U.S. accuses China, India of threatening WTO round
By Doug Palmer and Jonathan LynnMon Jul 28, 1:17 PM ET
A clash between the United States and two big emerging markets, China and India, over cutting farm and industrial tariffs threatened to derail more than a week of work to salvage a world trade deal Monday.
"We are very much concerned about the direction that a couple of countries are taking," U.S. Trade Representative Susan Schwab said during a break on the eighth day of World Trade Organization talks.
"I am very concerned it will jeopardize the outcome of this round," she told reporters.
Her comments reflected strong differences over U.S. demands for countries to agree to deep tariff cuts in at least some manufacturing sectors and China and India's insistence that developing countries be given a strong new tool to guard against agricultural import surges.
David Shark, deputy U.S. ambassador to the WTO, said resistance by India and China to opening up to more imports had thrown the global trade talks into their "gravest jeopardy" since their launch in 2001.
China responded quickly. "We have tried very hard to contribute to the success of the round," its WTO ambassador Sun Zhenyu told delegates. "It is a little bit surprising that at this time the U.S. started this finger-pointing.
TRIAL RUN FOR CLIMATE TALKS?
Top trade officials from around 30 key WTO members have been in Geneva since last Monday to try to agree on terms for cutting farm subsidies and tariffs on agricultural and manufactured goods. After a rough start, the talks appeared to be making progress just as problems resurfaced again.
The meeting has been described by some European officials as a test of a changing balance of power in the world as developing economies grow in confidence, and also a possible trial run for climate change talks.
India's Commerce Minister Kamal Nath told reporters India had never agreed to Lamy's package, but had continued talks in the hope of winning further concessions from developed countries.
"I'm still hoping we will see some movement. I'm still optimistic," Nath told reporters after meeting ministers from seven key WTO players.
Priorities include deeper reductions in allowed spending on developed country farm subsidies than the proposed 70 percent cut for the United States and 80 percent cut for the EU in the current package, he said.
Developing countries also need a better "special safeguard mechanism" to help ward off import surges or price collapses in farm products, and long-awaited action on U.S. cotton subsidies which hurt developing country farmers, he said.
The United States, under pressure to cut its farm subsidies and tariffs in core markets such as autos and clothing, insists developing countries make significant openings in return.
In manufacturing, it wants China, India and others to agree to "sectoral" negotiations, in which a critical mass of countries would agree to cut tariffs to as close to zero as possible for industries ranging from jewelry to chemicals.
The United States and many other farm exporters, such as Uruguay and Paraguay, also fear the proposed safeguard mechanism would let developing countries massively increase tariffs in response to normal growth in trade.
Separately, France kept up pressure on EU trade chief Peter Mandelson not to agree to a deal that meant farm concessions in return for little gains elsewhere.
VOLUNTARY OR NOT?
WTO members endorsed the idea of "voluntary" sectoral agreements at ministerial meetings in Hong Kong in 2005.
China and India object to a compromise provision which encourages countries to take part in at least two sectoral talks by allowing them lower cuts in other industrial tariffs.
Developed countries want sectorals in "machinery, chemicals and automobiles, in which they enjoy substantial export advantage" and are pressuring developing countries to join in, said Lu Xiankun, a Chinese press counselor.
In agriculture negotiations, "China has indicated that it intends to shield cotton, sugar, rice and other commodities from any tariff cuts whatsoever," U.S. envoy Shark said.
That makes it much harder for the White House to sell farm subsidy cuts to Congress, particularly for cotton, which WTO members have agreed will face faster and deeper reductions.
Lu noted the United States would be able to spend up to $14.5 billion on trade-distorting subsidies under the proposed deal, or about twice what it currently does.
(Additional reporting by William Schomberg, Laura MacInnis and Robin Pomeroy; editing by Alison Williams)
GENEVA: Developing countries raised the specter of millions of destitute subsistence farmers Monday as they pressed for extra protection of their domestic rice producers from surges in foreign imports.
India and Indonesia have led demands for a "special safeguard" to be included in a new global trade pact being negotiated in Geneva, despite opposition from the United States and agricultural exporters in Latin America.
Trade Minister Mari Pangestu of Indonesia, the world's fourth most populous country, said she has to ensure the survival of some 60 million farmers — mostly small-scale rice growers — who are vulnerable to competition from large foreign producers.
Poor countries want the power to increase tariffs on rice and other foods as soon as either imports rise or prices drop by a certain level. The U.S., European Union and others have proposed severe restrictions before countries can invoke emergency tariffs, Pangestu said.
"It's so limited that we cannot use it, whatever the situation — food crisis or no food crisis," said the agricultural economist, who is opposing a tentative deal laid out last week by WTO chief Pascal Lamy.
The issue of a special safeguard for poor-world farmers also featured in a list of gripes mentioned Monday afternoon by India's trade minister, Kamal Nath. He spoke as talks paused for heads to cool following a difficult closed-doors meeting at the World Trade Organization.
Nath, who has been singled out by Washington for criticism, said some 90 countries supported his position and that he was determined to protect the "poorest of the poor from import surges."
Developing countries have pointed to the current jump in food prices as a major reason for why their farmers need extra protection against a spike in prices or imports. They say rapid fluctuations could cause entire domestic rice markets to dry up if left unchecked, imperiling their food security.
Rich countries accept the need for a safeguard, but say it goes against the idea of a trade liberalization round to allow tariffs to climb above already existing levels, especially if the threshold for action is too low.
But Pangestu said poorer countries cannot risk waiting for the full impact of price drops to hit farmers before adjusting.
"It's not like manufacturing. It's not a machine you can just turn on or off," she told The Associated Press in an interview, adding that even a 10 percent import surge could hurt a large number of Indonesian farmers.
Pangestu dismissed an argument by countries that cheaper, imported rice would benefit Indonesia. Rice is a staple food in the country, as in much of Asia, and high prices have led to protests and even riots in recent months.
Pangestu said her country is hoping to become a net importer of rice in the medium term by increasing its farm output to better compete with large foreign growers. In the meantime Indonesia has the backing of more than half of the 153 members of the WTO on the issue of special safeguards, she said.
Any deal in the so-called Doha round of trade talks which began in the Qatari capital seven years ago requires the support of all members before it can come into force.
February 15, 2008
U.S. trade balance improves for first time since 2001
by Robert E. Scott with research assistance from Lauren Marra
The U.S. Department of Commerce reported yesterday that the goods and services trade deficit fell to $711.6 billion or 5.1% of GDP in 2007, a decline of $46.9 billion since 2006. The trade deficit dropped by an unexpectedly large $4.4 billion in December due to a sharp drop in imports of autos and vehicle parts and consumer goods. The sharp drop in imports in December provides further evidence of a U.S. slowdown in the fourth quarter. Today's report also indicated:
* The U.S. merchandise trade deficit, which includes only manufactured goods and commodities, declined $22.7 billion (or 2.7%) to $815.6 billion in 2007, while the services surplus increased to $104.0 billion, a $24.2 billion improvement (30.4%).
* The U.S. trade deficit with China rose $23.7 billion (or 10.2%) to $256.3 billion, offsetting improvements in the trade deficit with other countries such as Canada, Germany, the U.K. and other EU countries, Taiwan, Brazil, and Chile.
* The cost of U.S. petroleum imports also increased $27.9 billion (9.6%) in 2007; a small decrease (1.5%) in the volume of total energy related petroleum imports was more than offset by a $6.26 per barrel (10.8%) increase in the average unit cost of crude oil.
* The U.S. had a $53.5 billion global trade deficit in advanced technology products (ATP) in 2007, a $15.4 billion (40.6%) increase over 2006 levels. Trade with China can account for the entire U.S. ATP deficit in 2007 and most of the increase in the ATP deficit. The United States had a trade surplus in ATP products with the rest of the world of $14.2 billion in 2007. The United States had an ATP deficit with China of $67.7 billion in 2007, an increase of $12.6 billion over 2006.
While trade balances between the United States and many of its most important trading partners are improving, the trade deficit with China continues to grow, and the dollar value of oil imports continues to grow rapidly.
The U.S. goods and services trade deficit improved for the first time since 2001. The deficit fell to $711.6 billion (see Figure A below), or 5.1% of GDP in 2007, a sharp drop of 0.6 percentage points over the deficit in 2006. The improvement in the deficit was explained, in part, by continued rapid growth of U.S. exports, which increased a record $176.1 billion (12.2%) in 2007, as shown in the Figure A. A slowdown in import growth to 5.9% ($129.2 billion) also played a key role. The slowdown in import growth in 2007 reflects softening in consumer spending in the overall economy. Both the import slowdown and export growth were probably driven in part by the depreciation of the dollar in recent years.
The U.S. deficit in manufactured goods improved from $690 billion in 2006 to $679 billion in 2007, a decline of 1.6%. Manufactured imports are responsible for the bulk of the U.S. trade deficit. The manufacturing sector lost 3.3 million jobs between January 2001 and December 2007, including 200,000 jobs lost in 2007 alone. More than 32,000 U.S. manufacturing establishments closed between 1998 and 2005.
Trade deficits, manufacturing job losses, and plant closures are due, in large part, to overvaluation of the U.S. dollar. Much needed increases in the value of other currencies against the U.S. dollar since 2002 are largely responsible for the improvement in the U.S. trade balance in 2007. On a broad, inflation-adjusted, trade-weighted basis, a broad cross-section of currencies has gained 28% against the dollar since 2002, and 6.9% in 2007, as shown in Figure B. Most of that improvement has come against a group of major currencies, including the Euro and Canadian dollar, and the U.S. trade balance with those regions improved significantly in 2007. These currencies have gained 42.6% since 2002, and 7.9% in the past year alone.
In contrast, the currencies of "Other Important Trading Partners (OITP)," a group that includes China and a number of other East Asian nations that tightly manage the value of their currencies against the dollar, have gained only 12.5% in value since 2002 and 5.8% last year. As a result, the U.S. trade deficit with these countries continued to grow in 2007. (See: A Plunging Dollar? How Far and Relative to What?). Sustained improvements in the U.S. trade deficits will be unlikely unless the managed currencies are allowed to appreciate substantially (e.g., 30% to 40%).
Improvement in the U.S. trade deficit in 2007 was due to the combined effects of appreciation of the Euro and other currencies over the past five years, and the initial effects of a U.S. slowdown. The U.S. trade deficit in 2007 still exceeded 5.1% of GDP, an amount considered unsustainable by most economists. The deficit could start growing again once the current slowdown ends, unless governments in China and other OITP countries agree to substantially raise the value of their currencies. This is a good time for other countries to re-orient their currency policies and spur consumption growth at home. These developments would be good for both the United States and its trading partners and would lead to a more stable global economy.
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