In its official request for consultations, the US claims that the Central American country has failed to enforce effectively Guatemalan laws that protect workers’ rights, such as the freedom of association, the right to bargain collectively, and the right to work in acceptable conditions.

This alleged lapse in governance “harms US workers by forcing them to compete against substandard labour practices and tilts the playing field away from American workers and business,” the Office of the USTR said in a statement. Kirk, in his speech, urged the Guatemalan government to take “specific and effective action - including, if appropriate, legislative reforms - to improve the systemic failures in enforcement of Guatemalan labour law.”

Dispute fuelled by labour unions’ concerns

Labour unions in both countries have been publicly seeking action on the subject since 2008. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) - the largest federation of labour unions in the US - joined forces with six Guatemalan unions to file a public submission with the US Department of Labor, in which they denounced the alleged violations.

The US Labor Department issued a follow-up report in early 2009, the results of which prompted the US and Guatemala to begin negotiations on the subject. However, Kirk’s announcement made clear that the US is not satisfied with the results of these discussions and has not been appeased by what the Guatemalan government has done so far to rectify these problems.

According to the formal consultation request that Kirk and US Secretary of Labor Hilda Solis submitted to Guatemala, the US has engaged in a series of investigations over the last 11 months in which it has examined Guatemala’s compliance with Chapter 16 of CAFTA-DR. This provision requires each party to ensure the effective enforcement of its labour laws.

Their letter states that the US has “identified a significant number of failures to enforce, constituting a sustained course of action or inaction.” They accused Guatemala’s Ministry of Labour of failing to investigate alleged labour law violations, failing to take appropriate enforcement actions, and failing to enforce court orders.

Kirk and Solis, in their letter, also cited US concerns over labour-related violence in Guatemala, adding that they were troubled over the Guatemalan government’s response “to the use and threats of violence that appear to be related to the exercise or attempted exercise of labour rights in Guatemala.”

Guatemala suspects political motivation behind US actions

In a statement released yesterday by the Guatemalan Ministry for Foreign Affairs, the Central American country expressed surprise at the complaint, and was even more taken aback by Washington’s decision to announce the dispute in such a public fashion.

The Ministry’s statement also alluded to Guatemala’s concerns that the complaint could be politically motivated. The upcoming consultations should be held in “an environment of seriousness and mutual respect that will guarantee that the labour issue be studied objectively,” the statement said.

Trade experts interviewed by The New York Times also suggested that the complaint might not purely be driven by labour concerns. The administration of US President Barack Obama has been pushing Congress to ratify pending FTAs with Colombia, Korea, and Panama. The three pacts were signed during the Bush Administration but lawmakers have yet to ratify them. In recent weeks, Obama has especially been pushing the Korea-US FTA, despite deep-seated opposition from some members of the US Congress - especially from some of his fellow Democrats.

Much of the opposition to these three pending FTAs comes from their lack of labour provisions. However, if the Obama administration takes a hard line with Guatemala over labour issues, the White House might be able to prove to congressional Democrats that it views the subject as an important aspect of trade policy.

Next steps

The two countries now have 60 days, from the date of the complaint, to come to some sort of agreement in bilateral consultations. After that deadline passes, the mechanisms built into the CAFTA-DR FTA could subject Guatemala to an annual penalty of US$15 million, according to Guatemalan newspaper La Prensa.

Should Guatemala then fail to pay the US$15 million, the US could respond using trade sanctions - including the suspension of CAFTA-DR tariff benefits.

However, only some of the concerns brought up by the US - specifically, those relating to the enforcement of domestic labour laws - can be addressed via CAFTA-DR’s dispute settlement mechanism. Labour-related violence, for instance, cannot be dealt with using this procedure.

The case constitutes the first enforcement case on labour rights that has ever been brought under a free trade agreement. Since the establishment of the North American Free Trade Agreement in 1994, the inclusion of labour law provisions in FTAs has become increasingly common. However, only the most recent agreements provide for strong dispute settlement procedures for such cases, and even fewer allow for trade sanctions in the case of failure to comply.

ICTSD reporting; “AFP: US files labor rights case against Guatemala,” AGENCE FRANCE-PRESSE, 31 July 2010; “EE.UU. señala al país de violar leyes laborales,” PRENSA LIBRE, 31 July 2010; “E.E.U.U. iniciará disputa con Guatemala por violación de leyes laborales,” PRENSA LIBRE, 30 July 2010; “U.S. Plans Trade Complaint Against Guatemala,” THE NEW YORK TIMES, 30 July 2010.

Much of the final negotiations came down to a tête-à-tête between Argentina President Cristina Fernández de Kirchner and Uruguayan President José Mujica, according to Argentine newspaper La Nación, with Kirchner speaking on behalf of both her country and Mercosur’s two other members, Brazil and Paraguay.

Uruguay has long disagreed with its Mercosur partners over who should have the authority to impose export duties, with Montevideo arguing that the Mercosur bloc should hold that power. Argentina, Brazil, and Paraguay, meanwhile, are all in consensus that each country should apply duties as they see fit. During the meeting, Kirchner convinced Mujica to change his opinion on the subject, despite his concerns over that some Argentine duties could distort trade.

At a more inclusive meeting, Mercosur members also decided to eliminate by 2012 the double recovery of the common external tariff (AEC). Previously, non-Mercosur products were charged a tariff both when they entered the bloc and when they were re-exported to another Mercosur member.

Officials also agreed upon a mechanism for the redistribution of customs revenue among members. These two items were among the last remaining subjects of contention.

In announcing the customs code at a summit press conference, Kirchner lightly rebuked the sceptics who had said that the countries were incapable of consensus. “Everyone expected that this would not work out and said, in block letters, that it was impossible,” she said. She also praised her fellow heads of state for being able to put aside their differences through dialogue and consensus-building, calling this proof that Mercosur is “more than just a customs union,” according to La Nación.

Argentina has held the rotating presidency of the trade bloc for the last six months, a role that Brazil took on at the close of the summit.

Mercosur, Egypt FTA finalised after six years of talks

The Mercosur summit, which took place in San Juan, Argentina on Monday and Tuesday of this week, also saw officials sign the union’s second-ever FTA when it finalised a deal to open up trade with Egypt, Africa’s second-largest economy.

The pact, which took six years to finalise, will immediately eliminate tariffs on butter, maize, metals, oils, valves, and wheat. Duties on milk and industrial products will be phased out within the next four years, while tariffs on the remaining products covered by the deal will be removed over a period of either eight or ten years.

Most of the US$2.268 billion worth of commerce between Egypt and the four Mercosur countries - Argentina, Brazil, Paraguay and Uruguay - comes from Egypt’s trade with Brazil. The South American country imports approximately US$87.7 million worth of goods from Egypt, and exports US$1.44 billion in return, according to Spanish-language news agency EFE.

Argentina is Egypt’s second-largest Mercosur partner, exporting US$603 million worth of goods to the North African nation and importing US$53.2 million. The value of Egypt’s trade with Uruguay and Paraguay is substantially smaller.

Argentine Industry Minister Débora Giorgi lauded the benefits that her country would reap as a result of the pact, asserting that “Argentina will be able to sell more primary products and in better [trading] conditions in comparison with what it currently exports to Egypt,” according to La Nación.

Speaking more broadly, Giorgi also noted that the pact will provide Mercosur with the opportunity to export products that it currently does not sell to its new North African partner. These products could include vehicles, automobile parts, pharmaceuticals, and chicken, among others.

Egyptian Minister of Trade Rachid Mohamed Rachid referred to the FTA signing as a “historic moment,” given that Egypt “is the first Arab and African country to sign such an agreement,” according to Egyptian newspaper Al-Ahram. He also projected that the pact could lead to a doubling of trade exchanges between Egypt and Mercosur.
The agreement might also allow Argentina to make inroads into the Egyptian wheat market. Egypt is the world’s largest importer of the product, according to Reuters, while Argentina is one of its major exporters. Though Argentina did not export wheat to Egypt last year, that could change with the signing of this deal.

The Mercosur trade bloc is negotiating similar agreements with Jordan, Morocco, and the Gulf Cooperation Council (GCC) - a six-member union that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Summit attendees also addressed the issue of setting up a trade and cooperation agreement with the EU. The two parties re-launched talks in May, despite some pushback from EU member states who fear their farming sectors would suffer from increased competition with South American producers. The foreign affairs ministers from Mercosur’s four member countries said they hoped the EU would agree to Mercosur’s latest offer and accelerate progress toward an agreement.

Mercosur summit an overall success, despite Venezuela-Colombia distraction

While the customs code and the Mercosur-Egypt FTA were viewed as the main successes of the gathering, progress was also made in other areas - in spite of growing concerns over the tensions building between Venezuela and Colombia.

Venezuela signed a Mercosur membership agreement in 2006, but Paraguay’s legislature has not yet ratified the document. (Lawmakers in the other three Mercosur countries have approved it.) Bolivia, Chile, Colombia, Ecuador and Peru are “associate” members of the bloc; heads of state from those countries usually attend Mercosur summits.

Venezuelan President Hugo Chávez is also a regular attendee of the trade bloc’s gatherings, but in a surprise last-minute move he cancelled his trip to this week’s summit in Argentina. Colombian President Álvaro Uribe was also absent. Venezuela recently broke off diplomatic relations with Colombia after the latter alleged that it was under attack from rebels trained or funded by its neighbour.

ICTSD reporting; “Mercosur y Egipto buscan cerrar un tratado de libre comercio,” AGENCIA EFE, 15 July 2010; “Rachid signs free trade agreement to secure our agricultural imports,” AL-AHRAM, 4 August 2010; “Hugo Chávez pegó un sorpresivo faltazo a la cumbre del Mercosur,” EL CLARÍN, 3 August 2010; “Tras arduas negociaciones, aprobaron un código aduanero común para el Mercosur,” EL CLARÍN, 3 August 2010; “Acuerdan un nuevo código del Mercosur,” LA NACIÓN, 4 August 2010; “El Gobierno evalúa compensaciones,” LA NACIÓN, 3 August 2010; “Mercosur acuerda libre comercio con Egipto,” LA REPÚBLICA, 2 August 2010; “Mercosur Advances Toward True Customs Union,” LATIN AMERICAN HERALD TRIBUNE, 3 August 2010; “Mercosur expects the EU to match the latest offer for a trade agreement,” MERCOPRESS, 3 August 2010; “Mercosur signs trade accord with Egypt; Venezuela/Colombia conflict out of the agenda,” 3 August 2010, MERCOPRESS; “Mercosur bloc signs free-trade deal with Egypt,” REUTERS, 3 August 2010; “Bloque Mercosur acuerda libre comercio con Egipto,” REUTERS, 2 August 2010.

The meeting, the ninth of its kind since the act became law in May 2000, represents “the highest-level dialogue between the United States and the countries of sub-Saharan Africa,” US Trade Representative Ron Kirk said in his opening remarks on Monday.

AGOA builds on Washington’s Generalized System of Preferences for developing countries, eliminating US import duties on nearly all products (more than 6,400 tariff lines) exported from the 38 sub-Saharan African countries that currently qualify for the special privileges.

In the decade since the act was signed, US non-oil imports from sub-Saharan African countries have more than doubled, hitting US$3.4 billion in 2009, according to a statement from the Office of the USTR. Apparel, footwear, fruits and nuts, prepared vegetables and cut flowers are among the sectors that have benefited from the agreement, the statement said.

US-Africa trade took a major hit in 2009 as a result of the global economic crisis. US imports from countries in sub-Saharan Africa fell by 45.5 percent last year, largely due to a 47.3 percent slide in imports of crude oil. The fuel accounts for more than 90 percent of all US imports from AGOA countries, according to the International Trade Administration, a branch of the US Department of Commerce.

The economic crisis aside, Kirk acknowledged in his opening remarks that the implementation of AGOA has not been flawless.

“Some AGOA countries are not exporting under AGOA at all, and in some key AGOA sectors - like textiles and apparel - tough global competition is having an impact,” he said. He also noted that governance problems in African countries can act as significant barriers to trade. He called on the continent’s leaders to stand firm against corruption, to respect contracts, and to take measures to cut red tape.

But he stressed that AGOA’s first ten years have largely been a success story.

“There are some who may look at our trade with sub-Saharan Africa and see only petroleum or extractive minerals,” Kirk said, acknowledging a common complaint among some members of civil society. “But AGOA has brought about a greater diversity of products being exported to the US market duty-free - including non-oil, manufactured and processed goods.”

Addressing the room of high-level trade officials, Washington’s top trade envoy added that the United States will continue to work to secure a new global trade deal in the WTO’s Doha Round of trade talks. A Doha agreement, he said, is “the best way to ensure that trade’s promise as an engine for economic growth can be fully realised by sub-Saharan African nations.”

For the first time, this year’s two-day ministerial gathering in Washington is being followed by a subsequent forum aimed specifically at business leaders. The latter - which is taking place during the second half of this week in the central US state of Missouri - is meant to facilitate new interactions between US firms, African businesses and African leaders. The business forum will focus on agriculture, which was the only sector that saw a growth in trade between the US and AGOA countries last year.

US-Africa farm trade could get big boost if the US government got rid of its tariff rate quotes on African farm exports like sugar, tobacco and peanuts, the US Civil Society Coalition for African Trade and Investment said in a communiqué released in conjunction with a two-day NGO forum held in Washington last week.

The group said that such restrictions “limit trade in products that hold immediate trade potential for a number of countries.”

The group noted that AGOA has enabled a substantial expansion of US trade with sub-Saharan African countries, but added that the economic challenges facing the struggling region remain enormous. Seventeen African nations celebrate 50 years of independence this year, the group noted in its communiqué. “At independence, Africa’s share of global trade was three percent; it is now about two percent,” they said.

Under AGOA, the US provides eligible countries with substantial amounts of assistance to help African exporters make the most of the trade benefits to which they are entitled under the act. Total aid for fiscal year 2009 amounted to US$ 733 million. Much of that aid was been funnelled through four “regional competitiveness hubs” that have been established across the continent, the Office of the USTR said in a statement. The hubs are managed by US Agency for International Development.

AGOA allows the US president to determine on an annual basis which countries in sub-Saharan Africa should be allowed to benefit from AGOA’s trade preferences. In a presidential proclamation issued in December last year, Obama added Mauritius to the list of eligible countries and removed Guinea, Madagascar and Niger, citing those countries’ failure to make “continual progress” toward meeting the conditions of eligibility.

Those conditions cover a range of areas, including the rule of law, intellectual property protections, corruption, labour laws, poverty reduction strategies and human rights. Each of the three countries that Obama removed from the list in December had undergone either a constitutional crisis or a military coup during the previous year.

ICTSD reporting.

The quota agreement has been in place since 2002, when high levels of poaching and illegal trade led to the near complete collapse of the sturgeon population in the Caspian Sea. CITES member states agreed that countries sharing access to sturgeon stocks should be required to work together to ensure the industry is sustainable.

After a June meeting in the Iranian capital of Tehran, the countries agreed on export quotas, which were published by CITES on 23 July. The total 2010 caviar quota is 81 tonnes - five tonnes less than the total quota in 2008 and 200 tonnes less than the 2001 quota. “They are not huge differences but the trend is going down,” said Carlos Vasquez, a spokesman for CITES.

Caviar quotas for Caspian States amount to 3 tonnes of the prized beluga, 17 tonnes of sevruga, and 61 tonnes of osetra.

Environmentalists call for complete ban

The wild sturgeon population of the Caspian Sea provides 90 percent of the world’s black caviar - unfertilised sturgeon eggs. Due the popularity of the delicacy, stocks have been declining steadily since the early 1990s, when the industry was tightly regulated by Soviet Moscow. All species of Caspian sturgeon are now listed as “critically endangered” by the International Union for the Conservation of Nature (IUCN).

Still, all species - including the rapidly declining beluga - remain listed under CITES Appendix II, which restricts their trade on a scientific basis, but does not ban it entirely; trade is illegal only for species listed under Appendix I of CITES.

Of particular concern to environmental groups is the beluga sturgeon, which has been banned in the United States since 2005. The 2010 Beluga export quotas have dropped from their 2008 levels with Iran at 800 kilos from 1,000 in 2008, Kazakhstan at 1,500 kilos from 1,700 and Azerbaijain at a quota of zero from 300 kilos in 2008.

“It’s ludicrous to allow any fishing,” said Ellen Pikitch, executive director of the Institute for Ocean Conservation Science at Stony Brook University in Stony Brook, US. “The quotas should all have been zero for all of these species.”

Black market

However, some say that banning international trade of caviar entirely could be counterproductive. “It was a mistake to have no quotas because it led to an increase in the black market,” said Armen Petrossian a major US-based caviar importer.

Mounting demand and limited supply will lead to an increase in the price of wild caviar but it will take at least a month for the prices to settle. Petrossian estimated that prices would be as much as US$500 an ounce. Some experts say wild caviar could cost more than double that of the highest quality farmed caviar.

In the absence of wild caviar, many consumers have become accustomed to the widely available, consistent and less costly farmed caviar, which is now produced at high quality.

More information

The CITES export quotas for 2010-2011 can be accessed here.

ICTSD reporting. “Wild Caspian Caviar Returns.” NEW YORK TIMES 27 July 2010. “Caviar producers to resume exports.” PRESS TV, 25 July 2010.  “Caviar producers to restart wild caviar exports.” TELEGRAPH, 24 July 2010. “Wild Caspian Caviar Return.” 27 July 2010. “Beluga Sturgeon in Caspian Sea Reclassified as ‘Critically Endangered.’” SCIENCE DAILY. 22 March 2010.

Farmers are allowed to grow only two strains of GM crops in the EU: Monsanto’s MON 810 strain of maize, which was authorised in 1998, and a GM starch potato, known as the “Amflora” potato, which was approved for cultivation and industrial processing in March of this year.

However, the European Commission has approved a number of GM crops for feed or food uses, including one strain of sugar beet, three of soybean, three of oilseed-rape, six cotton varieties and 17 strains of maize.

The approval of the six new maize varieties is the result of a decision taken by the Commission after member states failed to return majority decisions either for or against the approval. Each of the six GM maize varieties in question has received a positive safety assessment from the European Food Safety Authority (EFSA).

EU member states are deeply divided over GM products. Critics of GM goods emphasise that the long-term impact of genetic modification for human and environmental health is unknown.

Member states Austria, Bulgaria, Germany, Greece, Hungary, Ireland and Luxembourg have banned the cultivation of GM seeds, while the Czech Republic, the Netherlands and the United Kingdom are open to allowing their farmers to grow the altered crops.

In a recent proposal, the Commission suggested that each of the bloc’s member states should be allowed to decide for themselves whether to allow the cultivation of GM crops within their borders. Before states could ban or approve them, however, any strains would need to undergo a safety assessment by European Food Safety Authority (EFSA) and receive EU approval.

Of the approvals announced this week, one renewed a previous decision on Syngenta’s insect-resistant Bt11 maize that expired in 2007, while the other five were for stacked maize varieties, which combine insect and herbicide resistance. One of those strains is from Sygenta, two were jointly developed by DuPont and Dow AgroSciences, and two are from Monsanto.

Exporters of GM crops outside the EU are likely to increase their pressure on the EU to open its markets to imports of the altered crops. The EU has a zero-tolerance policy on unapproved GM material in imports. Just last year, Europe’s supply chains of animal feed were disrupted when GM-tainted shipments of feed from the US were turned back at the EU border.

The US has long been critical of the EU’s anti-GM position, arguing that it is not in line with Europe’s commitments at the World Trade Organization.

This week the American Farm Bureau Federation, the largest and strongest farmers’ association in the United States, urged the administration of US President Barack Obama to impose sanctions on the EU, saying that the 27-nation bloc has not complied with a 2006 WTO ruling against its “de facto moratorium” on approving new varieties of GM crops for cultivation.

ICTSD reporting; “EC approves six GM corn varieties for food and feed,” FOODnavigator.com, 30 July 2010; “Commission proposes letting member states decide on GM cultivation,” FoodQualitynews.com, 15 July 2010; “EU Commission authorizes six GM maize for food and feed use,” Aquafeed.com, 2 August 2010; “EU’s new approach to the cultivation of GMOs- guide,” eubusiness.com, 13 July 2010.

10-11 August, San Francisco, USA. FOURTH SUMMIT IN OUR GLOBAL SERIES ON SUSTAINABLE AGRICULTURE. This gathering is the fourth in a global series of Sustainable Agriculture Summits, and focuses on how to measure and reduce water and carbon impacts throughout the agricultural supply chain. The summit is being co-hosted by American Business Conferences and its sister company London Business Conferences. This year’s gathering, while sponsored by corporate businesses, will attempt to include a diverse range of growers and small-scale suppliers. For more information, please visit http://www.sustainable-agricultural-partnerships-2010.com/.

11 August, Panama City, Panama. LATIN AMERICAN AND CARIBBEAN INDIGENOUS AND LOCAL COMMUNITY CAPACITY-BUILDING WORKSHOP ON THE CBD INCLUDING ISSUES RELEVANT TO ARTICLE 8(J) TRADITIONAL KNOWLEDGE AND ABS. This workshop will include a general introduction on the Convention on Biological Diversity (CBD), an overview of its mechanisms designed to support participation from indigenous and local communities in its processes, and a general introduction on access and benefit-sharing (ABS) and the negotiation of an international ABS regime. It will also analyse the Conference of the Parties 10 agenda with regards to the sixth meeting of the Article 8(j) Working Group, among other subjects. Participants will have the opportunity to develop informal proposals from their sub-region’s perspective. For more information, please visit http://www.cbd.int/meetings/.

WTO events

An updated list of forthcoming WTO meetings is posted at: http://www.wto.org/meets_public/meets_e.pdf. Please bear in mind that dates and times of WTO meetings are often changed, and that the WTO does not always announce the important informal meetings of the different bodies. Unless otherwise indicated, all WTO meetings are held at the WTO, Centre William Rappard, rue de Lausanne 154, 1211 Geneva, Switzerland, and are open to WTO Members and accredited observers only.

31 August: Dispute Settlement Body

Other upcoming events

15-17 August, Joensuu, Finland. THE UNIVERSITY OF EASTERN FINLAND - UNEP COURSE ON MULTILATERAL ENVIRONMENTAL AGREEMENTS. The University of Eastern Finland (UEF) and the United Nations Environment Programme (UNEP) are jointly organising a high-profile two-week course on multilateral environmental agreements (MEAs). Organisers hope that the course can serve as an opportunity for teaching lessons learned from past experiences in the field of international environmental law to current and future negotiators of MEAs. The course is geared towards experienced government officials that engage in international environmental negotiations. For more information, please visit http://www.joensuu.fi/unep/envlaw/.

23-28 August, Seoul, South Korea. XXIII WORLD CONGRESS OF THE INTERNATIONAL UNION OF FOREST RESEARCH ORGANISATIONS (IUFRO). This year’s IUFRO World Congress will centre on the theme “Forests for the Future: Sustaining and the Environment.” The programme will entail a mix of plenary sessions, sub-plenary sessions, technical sessions and poster sessions, with the goal of providing delegates with the opportunity to access the most up-to-date research and projects being conducted by leading experts and scientists. With the uncertainty of the global economy, the increasing scarcity of resources, and the detrimental effects of climate change on the environment, this event will help shift the focus to forests to showcase their potential role in mitigating climate change. For more information, please visit http://www.iufro2010.com/.

15-17 September, Geneva, Switzerland. WTO PUBLIC FORUM. The World Trade Organization (WTO) Public Forum 2010 will address “The Forces Shaping World Trade” and feature a series of events organised by civil society organisations. Discussions will take place under these sub-themes: the WTO and the players that influence the multilateral trading system; the economic, political and technological factors shaping world trade, and the role of the rules-based multilateral trading system in contributing to the global economic recovery; coherence between the WTO and other areas of global governance; and “Looking to the future: What post-crisis agenda for the WTO in a shifting-power scenario?” Registration is already open for this event. For more information and a schedule of events please visit http://www.wto.org/english/forums_e/ngo_e/forum10_background_e.htm.

CLIMATE CHANGE RISKS AND FOOD SECURITY IN BANGLADESH. By Winston Yu, Mozaharul Alam, Ahmadul Hassan, Abu Saleh Khan, Alex Ruane, Cynthia Rosenzweig, David Major, and James Thurlow, Earthscan, June 2010. This book focuses on Bangladesh, which is projected to be one of the countries that will be most affected by climate change. The authors consider a range of potential climate risks for the country, applying a series of economic and agro-ecological models in order to better evaluate the impact of climate change on both the agricultural sector and the economy. The book’s intended audience includes agricultural researchers, development partners and policy makers. For more details, or to order a copy, please visit http://www.earthscan.co.uk/?TabId=102311&v=512503.

DEEPENING CHINA-TAIWAN RELATIONS THROUGH THE ECONOMIC COOPERATION FRAMEWORK AGREEMENT. By Daniel H. Rosen and Zhi Wang, Peterson Institute for International Economics, June 2010. This publication analyses the recently signed Economic Cooperation Framework Agreement, which was signed by China and Taiwan last month. The authors make economic projections about the potential benefits of cross-Strait economic reform for both countries. They also predict a smaller, though also positive, result for the United States; the improved relations between China and Taiwan are likely to require the United States’ attention, in terms of economic engagement. For more information, or to download the paper, please visit http://www.petersoninstitute.org/publications/interstitial.cfm?ResearchID=1601.

“After some months of impasse in the negotiations, my own sense is that we are beginning to see signs of a new dynamic emerging,” WTO Director-General Pascal Lamy told trade officials at a meeting of the organisation’s Trade Negotiations Committee on Tuesday.

“Clearly, it is too early to say whether this new dynamic is firmly rooted and can expand to all issues under the negotiating agenda which still lag behind in terms of maturity,” he continued. “It is also too early to see how you engage on horizontal trade-offs across different areas.”

The WTO’s Doha Round trade talks, which were launched in 2001 with the aim of helping developing countries build their economies through freer trade, have struggled with a thorny political climate over the past two years. The last high-level push for a breakthrough agreement came in July 2008, when ministers gathered in Geneva for what turned into a nine-day negotiating marathon. That meeting collapsed over a dispute on agriculture trade; the talks have largely languished ever since.

In a promising political turn in September 2009, G20 heads of state called for the Doha Round to be completed by the end of 2010, citing the round’s importance in ensuring a sustainable economic recovery. G20 leaders met again in Toronto in June, and again they called for global trade talks to be brought to a close. This time, however, there was no mention of a deadline.

Despite the political lull on liberalising multilateral trade, Director-General Lamy has persistently proposed new strategies to drive the talks forward. Earlier this year, he urged WTO officials to adopt a “cocktail approach” to the negotiations - mixing bilateral meetings, small group consultations with Lamy, and multilateral processes in an effort to find some new space in the talks.

This approach seems to have produced at least a few positive results, a number of WTO ambassadors said at Tuesday’s meeting. US Ambassador to the WTO Michael Punke noted that the cocktail approach has produced “some initial, hopeful signs.” Chinese Ambassador Sun Zhenyu described the new strategy as “positive and helpful.”

But, of course, many divisions in the talks remain.

The United States’ position has been the focal point of much of the recent controversy. Washington has for several months been demanding deeper concessions from large developing countries like Brazil, India and China. The US ambassador repeated that theme on Tuesday, reminding those assembled that, at the Toronto G20 summit, US President Barack Obama had “called attention to the particular responsibilities of the emerging powers of our 21st century economy.”

But the emerging economies insist that they have already bled enough in the talks. They accuse the US of trying to roll back the hard-fought progress that has come over the course of nearly nine years of Doha Round negotiations.

“To complete the round, we need to stick to the mandate of development and capture what is already on the table and not to re-do the whole thing,” Chinese Ambassador Sun told the meeting.

Brazilian Ambassador Roberto Azevedo echoed that sentiment. “In our view, we must find solutions within the realm of what is on the table,” he said. “Any attempt to get more in a selective and non-reciprocal fashion will not help the process and could only lead to a quick unravelling of the negotiations with serious and long-lasting consequences.”

Such debates will be put on hold over the next four weeks, as delegates clear out of Geneva for their annual summer holidays. As usual, the organisation will resume its work in early September.

Lamy, ever a lover of metaphors, left delegates with an image: “As I said earlier, we have all the ingredients of our cocktail. The mood music is more upbeat. Now we need to move from stirring the cocktail to shaking it vigorously, vertically and horizontally,” he said.

“When we come back refreshed in September we will need to start turning these plans into real progress by intensifying engagement,” he added.

ICTSD reporting.

On 22 July, Senate Majority Leader Harry Reid announced that the Democratic Party’s leadership would not seek to include a cap-and-trade scheme in the energy legislation scheduled to come before the Senate before that chamber’s August recess.  Instead, the Democratic leadership will focus their efforts on a much narrower bill.

Last week’s announcement continues a trend of deepening uncertainty among Democrats on climate change legislation, particularly in the Senate. Since last May, when Senators John Kerry, a Democrat, and Joe Lieberman, an Independent, unveiled their climate change bill without the support of the bill’s Republican co-author, Lindsey Graham, the prospects for legally binding limits to greenhouse gases have steadily deteriorated.

The new version of the bill, which was released earlier this week, bears little resemblance to the original. (A summary of the bill is available here.) The focus has now shifted to the timeliest environmental issue in the US: the catastrophic BP oil spill in the Gulf of Mexico. In addition to proposed measures to improve safety on offshore oil and gas drilling projects, the bill could raise the US$75 million liability cap for companies involved in oil spills. Other measures that are addressed in the bill relate to land conservation, energy efficiency, and incentives for natural gas-fuelled vehicles.

Waning utilities support big blow to bill

In recent weeks, Senator Kerry has appeared to be gradually warming to the idea of compromising on the scope of greenhouse gas limitations. Though the original bill included greenhouse gas limits on the transportation, manufacturing, and utilities sectors, by the start of last week Kerry seemed prepared to negotiate away limits on the first two in favour of limits only on utilities.

After several meetings with prominent company representatives of the utilities industry, Kerry announced no breakthroughs. Utility companies had initially thrown their support behind the Kerry-Lieberman bill, but after learning that their greenhouse gas burden would not be shared by the transportation and manufacturing industries, the utilities balked. Instead, as a compromise, they seemed to ask for a weakening of the Clean Air Act, which Democrats were unwilling to concede.  Consequently, no agreement could be reached.

However, the failure to include greenhouse gas emissions in a climate bill cannot be blamed on the utilities negotiations alone. Senate Republicans, with their ability to filibuster Democratic proposals, could have stopped most Democratic legislation from passing.

Democrats needed a unified caucus plus at least one Republican vote to put greenhouse gas limitations through the Senate. Yet many Democratic senators, such as Jay Rockefeller from West Virginia, refrained from endorsing greenhouse gas limitations, saying that such limitations could hurt domestic industries in their home states. Further, Republican senators have branded the most widely discussed emissions limitation scheme, cap-and-trade, as a jobs-killing “cap-and-tax”; the negative branding has paid off.  As recently as 18 July, Majority Leader Reid said that the words cap-and-trade were “not in [his] vocabulary,” a testament to the toxicity the phrase has acquired.

Future of US cap-and-trade looking dim

It remains to be seen whether cap-and-trade, or some other scheme for a limit on greenhouse gases, might be able to make comeback.  Senator Kerry still vows to include such a limit in a bill, and it is possible that such a measure could come up for a vote in the form of an amendment to the Senate bill.  Alternatively, even if the senators pass a bill without greenhouse gas limitations, they will still have to negotiate a compromise version of the legislation with the House of Representatives, which included a cap-and-trade system in its climate change bill last year.

As a consequence, the House pressure could force the Senate to re-include an emissions limitation. In reality, however, such an outcome is unlikely.  Further, with the August recess coming fast, senators will have little time to devote to climate issues. Mid-term elections are held on 2 November, and the season between the August recess and the November elections is fraught with campaigning, to the detriment of legislation stalled in Congress.

After the elections, Democrats might still use the “lame duck” period between the election and seating of new senators in January to pass the legislation as well. After the new Congress is seated in January, it will have another opportunity to take up the legislation

Much will rely on the actions of President Barack Obama. In the wake of the collapse of cap-and-trade from the Democrats’ legislative effort, some activists have blamed the president for a lack of leadership on the issue. Though he campaigned for emissions limitations in 2008, he has largely left the details of such measures to legislators.

ICTSD reporting.