Small States and Trade Politics

WEEK FIVE

Dr. Jacqueline LAGUARDIA MARTINEZ

INSTITUTE OF INTERNATIONAL RELATIONSUNIVERSITY OF THE WEST INDIES

[email protected]

INRL 6003 SMALL STATES IN THE GLOBAL SYSTEM

Small States and Trade Politics

Multilateralism or regionalism?

Multilateral Trading System (MTS)• The multilateral trade system is an international political

system• The multilateral trade system can be broken down into

three individual components: I. an inter-governmental bargaining process, II. a set of rules governing international trade relations, and III. a dispute settlement mechanism • Throughout most of the postwar period, the General

Agreement of Tariffs and Trade (GATT) was the principle international trade institution. In 1994, the GATT was folded into a new international institution called the World Trade Organization (WTO)

The World Trade Organization (WTO)• The WTO is the institution responsible for the creation and

revision of the rules that govern the multilateral trading system and for the adjudication of disputes arising from differences in interpretation or application of those rules

• Its main function is to ensure that trade flows as smoothly, predictably and freely as possible

• Its functions include administering trade agreements, providing a forum for trade negotiations, providing a mechanism through which governments can resolve trade disputes, and monitoring national trade policies

• Above all, it’s a negotiating forum

The World Trade Organization (WTO)• 160 members since 26 June 2014In a nutshellThe basic structure of the WTO agreements: how the six main areas fit together — the umbrella WTO Agreement, goods, services, intellectual property, disputes and trade policy reviews.Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPS

Additional details Other goods agreements and annexes

Services annexes

Market access commitments

Countries’ schedules of commitments

Countries’ schedules of commitments (and MFN exemptions)

Dispute settlement DISPUTE SETTLEMENT

Transparency TRADE POLICY REVIEWS

Trade without discrimination• National treatment: Treating foreigners and locals

equally (imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market). The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents

• Most-favoured nation (MFN): Treating other people equally (Under the WTO agreements, countries cannot normally discriminate between their trading partners)

Nowadays…

• Trade liberalization is the dominant consensus

• The idea of “preferential market access” is loosing acceptance

• Small states are concerned with both the character and the intensity of their place in global trade and the nature of the rules and institutions governing the multilateral trading system

• Multilateral negotiations and institutions provide an opportunity for small countries to have a measure of countervailing power against the overweening power of large entities

• Small states need clear rules to conduct their trade activity (a transparent, democratic decision-making process based on consensus tempers differences in national power and economic size and multilateral trade rules prevent, or at least limit, arbitrary behavior by large governments and ensure greater predictability in trade relations)

Small States participating in the MTS

MST vs. Small States• The WTO’s decision-making process, while

formally by consensus, is in reality dominated by a small number of developed countries and some of the larger emerging economies

• The WTO’s dispute settlement mechanism is so costly in terms of time, money and technical expertise that most Small States are unable to make efficient and continuous use of it or to pursue cases effectively

WTO members most involved in disputes, 1995 to 2013

The participation of Small States in WTO decision making has not been as effective as it could be

• Failure to organize a cohesive small economy caucus• Lack of representation in the WTO: Many do not have

representation based in Geneva, and attend only periodically by way of their diplomatic missions in such cities as Brussels, Paris and London (from CARICOM, only Barbados, Jamaica and Trinidad and Tobago have WTO representation at the ambassadorial level). Besides, one or two people are far too few to cover adequately the issues that constitute the subject matter of the WTO, all the meetings and the informal consultations

Small States weaknesses in MTS• Large Number (could be a strength)• Difficulties to mobilize sufficient human and financial resources

to cover adequately the plethora of trade negotiations that are conducted bilaterally, regionally and multilaterally

• The cost of participating in the negotiation and adjudication of rules could be onerous, even prohibitive

• The limited institutional capacity that severely constrains their ability to conduct technical work, to formulate negotiating positions that reflect their interests and to increase and maintain the capacity for trade policy formulation and negotiating strategies

• Lack of computer and communications equipment, resources to conduct systematic outreach to stakeholders, constrained information gathering and dissemination capability and insufficient access to training and research

Lack of economic power

How Small States Can Participate More Effectively

• Small States should seek effective participation in the governance of the WTO in order to influence its deliberations

• Small States need to participate actively in trade negotiations in order to shape the rules, the pace of implementation and the extent of adjustment

• Small States are struggling to retain existing preferences in key markets and to establish the principle that small size is an additional constraint on development and should be accorded what is known in trade relations as “special and differential treatment”

• Small states can have recourse to the WTO dispute settlement mechanism to vindicate their rights free of the disparity of power that would operate in a bilateral situation

Small States: what to do

• More representation and participation: Overcome limited institutional capacity by collaboration, sharing and rationalization of resource (common entities to undertake technical work, formulate shared positions, coordinate negotiating strategies and undertake joint representation)

• Create a cohesive and effective strategic alliance (participation by any member state that considers itself to be an Small State)

Group of 77

• The Group of 77 at the United Nations is a loose coalition of developing nations, designed to promote its members' collective economic interests and create an enhanced joint negotiating capacity in the United Nations

• There were 77 founding members of the organization, but the organization had since expanded to 133 member countries

• The group was founded on June 15, 1964, by the "Joint Declaration of the Seventy-Seven Countries" issued at the United Nations Conference on Trade and Development (UNCTAD)

• The first major meeting was in Algiers in 1967

• Bolivia holds the Chairmanship for 2014

Group of 77

As of 2014, the group comprises all of UN members (along with the Palestinian Authority) – excluding the following:

• All Council of Europe members (with the exception of Bosnia and Herzegovina)

• All Organization for Economic Co-operation and Development members (with the exception of Chile)

• All ex soviets Republics (with the exception of Tajikistan)

• The new UN member South Sudan, along with two Pacific microstates: Palau and Tuvalu

http://en.wikipedia.org/wiki/Group_of_77

Small states and the Doha Development agenda• Increasing recognition that small states, or “smaller

economies,” require a special dispensation in the international trade regime (Work Program on Small Economies)

• BUT,• We agree to a work programme, under the auspices of

the General council, to examine issues relating to the trade of small economies. The objective of this work is to frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members. (WTO, 2001, Declaration of Doha, paragraph 35)

WTO crushes aspirations of SIDS…

Has Doha failed?• Many differences in agriculture liberalization:

reduction of agricultural tariffs, reducing agricultural subsidies and reduction of non-agricultural tariffs

• Resistance from developed countries (USA and EU) to open their agriculture domestic markets and highly skilled labor manufactures’ markets

• Started in 2001, supposed to end in 2005, but still ongoing… (the world has dramatically changed)

The Bali Package

• The WTO’s Ninth Ministerial Conference, held in Bali from 3 to 7 December 2013, concluded with ministers approving the “Bali Package”, a series of decisions covering trade facilitation, agriculture and development

• It is a selection of issues from the broader Doha Round negotiations

• It comprises 10 ministerial decisions/declarations covering trade facilitation, agriculture and development

The Bali Package• It aims to streamline trade by cutting “red tape” and simplifying

customs procedures• The accord includes provisions for lowering import tariffs and

agricultural subsidies• Developed countries would abolish hard import quotas on

agricultural products from the developing world and instead would only be allowed to charge tariffs on amount of agricultural imports exceeding specific limits

• Ministers decided to give temporary protection to food stockholding programs used for food security purposes and agreed to “exercise utmost restraint” in using all forms of export subsidy and other measures with similar effects

• On development, ministers decided to establish a monitoring mechanism to analyze the implementation of “special and differential treatment” provisions

Decisions relating to least-developed countries (LDCs)

• To improve the transparency of preferential rules of origin so that LDCs can better use the preferences accorded to them

• To improve the implementation of duty-free and quota-free market access for imports from LDCs

• Ministers also addressed the putting into operation of the waiver allowing WTO members to grant preferential market access to LDC services and service suppliers

http://www.youtube.com/watch?v=gxpXdJUkG5s

WTO questioned• In spite of the Bali package, Doha Round is stalled• Trade liberalization does not necessarily means

more economic development or individual/social welfare

• Small States not getting enough benefitshttps://www.youtube.com/watch?v=MFwydNu4CaM&list=PLE24D9E25F7054FF3&index=3https://www.youtube.com/watch?v=umvi8XeRgzkhttps://www.youtube.com/watch?v=H5kqcAksYZMhttps://www.youtube.com/watch?v=p5ausy98ERM

The global crisis since 2008 slows the multilateral negotiations in the WTO (economic crisis encourage protectionism, Regional Trade Agreements (RTAs) and bilateral Free Trade Agreements (FTAs)

Stagnation in multilateral efforts has fueled the regionalist approaches

Regionalism as a development strategy?

Bibliography in English• Richard L. Bernal, Participation of Small Developing Economies in the

Governance of the Multilateral Trading System, Working Paper No. 44, December 2009

• Tony Heron, 'Small States and the Politics of Multilateral Trade Liberalization', The Round Table, 2008, 97: 395, 243 — 257

• Valbona Muzaka and Matthew Louis Bishop, Doha stalemate: The end of trade multilateralism?. Review of International Studies

• Norman Girvan, Is ALBA a New Model of Integration? Reflections on the CARICOM Experience

• Shang-jin Wei and Jeffrey A. Frankel, Open Regionalism in a World of Continental Trade Blocs, IMF Staff Papers, Vol. 45, No. 3, September 1998

• Robert Devlin and Antoni Estevadeordal, What's new in the New Regionalism in the Americas?, May 2001, Working Paper 6, Inter-American Development Bank