Special Report on Trade Issues in 2005: the Doha Round of WTO Trade Negotiations, the  Central American Free Trade Agreement, Textile Imports to Developed Countries and Taxing International Transactions to Benefit Developing Countries

(Last updated December 11, 2005) Trade relations between developed and developing countries are structured in favor of the developed countries: the United States and Canada, countries of Western Europe, and Japan. This is because some of the developed countries have been in charge of making the rules for a very long time--certainly since before the 1700's. The way that the rules are made have certainly changed.  At one time, Spain with colonies and control of the seas, established the unwritten rules. Later, Great Britain took control of the seas, had colonies and did the same thing.  Subject, of course, to negotiation which was fundamentally subject to power relations--the strong dictated to the weaker. Now we have the World Trade Organization, quite a number of regional or specialized trade agreements, and the operation of country legal systems, which can be used to enforce business practices such as contracts and patents.

This article, concerned with trade issues in 2005, deals with three topics:

• The World Trade Organization (WTO), including clothing imports to the U.S. and other developing countries
• the Central American Free Trade Organization (CAFTA)
• the possibility of taxing some international transactions such as currency flows or international airline flights for the benefit of poor countries.

WTO  After World War II the General Agreement on Tariffs and Trade (GATT) was established to set rules for international trade.  The successor to the GATT--it even has the same building in Geneva, Switzerland--is the World Trade Organization.  It was established, in Hunger Notes view, so that developed countries could extend their control of international transactions into key new areas, especially including intellectual property rights (e.g. Microsoft didn't want people in developing countries copying computer code) and foreign investment (by developed countries in developing countries). While legal safeguards were presumably in place to protect these property rights in developing countries, this was viewed as not sufficient.  Much better--from the point of view of firms in developed countries and their active supporters, developed country governments--to make the right of trade dependent on compliance with a broad range of controls embodied in the "new and expanded" WTO.  This would mean "one stop shopping" with respect to rules enforcement.  While the developed countries are ostensibly in favor of free trade--free trade is a mantra with the George Bush administration and Republican law makers for example--developed countries are not in favor of free trade when it does not suit their interests.  The key example is agriculture.  The United States, Japan, and European countries have giant agricultural subsides and even quota limitations--the U.S. sugar quota is a major example.   How do they get away with it?  Well of course they wrote the original WTO rules which provide for "differential treatment" for agriculture. The Doha round of trade negotiations is supposed to take major steps to reduce barriers to the export of developing country agricultural products.  Developed country governments do not much want to do this, and so one theme this year is struggle over agricultural trade rules.  A second similar major struggle is over textile imports (also something which developing countries have a comparative advantage) which appears in a separate subsection below.

Photo: AFP.  Anti-riot police repeatedly battled protesters trying to storm the World Trade Organization meeting in Hong Kong

Poor countries get little from ostensible 'development' WTO trade negotiating round  BBC News   December 19, 2005 (You will leave this site.) 'Modest' trade deal struck in Hong Kong.  Developed countries agricultural subsidies 'will' end by 2013, providing that developing country industrial tariffs are also lowered.  BBC News   December 18, 2005 (You will leave this site.)

World Bank Reconsiders Trade's Benefits to Poor Paul Blustein Washington Post December 17, 2005 (You will leave this site and be required to register [once] with the Post.) 

Doha development agenda fades at the World Trade Organization. Developed countries continue to push a self-interested agenda for the WTO December Hong Kong meeting.  Maria Riley December 11, 2005

The tariff mismatch: purchasers' unseen penalty hits hardest on low-end items  Paul Blustein Washington Post December 11, 2005 (You will leave this site and be required to register [once] with the Post.)

E.U. Offer Deflates Trade Talks  Paul Blustein Washington Post October 29, 2005 (You will leave this site and be required to register [once] with the Post.)

The E.U. offered to cut tariff rates on its farm products by an average 46 percent -- from 22.8 percent to 12.2 percent -- if other countries take similar measures. European Trade Commissioner Peter Mandelson called the proposal "the most extensive the E.U. has ever offered" in such negotiations....But officials from other nations said the proposed market-opening measures were substantially more modest than they appeared, especially because the E.U. was insisting on sheltering large numbers of "sensitive" products such as beef, poultry and sugar from deep tariff reductions. 

United States and the European Economic Union propose big agriculture subsidy cuts in an effort to get stalled Doha Round World Trade Organization trade talks moving  BBC News  BBC News  October 10, 2005 (You will leave this site.) Trade talks may collapse  BBC News September 23, 2005

U.S.--Brazil rift on cotton deepens: Brazil threatens WTO approved sanctions, U.S. threatens removal of Brazil's trade preferences  BBC News  October 7, 2005 (You will leave this site.) The United States fails to comply with World Trade Organization requirement to reduce cotton subsidies; Brazil asks WTO sanctions, saying its small farmers are harmed  BBC News  September 23, 2005

Poor Nations Propose Farm-Aid Compromise  Peter S. Goodman Washington Post  July 13, 2005 (You will leave this site and be required to register [once] with the Post.)

Agricultural Trade: Reaping a Rich Harvest from the World Trade Organization Doha Round of Trade Negotiations    International Monetary Fund  March 30, 2005 (2 page PDF file. This article first appeared in Finance & Development, December 2004, Vol. 41, No. 4, published and copyrighted by the International Monetary Fund.)

Trade and Transnational Corporations: the Solution to World Hunger or a Major Part of the Problem?  Peter O'Driscoll April 7, 2005

Bush Administration Asks for Reduction in Large Cotton Subsidies, Against the Wishes of Cotton Farmers, a Key GOP Constituency  Dan Morgan   Washington Post  March 8, 2005 (You will leave this site and be required to register [once] with the Post.)

Textile imports For many years, developed countries restricted textile imports from developing countries, by quotas, tariffs or other arrangements, such as "voluntary" limitations. This was done because, although the United States and other developed countries were ostensibly in favor of free trade, this was to a real degree propaganda, to be set aside when free trade led to harm to developed country industries, such as textiles, and other goods in which the developing countries had a cost advantage in production.  Though the United States and other developed countries did permit a substantial reduction in the size of the textile industry, they also imposed strict limitations on imports. For the United States, a key agreement was the 'multifiber' agreement, which limited the size of imports from major importers such as China."  There were also additional agreements, such as, for the United States,  the Generalized System of Preferences, and more recently,  the African Growth and Development Agreement (AGOA) that permitted exporting countries that were not key exporters to increase their exports. However with the advent of the WTO, with stricter rules, the free trade rules are stronger, permitting China and other low cost producers to increase exports, threatening both developed country textile producers and developing countries that benefited from special deals such as AGOA.

China attacks 'unfair' U.S. textile quotas  BBC News  June 3, 2005  (You will leave this site.)

China to Raise Tariffs On Clothing Exports  By Paul Blustein,   Washington Post  May 21, 2005 (You will leave this site and be required to register [once] with the Post.)

Caps on Chinese Textiles Revived: U.S. Move Limits Surge of Imports That Began in January  Paul Blustein  Washington Post  May 14, 2005 (You will leave this site and be required to register [once] with the Post.)

CAFTA  A second issue is regional trade agreements, such as the Central American Free Trade Agreement (CAFTA). European countries are also negotiating regional trade agreements. To Hunger Notes, the regional trade agreements seem to be a case of "divide and conquer"--get better terms by negotiating with a subset of developing countries rather than, as in the WTO, the larger group.  Certainly in CAFTA, the United States got Central American countries (and the Dominican Republic) to sign off on a modest increase in their U.S. sugar quotas rather than quota abolition.

The U.S. House of Representatives has narrowly approved the controversial Central American Free Trade Agreement, bringing the pact a step closer to law  BBC News, Lagos, July 27, 2005 (You will leave this site.)

U.S. senators back Latin trade pact  BBC News July 1, 2005 (You will leave this site.)

Businesses Will Cut Off Funding to  Members of Congress Who Oppose the Central American Free Trade Agreement, U.S. Chamber of Congress Says  Thomas B. Edsall  Washington Post June 12, 2005 (You will leave this site and be required to register [once] with the Post.)

The Central American Free Trade Agreement (CAFTA) Could Fall to Big Sugar      Steven Pearlstein Washington Post  May 11, 2005 (You will leave this site and be required to register [once] with the Post.)

Hispanic Groups Divided Over CAFTA Benefits  Jim Abrams The Associated Press May 7, 2005 (You will leave this site and be required to register [once] with the Post.)

Five Nations to Lobby for CAFTA Approval Sergio de Leon The Associated Press May 9, 2005  (You will leave this site and be required to register [once] with the Post.)

The Central American Free Trade Agreement: Designed for Profit for U.S. Drug (and Other) Companies? Harold Meyerson Washington Post March 30, 2005 (You will leave this site and be required to register [once] with the Post.

U.S. Trade in the Americas: Regional Update  Alexandra Spieldoch February 2005

Taxing International Transactions. A third issue is taxing international trade for the benefit of developing countries. A key idea was the "Tobin tax," named for an economist, James Tobin, who proposed it. This involved a tax on international financial transactions and was universally opposed by the international financial community and developed country governments such as the United States and Great Britain that benefited from private international financial institutions.  A tax on international airline flights, a more modest proposal, was also proposed.  France is evidentially taking steps to implement such a tax for international airline flights originating within her borders, as the following article indicates.

France plans tax on international airline tickets to benefit developing countries  Hunger Notes September 2, 2005

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