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Trade roller-coaster: The ups and downs in 2008 and the road ahead

Focus Philippines

Trade Roller-Coaster: The Ups and Downs in 2008 and the Road Ahead

By Joseph Purugganan

It was a dizzying roller coaster-year for trade.

In the year 2008, the Doha Round negotiations in the WTO teetered between breakthrough and breakdown. Over the course of countless green room meetings, ministerial conferences and four revisions of the draft texts that emerged last year, we witnessed several attempts to hammer out a new global trade deal despite the huge and widening gap between positions of Member countries on many critical issues.

As the multilateral trade talks faltered, bilateral and regional free trade and economic partnership agreements on the other hand surged, fueled mainly by the aggressive push by the most powerful economies - the US, EU, Japan and China - of their respective brands of commercial diplomacy. Bilateral and regional trade agreements now cover practically the entire globe in a web of interlocking economic arrangements.

Global issues like climate change and rising food prices which had profound effects on both developed and developing economies also became battleground issues in 2008. As anti-FTA forces capitalized on these crises to point out the failure of the neo-liberal paradigm, proponents of free trade bolstered the idea that an acceleration of trade liberalization is the solution to these crises.

The Doha Train

Reeling from the collapse of previous high level Ministerial meetings and attempting to skirt around the more politically contentious issues, the negotiations turned more technical in 2008 as the negotiating committees and the WTO secretariat in Geneva took the driver’s seat and steered the direction of the multilateral trade talks.

The engine clearly of the Doha Train in 08 was the text. The technical meetings led to consolidated draft texts (four came out in 2008), which embody middle ground proposals aimed at building the consensus needed to move the negotiations forward.

Rather than galvanizing consensus however the draft texts sowed further division among the Members. Developed countries led by the United States expressed disappointment over the failure of the February 2008 texts for example to move countries closer to a new global trade deal. For the US the middle ground positions were not ambitious and argued against the protectionist tendencies of some developing countries.

Developing countries were also unhappy about the texts and continued to raise their concerns regarding the direction that the negotiations have taken, moving farther and farther away from its avowed development objectives.

The revisions and debates over the texts however, did give the negotiations a semblance of movement, making it appear that a consensus is within reach when in fact the positions remained divergent. In the absence of a Ministerial Level Meeting, the movement in the talks, no matter how insignificant or even manufactured, kept the hopes of a Doha deal alive throughout the year.

As in previous years, international meetings more notably the World Economic Forum in Davos, Switzerland (January), the G8 Summit in Hokkaido (July), and the APEC Summit in Peru (December) became springboards as well for consolidating broad political support for Doha.

In Reverse

For the Philippines, the proposals for special products and special safeguards mechanisms were still the main issues in the agriculture negotiations. The Philippines and Indonesia have been at the forefront of the G33, a group of 45 developing countries pushing for provisions that would allow developing countries the flexibility to exempt some products from tariff cuts and institute measures to protect their economies from import surges.

Through the efforts of G33, SP/SSM emerged as the main agenda of developing countries in the agriculture negotiations and as a consequence also became a most attacked agenda. The United States led the assault on SP/SSM a few years back with its proposal to limit special products to five tariff lines. Prior to the US proposal, there was already wide agreement that developing countries could self-designate at least 20 % of their agricultural tariff lines as special products. The US proposal threw the negotiations in disarray and have been sliding down hill ever since.

The attention has now completely shifted away from the issue of coverage to the issue of designation. Opponents of SP, arguing that this could be abused as a protectionist measure, have successfully re-introduced a set of criteria to be used for designating special products. The SSM agenda too has been scuttled. Volume and price triggers, and a host of other qualifiers that exclude among other things imports from bilateral and regional trade agreements have been inserted making special safeguards practically useless.

This kind of watering down of the agenda was also evident in the NAMA negotiations, where the attention shifted away from the issue of the coefficient in the Swiss formula, which was highly contentious, to the issue of flexibilities for developing countries. The US and EU argued that developing countries must be made to choose between a high coefficient and greater flexibilities and that they cannot have both in order for the round to maintain an acceptable level of ambition .
Towards the end of the year, there was a push for mandatory sectoral negotiations as a way to ensure that an ambitious market access agenda was kept alive at least in some sectors, and that the on-going sectoral discussions could pave the way for more participation among Members which would eventually open up the entire NAMA talks.

The Philippine government, in a clear break from NAMA 11 supported the US proposal for mandatory sectoral negotiations, a position that was strongly criticized by small fisherfolks among others who feared that an acceleration of the fisheries negotiations would be inimical to their interests.

The Bilateral Track

In the Philippines, the Japan-Philippines Economic Partnership Agreement (JPEPA) took center stage as the main trade issue in 2008. The debates in the Senate over JPEPA’s ratification which entered its second year put a spotlight not just on the agreement itself but on the broader issue regarding the nature, substance, and process of trade negotiations in the country.

The Philippine government led the pro-JPEPA charge, unleashing its money and influence in an aggressive campaign for Senate ratification the likes of which we have not seen, probably since the failed campaign to get the Senate approval of the US Bases. Groups opposing JPEPA put up a gallant fight, maximizing whatever space was available- inside the halls of the Senate or out on the streets, in order to let the public know how lopsided the deal is and how toxic it would be to the environment and the economy. The Senate finally approved JPEPA on December 8, 2008. The approval however has triggered a call for reforms in the trade negotiations and policy making processes.

Another major front in the campaign against unjust trade deals is the continuing campaign against a comprehensive region to region trade agreement between the EU and ASEAN. In an attempt to fast track the EU-ASEAN FTA negotiations, four “exchange of views” meetings were held last year. These talks however failed to generate the needed momentum prompting the increasingly frustrated EU to announce a possible shift to a bilateral approach to the negotiations. The EU has been known in the past to employ such tactics in order to achieve its goals in trade negotiations. Just last year, it threw out the prospects of a regional deal with the Community of Andean Nations (CAN) opting instead to move ahead with bilateral deals with Peru and Colombia, sidestepping the opposition of Bolivia and Ecuador.

Whether or not the EU will make good its threat to go bilateral with ASEAN is something that should be closely monitored this year, especially in the wake of ASEAN’s own assertions of regional unity with the historic adoption of the ASEAN Charter.

The Road Ahead

A number of signposts are worth watching in 2009. These issues and broad areas of concerns could have profound effects on the economy and exert influence on trade policies and trade negotiations for the coming years.

The Obama Presidency- In his first ever remarks minutes after being sworn in as 44th US President, Obama affirmed the “unmatched power“ of the Market to “generate wealth and expand freedoms” but also alluded to the need for a “watchful eye” to prevent the market from “spinning out of control”. It would be interesting to know how this rhetoric would translate to official policy and to what extent would this constitute a new thinking in Washington on trade issues.

Another area of US Trade Policy where shifts in policy might be forthcoming is in the hugely contested issue of farm subsidies. Earlier, President-elect Obama criticized the $49 million worth of farm subsidies paid to ineligible wealthy individuals and said that his administration intends to end this kind of “wasteful spending”. A possible overhaul in the US farm subsidy program which could lead to real cuts in domestic support could influence significantly the Doha talks.

New Global Economic Consensus- We witnessed in 2008 several attempts to re-fashion the failed free trade paradigm as part of the solution rather than the problem that led to the economic crisis. It would be interesting to see how what kind of global consensus on trade would emerge and ascend to the mainstream. Would this new consensus fuel a more aggressive pursuit of comprehensive and ambitious free trade and economic partnership agreements or would there be a more cautious approach to trade negotiations? What would this new consensus say about issues of domestic regulation and the protection of policy space? These are some of the questions and issues that could unravel this year.

ASEAN Regionalism- ASEAN went on free trade frenzy in 2008 concluding comprehensive deals with Japan, Australia and New Zealand, and India; and formally adopting the ASEAN Charter and an economic community blueprint. These new policies and agreements would all take effect this year. It would be interesting to see how a seemingly revitalized ASEAN would proceed towards its goal of enhanced regional integration in the wake of the global economic crisis and in response to new global and regional challenges.

 source: Focus