Shrinking the GapShrinking the Gap::Potential Roles of the WTO Potential Roles of the WTO
& Trade Agreements& Trade Agreements
Parr Rosson, Professor & DirectorParr Rosson, Professor & Director
Center for North American StudiesCenter for North American Studies
Department of Agricultural EconomicsDepartment of Agricultural Economics
Texas A&M UniversityTexas A&M University CNAS
US Trade StrategyUS Trade Strategy
• Multilateral Trade Negotiations World Trade Organization
• Regional Trade Agreements Central American Free Trade Agreement
• Bilateral Trade Agreements US-Australia Trade Agreement
CNAS
Australia ‘04Australia ‘04
Bahrain ‘04Bahrain ‘04CAFTA ‘04CAFTA ‘04
Chile ‘04Chile ‘04
FTAA ‘06
Morocco ‘04Morocco ‘04
Southern African Southern African Customs Union ‘05Customs Union ‘05
Singapore ‘03Singapore ‘03
Jordan ‘03Jordan ‘03
U.S. Trade Agreements-3d Largest MarketU.S. Trade Agreements-3d Largest Market
NAFTA ‘94NAFTA ‘94 Israel ‘85Israel ‘85
CUSTA, ‘89CUSTA, ‘89
Andean FTA Andean FTA ‘05‘05
Panama ‘05Panama ‘05
Thailand ‘05Thailand ‘05
Why Regional Agreements?Why Regional Agreements?
• 2d Best Solution After MTN Slow Progress in WTO Cancun Ministerial Derailed Progress FTAA ‘Lite’ Not As Appealing
• Economic Incentives Open Markets Create Economies of Scale Increase Business Efficiency
CNAS
Strategic ConsiderationsStrategic Considerations
• Stem Illegal Immigration• Secure Strategic Materials
Oil/Natural Gas Fertilizer
• Create Buffer Against Terrorism ‘Seam State’ Argument, Thomas Barnett,
U.S. Naval War College (New Rule Sets Project2000)
CNAShttp://www.nwc.navy.mil/newrulesets/
World Population
Energy Information Administration, Annual Energy Outlook, 2003.
1990 2000 2001 F2005 F2010 F2015 F20200
2
4
6
8
0
2
4
6
8
NA WE I. ASIA EE/FSU D. ASIA
ME AFR CSA TOTAL
Billions
6,310
7,570
Ind. + 8%, Dev. + 31%
World Economic Output
Global Insight, Inc., World Economic Outlook, 2002.
1990 2000 2001 F2005 F2010 F2015 F2020$0
$10
$20
$30
$40
$50
$60
$70
NA WE I. ASIA EE/FSU
D. ASIA ME AFR CSA
GDP, Trillion 1997 Dollars
Ind. + 64%, Developing + 140%
World Energy Consumption
Energy Information Administration, Annual Energy Outlook 2003, www.eia.gov/iea
348
399 404434
481
532
583
1990 2000 2001 2005F 2010F 2015F 2020F0
100
200
300
400
500
600
700
NA WE I. ASIA EE/FSU
D. ASIA ME AFR CSA
Quad. Btu
11
22
11
22
Ind. + 28%, Developing + 69% (2001-2020)
World Oil Production Capacity, 1990-2020
Source: EIA/International Energy Outlook 2003, Oil Production and Capacity Projections
69.4
79.284.2
93.9103.3
113.5
63.771.2
76.4
86.1
96.0
106.6
1990 2001 F2005 F2010 F2015 F20200.0
30.0
60.0
90.0
120.0
Total OPEC United States Canada Mexico
China Former Soviet Union Total Other Non-OPEC Total World
Million Barrels/Day
Million Barrels/Day (Avg.)
U.S. Oil Imports by Source
Petroleum Imports by Country of Origin, 1960-2003. USDOE, EIA, Annual & Monthly Reports
6.91
5.07
8.02 7.718.33
8.84
10.16
11.4611.02
12.0311.24
1980 1985 1990 1993 NAFTA 1995 1997 2000 2001 2002 20030.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00NAFTA Non-OPEC (Ex. NAFTA) OPEC
Million Barrels/Day
U.S. Crude Oil Imports by Country, 2002
Source: Energy Situation Analysis Report
1.70
1.51 1.491.40
0.78
0.59
0.43
0.21
0.98
South America
Saudi Arabia
Mexico
Canada
North Sea
Nigeria
IraqOther Persian Gulf
Other
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80 Million Barrels/Day
U.S. Fertilizer ImportsU.S. Fertilizer Imports
USDA, FAS
10.8 10.8 10.4
12.2
13.6 13.7 13.914.6
15.3 14.9
16.6
18.117.0
1990 1993 1995 2000 20020.0
5.0
10.0
15.0
20.0 Canada W. Europe ROW
Million Metric Tons
U.S. Fertilizer Imports from ROW, 2002U.S. Fertilizer Imports from ROW, 2002
1291
438 394289
216 178 16088 72 31
Russia/Belarus
Trinidad/Tobago
Saudi Arabia
Qatar
Bahrain
Venezuela
Egypt
Lithuania
Morocco
Kuwait
0
200
400
600
800
1000
1200
1400
1600
1,000 Metric Tons
BackgroundBackground
• The Pentagon’s New Map & Esquire March 2003
• Security in a Post Cold War EraNew Operating Environment
• Post September 11, 2001 WorldRole of Security in Global Age
• Global Disconnect: Gap Between Functioning Core & Nonintegrating Gap Nations CNAS
Globalization: What Does It Mean?Globalization: What Does It Mean?
Integration of Economies & Societies
Global Rule SetDemocracyTransparency & Rule of LawFree Trade
CNAS
Globalization & DevelopmentGlobalization & Development
• Does Globalization Have Binary Outcomes? Great, Everyone Better Off Horrid, Failing Humanity
• Neither, But In Between?
• Where Has Globalization Worked?China, India, 22 Others, + 5% PCI, 3 Billion People
• Where Has It Not Worked?Sub-Saharan Africa, Middle East, Former Soviet
Union, Declining PCI, 2 Billion People CNASSource: World Development Report, 2001
Globalization & SecurityGlobalization & Security
• New Security Paradigm: Disconnectedness Defines Danger
• Outlaw Regimes Disconnected from Globalizing WorldFew or No RulesDifferent Societal NormsLack Ties of Mutual Dependence
CNAS
Assumptions: Old & NewAssumptions: Old & New
US Military Capable of Handling Threat from Great Power Can Handle Threat from Minor Conflicts in LDCs
September 11 Redefined Perception of the Threat
US Military Response Inversely Related to a Country’s Global Connectedness CNAS
Conditions in The Functioning Conditions in The Functioning CoreCore
Free Media & PressOpen Financial TransactionsCollective SecurityStable GovernmentsRising Living StandardsMore Deaths by Suicide than
Murder CNAS
Conditions in The Non-integrating Conditions in The Non-integrating GapGap
Politically Repressive RegimesPoverty, Hunger & DiseaseRoutine Mass MurderYoung PopulationChronic Conflicts, Spawning Next
Generation of Terrorists
CNAS
ImplicationsImplications• Global Disconnect Means Foes Not
Near Peer, Not Even a Nation ‘Super Empowered Individuals’
• They Are Products of ‘The Gap’
• To Thwart Threat, ‘Seam States’ are Critically Important Mexico, Central America, Brazil, Thailand,
Malaysia
• Seam States Are the “Firewall”CNAS
ImplicationsImplications• Shrinking the ‘Gap’ is Crucial
• Middle East Is the Starting Point
• Policy Goals and Role of Trade? Security-within nations Increased Aid (Military, Food, Infrastructure,
Development) Democracy Freer Trade Rule of Law Education (Human Capital) CNAS
The Doha Work ProgramThe Doha Work Program
CNAS
U.S. Average Tariff, 1789-2002
Statistical Abstract of the United States
17891816 1820 1840 1860 1880 1900 1920 1940 1960 1980 20000
10
20
30
40
50
60
70Percent
0
10
20
30
40
50
60
70Tariff of Abominations, 1828
Morrill Act, 1861
Smoot-Hawley Tariff, 1930
Generalized System of Preferences, 1968
Fordney-McCumber Tariff, 1922
GATT, 1947
WTO, 1995
1789
World Average Agricultural Tariffs, 2000
115
85
55
4030
25
12
South
Asia
Carib
bean Is
lands
Centra
l Am
erica
South
Am
erica
Europea
n Union
North
Am
erica
United S
tates
0
20
40
60
80
100
120
140 Bound Average
World Average
62%
Percent
Doha Development AgendaDoha Development Agenda
• Economic Development Issues Affecting Less Developed and Developing Countries at Forefront of Negotiations
• Agriculture Negotiations Began in 2000 Uruguay Round Agreement on Agriculture
• After Setback in Cancun-September 2003, Consensus Reached on Work Program, July 31, 2004
CNAS
Doha Work Program (DWP)Doha Work Program (DWP)
• Provides Framework for Negotiations to Proceed
• Modalities To Be Negotiated Procedure & Degree of Trade Liberalization
• For Agriculture, Negotiations Center on DDA Reform of the Three Pillars Market Access Export Competition Domestic Support
CNAS
Market AccessMarket Access
• Tiered ApproachHigh Tariffs Reduced the Most
• Tariff Reductions from Bound RatesHarbinson 2d Draft Likely Starting Point
• Designation of Sensitive Products
• Special & Differential Treatment for LDCs & Developing CountriesLonger Time Frame, Less Reduction
CNAS
Export CompetitionExport Competition
• Reduce & Phase Out Export Subsidies by Date Certain Export Credit Guarantees > 180 Days
$4.7 Billion/year in Recent Years t.b.n. Interest Rates, Premiums, Payment
• Eliminate Trade Distorting Practices of State Traders, such as Canadian Wheat Board Subsidies, Govt. Financing, Loss Coverage
• Food Aid that Displaces Commercial Sales to Be Eliminated CNAS
Domestic SupportDomestic Support• Biggest Spenders Take Biggest Cuts
Tiered Formula Using Total AMS EU ($71 Billion), Japan, US ($49 Billion)
• 20% Reduction in Allowable Trade Distorting Support in Year 1 Amber Box + De Minimis + Blue Box = $49 Billion $9.8 Billion Reduction for US No Impacts on US Farm Program Spending at Current
Levels ($23 Billion/Year) If Prices Fall & Spending Exceeds $39.2 Billion, then
Program Impacts
CNAS
Domestic SupportDomestic Support• Blue Box: Direct Payments, Production
Limiting Programs or Decoupled Payments Direct Payments, Fixed Area & Yield Base or 85% of
Fixed Base Create a ‘New’ Category (Shelter CCPs) Other Changes t.b.n.
• Green Box: Minimally Trade Distorting Criteria Reviewed & Clarified Ensure Only Minimally Trade Distorting Policies
Included Likely Remain a Shelter for Non-trade Concerns
(Multifunctionality, etc.)
CNAS
IssuesIssues
• Are More Trade Agreements a Desirable Outcome?
• Without Trade Agreements, U.S. Market Access Limited With Agreements, No Guarantee of Market
Growth
• Investment & Economic Development Crucial for Central America & Many Other Trading Partners CNAS
ConclusionsConclusions
• U.S. Market Much More Open than Others
• With Trade Agreements, Tariffs Will Fall, U.S. Access to Foreign Markets Will Increase
• Opportunity for Input On Agreements
CNAS
Thank You!Thank You!
Informed Decisions for Global Informed Decisions for Global Change”Change”
Parr RossonParr Rosson
Ph: 979-845-3070Ph: 979-845-3070
E-mail: [email protected]: [email protected]
CNASCenter for North American Studies
Http://cnas.tamu.edu
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