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: prosson@tamu.eduE-mail: prosson@tamu.edu

CNASCenter for North American Studies

Http://cnas.tamu.edu

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