Trade Negotiations: A Crowded Calendar

By Randy Green and Richard Pasco

    After last year’s Congressional debate on Trade Promotion Authority, the general public's attention has shifted away from trade policy.  Trade pacts with Chile and Singapore have caused barely a ripple in the public mind, however absorbing they may be to trade specialists.  And no current trade issue has come close to generating the emotional debate that raged over the North American Free Trade Agreement a decade ago, or the World Trade Organization meeting in Seattle in 1999.

    Nevertheless, 2003 will in some ways be an extraordinarily busy year in trade policy.

• The Administration will ask Congress to approve the trade agreements with Chile and Singapore, probably in the latter half of the year, according to comments by U.S. Trade Representative Robert Zoellick.
• The United States and five Central American nations hope to complete a free trade agreement by the end of this year.
• World Trade Organization (WTO) members have set a March 31 deadline – widely expected to be missed – to agree on parameters for negotiating further worldwide cuts in agricultural protection.
• The United States and 33 other countries have an ambitious agenda for making progress toward a Free Trade Area of the Americas (FTAA) agreement.
• U.S. trade negotiators intend to launch talks on two more free-trade pacts, with Australia and (separately) with five Southern African nations.

DOHA ROUND

    Full-scale WTO trade rounds traditionally last for a number of years, and events in the current Doha Round suggest that it will be no exception.  Agricultural negotiators are supposed to agree by March 31 on “modalities,” the methodology by which reductions will be agreed in border protection, domestic subsidies and export subsidies – though the amount of the reductions would be negotiated over the balance of 2003 and 2004. 

    In reality, it appears unlikely that March 31 will bring such an agreement.  Only in the last week of January did the European Union (EU) obtain approval from its member states for its negotiating proposal, after overcoming earlier opposition from France and Ireland.  The final EU proposal will reportedly link a phaseout of export subsidies to similar treatment for export credits and deficiency payments – two policy tools extensively used by the United States, and whose selection presumably was not an accident.  Neither this juxtaposition of policies, nor the EU’s earlier emphasis on “non-trade concerns” such as animal welfare, food safety, and geographical indicators will be helpful in bridging the gulf that separates the EU from the United States and the free-trade-oriented Cairns Group.

    The February 12 release of a draft paper by the chair of the WTO agriculture negotiations, Stuart Harbinson, outlines his suggestions for negotiating modalities. The Harbinson paper includes specific demands from both the United States and the EU, which forces both camps to make politically difficult choices to meet the March 31 deadline for agreement on negotiating modalities.  Specifically, the paper calls for the elimination of export subsidies as proposed by the United States, but not as quickly as sought by the United States and other members of the Cairns group.  On market access, the paper would result in the EU being able to maintain higher tariffs than the United States.  On domestic support, the paper calls for a flat 60% reduction in trade-distorting (i.e. "amber box") support, which is only 5% more than the EU proposed in its submission to Chairman Harbinson.  The reactions to his paper among WTO member countries will say a lot about whether much progress is likely for the balance of the year.  Assuming there is no dramatic breakthrough in March, the next event that might force action is a ministerial-level meeting in Cancun, Mexico, in September, that is billed as a “mid-term review” of the Doha Round.

FREE TRADE AREA OF THE AMERICAS

    On February 11, United States led the way in submitting its offer for reducing tariffs and other trade barriers in advance of the February 15 deadline for Western Hemisphere countries involved in the FTAA talks to table their offers.  Brazil did not meet the deadline, and its size and influence in the hemisphere caused other nations to hesitate as well.  Though exact dates are uncertain, there should be a major negotiating session in Trinidad and Tobago during the first quarter of the year.  Then, requests for “improvements” in other nations’ offers – basically, counteroffers – are due by July 15, and a ministerial-level meeting is slated for Miami in November. 

CENTRAL AMERICA FTA

    Ten negotiating sessions during the course of this year are supposed to produce a completed U.S. Central America Free Trade Agreement (FTA) by December 31.  Besides the United States, the countries of Guatemala, El Salvador, Honduras, Costa Rica and Nicaragua are participating in these talks, which were formally launched January 8-9.  The U.S. plans to table draft text at its negotiating session in Cincinnati at the end of February but is not expected to make a market access proposal until the third or fourth round of talks, which are scheduled for El Salvador in March and Miami in April. 

    It might seem counterintuitive that these countries are negotiating an FTA with each other at the same time that all of them are participating in the FTAA talks.  Some observers see the Central America FTA as either leverage – to let Brazil and other countries in the hemisphere know that if the FTAA stalls, the United States has other options – or insurance, in the event that the FTAA runs into long delays.

OTHER AGREEMENTS

    The FTA with Southern Africa could possibly conclude by December 31 if all goes according to plan.  However, the EU’s FTA with South Africa took four years to conclude, making a timetable of less than a year rather ambitious for this proposed pact.  Under fast-track procedures, talks could begin at any time from this point forward.

    Meanwhile, the United States and Australia are set to begin the first round of negotiations in the week of March 17 in Canberra, Australia, on a bilateral free trade agreement.  In this case, the negotiations are thought unlikely to conclude before the end of 2004.  Of all the recent FTAs, this one has attracted the most criticism from agricultural groups, reflecting disputes ranging from sanitary and phytosanitary barriers to Australia’s use of state trading entities (STEs) for wheat, sugar and other commodities.  Recently, however, some farm group have appeared less strongly opposed.

CONCLUSION

    There is a cliché that runs, “When all was said and done, more was said than done.”  That could prove the case for trade policy this year.  The issues are not easy ones and many other topics, from the sluggish economy to possible war in Iraq, compete for the attention and time of the world’s heads of state and government. 

    At the same time, the crowded agenda makes it clear that U.S. policy makers have adopted the free trade agreement as a paradigm.  An FTA is now seen as one of the primary means for cementing a close bilateral or multilateral relationship.  And despite growing criticisms of “globalization” and the election of populist or leftist governments in many Latin American countries, Washington still sees trade liberalization as an imperative.

Richard Pasco is an attorney in the firm specializing in legislative, agricultural, food safety, and trade law.