First Talks with the Obama Administration

NEWS FLASH N° 2009/07

3March 2009

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Doha Round - EU hopeful of reviving world trade talks despite economic gloom

European officials believe a series of events over the next few weeks could be crucial to deciding the fate of the Doha Round of world trade talks, as EU Trade Commissioner Catherine Ashton prepares to visit Washington for

first talks with the Obama administration.

Many analysts are convinced a breakthrough in the Doha talks is impossible as protectionist sentiment grows in response to the economic downturn. However, the European Commission’s trade officials are hopeful the arrival of a fresh team in Washington, the 2 April summit of leaders from the G20 group of economic powers in London and the Indian elections in April or May could all add new impetus to the stalled negotiations. EU leaders, at their 1 March ‘crisis’ summit in Brussels, pledged to “invest every effort to build consensus on modalities leading to a rapid conclusion” of the Doha agenda (see last paragraph of attached press release).

President Barrack Obama released his first annual trade agenda on 2 March, saying a Doha agreement “would be an important contribution to addressing the global economic crisis”. However, he suggested the US would take a tough line, saying the “imbalances” in the current negotiations would have to be corrected to ensure clear advantages to American workers, farmers and businesses.(see attached today’s’ Europolitics article)

Joint letter by NAM, AFBF and CSI to President Obama and reaction of ESF

Please find attached a letter that US CSI, the Farm Bureau, and NAM sent last week to US President Obama, intended to advise the new US administration prior to the G-20 in London, of priorities in trade policy. It takes a similar negative tone as their former joint letter from last December.

The first point is to strengthen and extend the standstill and to more directly engage the WTO as a monitor and scorekeeper. The second is to establish that the current texts for agriculture and NAMA, and the current services offers and signals, are not sufficient basis on which to call another Ministerial. From what ESF got from CSI President, Mr.Robert Vastine, CSI has joined the agriculture and goods sectors in saying those texts are not good enough partly because they believe (given the single undertaking) that they need a better deal in those sectors to generate more and better services offers. CSI doesn’t like the idea that one needs to conclude Doha simply in order to “build global confidence.” But they do repeat their continued commitment to the round, and call for “technical” talks to continue, like the services cluster later this month.

ESF Chairman of the Policy Committee, Mr. Richard O’Toole, responded to CSI and confessed to being somewhat puzzled by the stance taken in the letter (see excerpts below and full text attached):

“Firstly, it seems clear that the content of a Doha deal on agriculture and goods is likely to be bounded essentially by the framework set out in the latest compromise texts on these topics. I cannot see how one could realistically expect a successful result to emerge from the Doha negotiations that would substantially vary the basic approach in these texts.” He said (...)

“Secondly, I do not think it is wise for the industry to make a bald judgement, especially publicly, on the timing of a Ministerial meeting. That is surely a tactical question for negotiators to assess and to pronounce upon. From a services point of view, we have tended to advance our objectives when Ministers are required to discuss services and not just bicker over goods and agriculture.”(...)

Thirdly, the services sector has quite a distinct interest from the manufacturing and agriculture sectors where so far the substantive efforts of the negotiators have focussed. We have struggled as a sector to get visibility as to what is really on offer. Yet the economic importance of our sector is much greater than that of agriculture or manufacturing, the more so as international services trade grows exponentially. There is less asymmetry too between industrialised and developing countries insofar as the benefits on services are concerned. The services sectors also, in my view, carry less protectionist baggage than agriculture and manufacturing because they benefit greatly from globalisation and, indeed, should sufficient benefits for services emerge in due course they could well provide an additional solvent to dissolve outstanding gaps on agriculture and goods . We did get some encouraging visibility from the plurilateral process on services, the various "services clusters" and from the indications given at the Services Ministerial last Summer but we have been frustrated by the absence of tabled services schedules which in the final analysis provide the only real evidence of the sort of liberalisation we can expect. The deadlines for the tabling of services schedules (which will allow the real services negotiations finally to engage) has been held up by the failure to agree on agriculture and goods modalities. It is surely in our (services) interest therefore to encourage an acceptable agreement on agriculture and goods but to make it crystal clear that such an agreement is only a waypoint on the path to concluding the Round, that the services negotiation remains a third important pillar of the negotiations and that an overall assessment of the Doha outcome cannot be made until services schedules are first tabled and then adjusted in the light of intensive bilateral/plurilateral negotiations. While the final paragraphs of the letter make some reference to this dynamic, I felt that the case for services got somewhat lost in the overall message.

Finally, the decisions facing the new Obama administration on Doha cannot be divorced from the current economic and financial situation.

US – New Trade policy agenda for 2009

The new US Administration yesterday released its 2009 Trade Policy Agenda and 2008 Annual Report. The document is a mandatory report to Congress and contains the first concrete indications of future US trade policy, including the new US administration's stance on the Doha Round. The summary here below is provided by BUSINESSEUROPE International Affairs Department. Key points are:

General

The Administration is still working out the details of its approach. The document gives broad outlines rather than detailed proposals. This is understandable as the hearing for new USTR Ron Kirk will only take place on March 9.
Given the rhetoric of the Presidential campaign, the document strikes a relatively conservative tone. It makes clear the importance of trade to the US and global economies and highlights a number of points the need for compliance with international trade rules. Nonetheless there is a new emphasis on labour and environmental issues.

Doha

The Administration supports the Doha Round as an element in economic recovery states a commitment of the Administration to a result. However, it highlights an “imbalance” between US commitments and the lack of clarity in what emerging countries using flexibilities would deliver. This is a different tone to that used by the Bush Administration but not a real change in the US position. Certainly there is no sense that the US will take an initiative to move forward with the Round in the short term. Separately, the document acknowledges an obvious fact, that lowering trade barriers in the current economic climate will be a challenge.

Bilateral

The document treads a line between the skepticism expressed about various FTAs in the campaign and political realities. From an EU perspective the key point is on Korea. It would not seem that ratification will move forward quickly. Rather the document suggests that there will first be extensive public consultation on the benefits of the agreement (along with the Agreements on Columbia and Panama.) The Administration would then “establish benchmarks” for progress on South Korea and Columbia, while Panama would move more quickly. This would seem to indicate some potential renegotiation.
The Administration will also look at existing agreements, pledging a review of all FTAs and bilateral investment treaties in place and a dialogue with Canada and Mexico on improving NAFTA “without having an adverse effect on trade.”
The administration will seek a new trade promotion authority, but only after consultation with Congress and the establishment of the Administration’s priorities.

Trade and social issues

The document highlights the inclusion in February’s stimulus package of an expanded programme of trade adjustment assistance; stresses its aim of building on the labour rights provisions in existing FTAs; and suggests that some kind of support programme for small and medium sized enterprises to become more involved in trade is possible.

Trade and environment.

The document includes strong support for negotiations on environmental goods and services in the WTO which is unsurprising. More importantly it sends a signal that border measures may be considered as part of action on climate change, though this is left very vague, expressing a concern that trade rules “do not block us from achieving this critical environmental task”.

Trade and security

There is a positive change of tone on security, emphasizing cooperation with partners and measures implemented in the “least trade-impeding manner possible”. Combined with recent statements by the Secretary for Homeland Security Janet Napolitano, it is hoped that progress may be possible on the 100% scanning issue.

ASEAN: ASEAN leaders issued Cha-am Hua Hin Declaration for ASEAN Community

The 14th ASEAN Summit, lasting from February 28 to March 1, wrapped up with the Cha-am/Hua Hin Declaration on the Roadmap of the ASEAN Community as well as approval of numerous measures to enhance cooperation among ASEAN members, particularly in coping with negative impacts of the global financial and economic crisis, and effectively realizing the bloc's Charter.

The best way to respond to the financial and economic crisis would be to intensify regional cooperation and self-reliance, share macro-economic policies as well as implement economic stimulus packages through budgetary tools, loosened monetary policies, and broader credit access for business, especially for small and medium-sized enterprises (SMEs), agreed ASEAN leaders.

The leaders also emphasized the importance of pursuing global free trade instead of protectionism and non-tariff barriers, committed to a joint determination for the success of the Doha talks round of the World Trade Organization (WTO).

ASEAN agreed to quickly kick-start the US $120 billion pool of foreign exchange reserve that can be used by the countries to defend their currencies from the global financial crisis; called on developed economies to cement cooperation with developing partners to restore and ensure the performance of the financial market, renovate the global financial system with more adequate care of the developing world's position.

Many other documents were issued by the leaders, including agreements on investment, commodity trade, petroleum security, the Joint Declaration on the Attainment of the Millennium Development Goals in ASEAN, Statement on Food Security in the ASEAN Region, and free-trade agreements with Australia and New Zealand.

On the sidelines of the Summit, talking with representatives of the ASEAN Inter-Parliamentary Assembly (AIPA), ASEAN Business Advisory Council (ABAC),ASEAN youth delegations, the leaders appreciated their contributions to the making of ASEAN policies and encouraged them to do more for the construction of the ASEAN Community on the basis of the targets and principles of the ASEAN Charter.

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