and efficient competitor across a range of industries, the freedom to trade - so painfully achieved over previous decades - has yet to receive a serious challenge.

Will the WTO's institutional credibility hold up when there are no ongoing negotiations to futher liberalize trade? Or should we expect backsliding in the wake of Doha's failure?

Posted by Dingel at 08:07 PM | Comments (0)

July 12, 2006

WTO will evaluate PTAs

The WTO adopted measures on Tuesday to work through the backlog of PTAs awaiting evaluation:

Officials said it opens the way for clearing a huge backlog of some 200 regional trade agreements, or RTAs, many of which have been awaiting the WTO green light for a decade or more, and for fast action in accepting new ones.
"This decision will help break the current logjam in the WTO on regional trade agreements," Mr Lamy said in a statement...

"Hopefully, this decision is a good omen for much-needed progress in other areas of the talks, such as agriculture and industrial goods trade, where agreement is urgently needed," added Mr Lamy, currently travelling world capitals in search of a breakthrough on the Round.

This measure has little connection to those other areas and I see no reason for it to spur progress at the negotiating table.

The decision, reached in committee on Monday, provides for WTO economists to present an analysis of each agreement, with trade statistics, which will make it easier for smaller countries to determine how an RTA might affect their trade.
Until now, members have simply been presented with the often complex texts of such agreements.

Only one agreement - between the Czech Republic and Slovakia after the break-up of their former unified state in the early 1990s - has been approved in the last decade.

I raised this topic two months ago, and Ben Muse's answer to my query on GATT Article XXIV compliance appears to have been correct.

Will the WTO acquiese to the proliferation of PTAs and greenlight all of them? Or will it try to strike some down?

Posted by Dingel at 08:52 AM | Comments (1)

June 12, 2006

WTO Dispute Settlement Database

I'm developing an interest in the WTO dispute settlement mechanism. Here's a data set that might help some in their research:

The dataset covers all 311 WTO disputes initiated through the official filing of a Request for Consultations at the WTO, from 1 January 1995 until July 31, 2004, and for these disputes it includes events occurring until February 28, 2005. For these disputes, the dataset covers exhaustively all stages of dispute settlement proceedings, from the moment when consultations are being requested to the eventual implementation of the rulings.

Posted by Dingel at 08:04 PM | Comments (0)

May 30, 2006

GATT Article XXIV Compliant FTAs

Is anyone aware of a resource that details which CUs and FTAs have been found to be compliant with Article XXIV of the GATT? The best I have thus far is footnote seven in "Agriculture, GATT, and Regional Trade Agreements" by Sharon Sheffield:

As of January 1995, only 6 RTA’s [sic] have been found to be compliant with Article XXIV by unanimous agreement of the working party. Of these 6, only 2 are presumed to still be in operation (Czech-Slovak CU and the Caribbean Community and Common Market).

Posted by Dingel at 05:46 PM | Comments (1)

February 08, 2006

More on the GMO case and WTO mission creep

Commenting on my previous post, Schiller and Ivan defended the WTO's recent GMO decision. They say that the WTO was right to condemn the EU for using (bunk) science as an excuse for agricultural protectionism.

I'm very sympathetic to the arguments that the GMOs are reliable and safe. My doubts about the ruling are not a result of an aversion to biotechnology. Rather, I fear that the WTO's approach to handling environmental regulatory issues will imperil its ability to promote trade liberalization. The intersection of regulatory policy and protectionism will prove much more difficult to handle than the simple collective lowering of trade barriers as accomplished under the GATT. Moreover, the WTO will face a growing number of disputes over non-tariff barriers, especially as tariff walls decline.

The old shrimp & turtle dispute was a case similar to the GMO conflict, but the WTO ruled differently in that instance. It approved import prohibitions targeting a production method (use of shrimp nets without turtle escapes) deemed environmentally unfriendly. If the WTO recognizes trade sanctions and protectionism as legitimate means for promoting and defending environmental interests, then the dispute resolution panel will inevitably become a judge of scientific matters, rather than of compliance with WTO agreements.

If harmonizing trade barriers requires the harmonization of regulatory schemes, then the WTO will confront disputes regarding a plethora of non-trade issues. While I doubt that any state will soon challenge export or import bans regarding nuclear technology, one can imagine that the WTO may have to tackle issues like bans on the transfer of encryption technology. The WTO has already managed to entangle itself in the matter of intellectual property (pdf), a move which has been criticized by economists ranging from Bhagwati to Stiglitz. While most countries are interested in lowering trade barriers, many are much less comfortable with signing onto a global regulatory agency with far greater implications for domestic policy space.

Whether it's feasible for the WTO to remain focused upon trade liberalization without experiencing mission creep into regulatory issues remains an open question. I don't see a simple remedy for the problem of protectionism masquerading as environmental, labor or health policy.

Posted by Dingel at 06:40 PM | Comments (1)

February 07, 2006

GMO case hurts WTO

I agree with Dan Drezner that the WTO ruling on genetically modified foods will hurt the organization. The Europeans strongly feel that the WTO is stepping outside its jurisdiction by condemning EU policy on a non-trade issue, since they consider the import prohibition to be a health and safety matter. They'll choose to suffer US sanctions rather than allow GMF imports.

Thus, this case was lose-lose for the WTO from the beginning. A ruling against the US would have condemned the significant potential benefits of biotechnology, while the ruling against the EU will only undermine the trade body's credibility.

Posted by Dingel at 09:27 PM | Comments (3)

December 28, 2005

Stiglitz & the Shrimp-Turtle case

In a previous post, I noted that Joseph Stiglitz misinterpreted the WTO's turtle-shrimp decision. He had written:

The WTO puts trade over all else. Those who seek to prohibit the use of nets that harvest shrimp but also catch and endanger turtles are told by the WTO that such regulation would be an unwarranted intrusion on free trade. They discover that trade considerations trump all others, including the environment! [Globalization and Its Discontents, p.216]

In his latest text, Dr. Stiglitz corrects his interpretation:

In its adjudication, the WTO's Appellate Body made clear that the WTO gives countries the right to take trade action to protect the environment, in particular relating to human health, endangered species, and exhaustible resources... The US lost the case, not because it sought to protect the environment but because it discriminated between WTO members. (The United States was discriminating by giving Asian countries only four months to comply with its law, but allowing Caribbean Basin nations three years.) But the significance of the Shrimp-Turtle rulings is that they endorse the use of trade policy to enforce environmental standards. [Fair Trade For All, p.136-7]

Posted by Dingel at 11:33 AM | Comments (0)

September 27, 2005

Who you won't see at the WTO this year

Ukraine cannot join the World Trade Organization (WTO) in 2005, the country's acting economic minister said Tuesday. Sergei Terekhin said, "We have pessimistic forecasts regarding Ukraine's accession to the WTO this year." [Novosti]

In a tough warning to anti-globalization protesters, Secretary for Security Ambrose Lee vowed to bar known troublemakers from entering Hong Kong during the World Trade Organization's meeting in December, sparking fears that authorities are compiling a blacklist of WTO opponents. [The Standard]

Posted by Dingel at 08:47 AM | Comments (0)

September 25, 2005

Who is to blame for the WTO's shortcomings?

Peter Gallagher writes that the WTO is structurally sound, arguing that the organization is being undermined by the fact that its two largest members, the US and EU, don't even pretend to respect its rulings. He's got some good examples to support that claim.

Posted by Dingel at 07:06 PM | Comments (0)

August 12, 2005

Liberalization due to WTO participation in Asia

Two stories on WTO-induced liberalization:

Vietnam: "Accession to the World Trade Organization would throw up jobs in hi-tech fields in Vietnam but also present challenges, a top labor expert said."

Malaysia: "Come 2008, Malaysia has to bear the full brunt of the liberalisation rules under the World Trade Organisation (WTO) for 'non agricultural access' and this covers products like automobiles. Known as the 'big bang liberalisation', the picture is rather grim ahead unless Malaysian national car companies become more competitive."

Posted by Dingel at 03:04 PM | Comments (0)

August 10, 2005

WTO & Trade Liberalization: Don't read blog posts when research papers are available

Posting an answer to a question you posed only four hours earlier is a sure sign of unfamiliarity with the literature in that area. Luckily, Ben Muse has pointed me to Andrew K. Rose's web page, which contains a plethora of links to his papers and various responses on the topic of the GATT/WTO's effectiveness in liberalizing trade. I'm going to bury my nose in these papers for a day or two.

Posted by Dingel at 08:03 AM | Comments (0)

August 09, 2005

Yes, the WTO does liberalize trade

Perhaps I have found an answer to the question posed in my previous post's title.

Check out this Economist article for more discussion of the WTO's effectiveness in liberalizing trade. The paper by Tomz, Goldstein and Rivers that it mentions exhaustively investigates the criterion Rose used to determine GATT participation. By using formal membership as the measure of GATT participation, Rose's paper neglects the substantial participation by informal member nations:

The solution to this mystery lies in understanding who actually participated in GATT. We show that Rose has overlooked a large proportion of countries to which the agreement applied. By mistakenly classifying many countries as nonparticipants, when in fact they had both rights and obligations under the agreement, he systematically underestimates the effect of GATT on international trade. The purpose of this paper is to identify the full set of GATT participants and, once this institutional detail is understood, to show that GATT did indeed contribute to the substantial growth in postwar trade.

They find that "trade is approximately 72 percent higher when both sides of the dyad participate in GATT and nearly 31 percent higher when only one side participates."

GATT created rights and obligations not only for contracting parties but also for countries and territories that did not appear on the formal membership roster. By treating colonies, de facto members and provisional members as if they were outside the organization, previous research has understated the institutional research and economic effects of GATT.
Once we account for all participants, our analyses show that participation in GATT— either as a formal member or as a nonmember participant--substantially increased trade. Grouping nonmember participants with nonparticipants causes a substantial downward bias in the estimated effect of GATT membership. When this misclassification is corrected, we find that the agreement proved beneficial for both formal members and nonmember participants, which traded at higher levels than countries outside GATT. These findings withstand a variety of sensitivity tests involving changes in sample definitions and estimation techniques. Overall, GATT exerted a positive effect on trade in nearly all time periods and for most groups of countries.

It would be hasty to dismiss the WTO.

Posted by Dingel at 04:15 PM | Comments (1)

Does the WTO liberalize trade?

In reply to my pessimistic evaluation of trade liberalization's momentum, Alex Singleton says that I shouldn't let the best be the enemy of the good, noting that CAFTA, while unpopular, was more politically feasible than unilateral liberalization.

I would normally reply that the realistic alternative to regionalism is multilateralism, not unilateralism, but I just read a paper (PDF) from Andrew K. Rose of Berkeley that argues that the conventional faith in the WTO is misplaced. Using a very traditional gravity model, Rose finds WTO membership to be both economically and statistically insignificant in affecting trade flows, with point estimates occasionally turning out negative. After demonstrating the robustness of this (non-)finding, he ponders:

Of course the most interesting issue that remains is why the GATT/WTO doesn’t seem to have had much of an impact on trade. It is natural to ask whether GATT/WTO members have systematically lower trade barriers. The answer seems to be negative; see Rose (2002). There are at least two possible reasons. The first is that the GATT/WTO has not typically forced most countries to lower trade barriers, especially developing countries that have received “special and differential treatment.” The second reason is that members of the WTO seem to extend most favored nation status unilaterally to countries outside the system, even though they are under no WTO formal obligation to do so. Ongoing research (Rose, 2002) indicates that the negative effect of GATT/WTO membership on trade may appear because membership simply has little effect on trade policy. [Berkeley (PDF)]

In discussing the negative effects of preferential trade agreements, I have sometimes described discriminatory trade policy as damaging the WTO. Dr. Rose's paper is a good reminder that MFN and low barriers, not membership in the WTO, are the hallmarks of good trade policy. As is often noted, unilateral liberalization, whether spurred by the desire for improved economic performance or forced upon policymakers by a crisis, has occurred frequently during the last half century, but rarely received the attention that is showered upon reciprocal liberalization.

That said, dramatic unilateral liberalization would certainly capture public attention, and Mr. Singleton is likely right that it will not be politically feasible in the near future. As such, free traders ought to devote attention to making the WTO an effective force for liberalization.

Posted by Dingel at 12:19 PM | Comments (1)

August 01, 2005

WTO Membership Benefits

I thought that the world of textiles had entered "2005 and beyond: the Quota-Free Era," so I was confused when I read this article:

Fees applied to quotas on garment and textile exports to the United States have been abolished by the Vietnamese Ministry of Finance in a recent decision.
Deputy Finance Minister Truong Chi Trung said the decision, dated July 25, was good news for about 800 US-bound garment and textile exporters in Vietnam.

The decision was made in the context that Vietnamese garment and textile exporters are facing fierce competition from their Chinese rivals, with the threat of decreasing exports.

Trung went on to say that the abolishment of quota fees will not cause a big impact on the country's tax revenues as fees collected from garment and textile exports are estimated at a mere VND50-55 billion a year....

To boost exports to the US, Vietnam plans to negotiate with the US to increase quotas for Vietnamese garment and textile exporters and simplify procedures on granting export permits, Trung said. [Yahoo]

I was aware of the calls for the imposition of "emergency" quotas upon Chinese textile exports, but how is the US getting away with plain old protectionism?

Here's the trick: Vietnam isn't a member of the WTO. Neither are Russia, the Ukraine, nor Belarus. The US maintains textile quotas against each of them.

Posted by Dingel at 11:44 AM | Comments (0)

Trade Diversion

Commentary on development, globalization, and trade by Jonathan Dingel.