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Thursday, June 21, 2007

Interesting timing (2)

While EU leaders are at the navel-gaze-athon in Brussels, the Doha round has finally officially collapsed. When everything at the European Council is over, that will remain a striking disaster.

You can find out more about the EU's role in this monumental political failure here, and also here, and also get a longer pamphlet about what needs to change here.

In summary, the EU is the main obstacle to a successful conclusion to the current Doha round of trade talks - because of its incredibly limited offer on both tariff and subsidy cuts. A spokesman for Peter Mandselson told the Guardian: “Nothing as part of the EU's offer in world trade talks will reduce overall levels of EU farm spending by one cent.” So why even pretend to negotiate?

Nicolas Sarkozy, has said that he wants the EU to offer even less. He has said that he will veto any more ambitious offer because he will never “sacrifice French agriculture on the altar of liberalisation”. He said the current level of spending on the CAP was “neither excessive nor unjustified.”

More generally he says that “Controlling globalisation means re-establishing Community preference… Europe must buy European… A Europe without borders, that has trade agreements with China, Brazil and India is not what we want. We want a Europe with borders.” Of course, he then said that: “This does not mean a return to protectionism...” Well, you could have fooled us.

There is a large poster in the OE office of the famous passage from Keynes' Economic Consequences of the Peace:

What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914... The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.

He could secure, forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference.

But most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement.

That is perhaps how politicians have regarded globalisation and the WTO: normal, certain, and permanent, except in the direction of further improvement.

Undermining the WTO – which is one of the great achievements of the post war world - is really, really, really stupid. The willingness to let the Doha round fail risks unravelling the whole fabric of multilateral trade.

In its place we would see a horribly tangled web of inferior bilateral deals. The world’s leading economies would compete to gain preferential market access by signing bilateral deals with weaker countries. If we go down this route low income countries will become marginalised ‘spokes’ around the ‘hubs’ of the EU, US, and China, and they will suffer trade diversion as a result.

Some interest groups and countries in the EU seem to actually want this to happen. The EU is currently negotiating bilateral deals with India, the ASEAN countries and South Korea under what it calls the “competitiveness agenda”.

Peter Thomson, in charge of the negotiations at the Commission's DG trade admitted at a recent seminar we organised that the EU’s bilateral deals with countries like South Africa are “not entirely development-driven.” While he said countries like the UK wanted it to be, the EU as a whole has a "mercantilist" approach.

Worse still, by the end of this year the EU wants to agree controversial Economic Partnership Agreements - which will require African, Caribbean and Pacific (ACP) countries to get rid of 80% of their tariffs against the EU over the course of the next ten years. But the track record of outside organisations imposing this kind of shock therapy on poor countries is mixed at best.

Despite a lot of warm words, the motivation behind this all does seem to be essentially a mercantilist one. The EU sometimes seems to be running a 17th century trade policy in the 21st century.

So what is the underlying problem here? One is that several of the EU members still have quite a protectionist culture. But another problem is that there is a head on conflict between the idea of an open Europe and the idea of a tightly integrated European block. As the former European trade commissioner Willy De Clerk said: “We have not created the single market to turn it over to greedy foreigners”

Many people in the EU seem to worry that if you just have complete global free trade then the EU would become irrelevant. For these people integration is an end in itself – and that’s the main difference between today’s EU and an open Europe.

1 comment:

Anonymous said...

Praising WTO (and Doha as its child) as 'one of the greatest achievements of this civilization' (what seems to be the position of the author) is indeed an interesting position. Nowhere in the text the other side is not mentioned (India, Brazil etc) which is equally intrasingent in their position. However, not less logical than is the Eueopean position. Why, for the sake of all saints in the heaven, should Brazil or India allow heavily subsidized agricultural products into their market? For the noble idea of 'free trade'? Should India let their farmers perish like is happening right now in Central America (Guatemala especially) where local farmer cannot allow himself to have a one single cow because Nestle is selling its powdered milk so cheap that it kills local production? Is it necessary to destroy local farmers like is the case in Scotland where Tesco sells milk from Slovakia because it is cheaper to bring it from there than to pay for it to the local farmer? What the so called science of economics calls 'adjustments' to such utterly senseless ideas are in fact tectonic movements in civilization. In fact, slowly, local population is being marginalized because the reason for its existence disappears. Why? Because of WTO is 11th commandment?
So, where there were cows grazing now suburbia grows.
Something more shortsighted is very difficult to imagine. The whole idea of free trade which comprises the possibility of ever increasing access to cheap energy is coming to tan end - and very soon at that. So where will industrial world get its food when transport costs become prohibitive? The position if India and Brazil in their Doha negotiations is probably the most important lamp that shines on this 'free trade' plot.