IBT News Blog

This article discusses the new US policy of sending food and drug inspectors to US embassies in developing countries to monitor the quality of items sent to the US. It also discusses the use of this practice by other countries. http://www.iht.com/articles/2008/01/25/business/25fda.php .

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EU and U.S. try to rekindle Doha trade talks
By Stephen Castle International Herald Tribune
Thursday, January 24, 2008

Against a gloomy economic backdrop, the United States and the European
 Union called Thursday for a fresh effort to rescue stalled trade talks
 to restore confidence in the global economy and stave off the growing
 threat of protectionism.


Fears of a recession in the United States have raised the stakes over
 the dormant trade negotiations, and Susan Schwab, the United States
 trade representative, appealed to advanced developing countries to make
 more concessions.


With trade ministers slated to hold informal discussions on the Doha
 development round in Davos on Saturday, both the United States and the EU
 say a breakthrough in 2008 would generate billions of dollars in
 additional trade and help shore up confidence in the global trading system.


However, a deteriorating economic climate could make it harder for
 politicians to compromise because of worries voters would have about their
 jobs.


"With turmoil in the economy and a slowdown  - and we expect there to
 be some growth but we know it won't be so fast  -  it makes negotiating
 a trade-liberalizing agreement and implementing a trade-liberalizing
 agreement that much more important," Schwab said during an interview
 here. "But circumstances also carry some risk in terms of the potential for
 calls for retrenchment and economic isolationism."


Schwab  said that President George W. Bush strongly supports completing
 the round in 2008.


In addition to increasing trade, a deal in 2008 would make "an
 important statement about the health and prospects of the global economy" and
 would have a "psychological impact that you couldn't measure," Schwab
 said.


There was a strikingly similar message from the the European trade
 commissioner, Peter Mandelson, as he arrived here Thursday. "The Doha round
 is not a panacea to the immediate issues facing the global economy,
 but a breakthrough this year would be a timely injection of confidence as
 well as sending a political sign on of commitment to the WTO and its
 system of international trade," Mandelson said. "It would demonstrate
 our collective ability to manage the global system in the interests of
 all. Equally, failure would remove a much needed insurance policy against
 creeping protectionism and isolationism in the global economy."


The talks, which started in 2001, are designed to help increase trade
 and develop the economies of poorer countries but have failed to gather
 momentum with negotiators, who have missed a succession of deadlines
 set for striking a deal.


The United States is under pressure to reduce subsidies on agriculture
 and the EU to cut tariffs on farm products.


But with important negotiating texts due to emerge from the World Trade
 Organization within the next two weeks, the United States and the EU
 are joining forces in seeking to increase pressure on emerging economies
 to compromise over industrial tariffs.


"The U.S. and the EU have not resolved all our differences over Doha,"
 Schwab said, "but I think both of us realize how critically important
 Doha is. If an agreement were to start coming together, we are pretty
 sure we can bridge our differences.


"The key rests with all of us but most particularly with advanced
 developing countries and whether they are prepared to make contributions to
 the round commensurate with their level of development and growth," she
 added.


One European official made the same argument while speaking on
 condition of anonymity, but Mandelson has not gone so far in public.


Schwab dismissed widespread worries that the U.S. presidential
 elections complicated the prospects of reaching a deal in 2008. Using this as a
 reason not to engage seriously in the negotiations would be "a
 convenient excuse," she said.


It remains far from clear whether developing countries share the new
 mood of urgency over the need for a deal, or whether they are willing to
 move even if they do.


The Indian trade minister, Kamal Nath, speaking in Davos, said  his
 country was probably less vulnerable to an economic downturn in the United
 States than other big nations. "No economy can totally decouple itself
 from the U.S,"  he said. "The question is: What is the impact? The
 economic impact in the West, I don't think, is matched by the economic
 impact in the East. China is dependent on the export market more than
 India."


Asked at a panel discussion whether there was a prospect of a deal this
 year, Nath was positive but noncommittal. "We have always come back to
 Davos and said 'we will do it this year.' Maybe this time we will not
 have to come back next year and say the same," said Nath.


Pascal Lamy, director general of the WTO, said that a deal was "doable
 in the next few months" and also highlighted the stabilizing benefits
 of a deal in the current circumstances. "When you are confronted by
 uncertainty and instability in the markets, one way to address this would
 be to create a more stable, transparent and certain trading system and
 the best way to achieve that would be to reach a Doha deal," Lamy said.


Despite the declarations, analysts remain skeptical. Andre Sapir,
 senior fellow at the Bruegel research institute in Brussels, said a meeting
 of heads of government might be the only forum that could give a real
 impetus to Doha and that, even if there was an agreement, it was
 difficult to see any deal being agreed by the U.S. Congress. "At these times
 there is always the risk of protectionism," he added.

This story discusses attempts currently underway by the Bush administration to enter into a bi-lateral free trade agreement with Colombia: http://news.bbc.co.uk/2/hi/americas/7207922.stm. It discusses the role of the domestic political climate in the US on the chances of the agreement's success and also demonstrates the link between trade agreements/protections and government stability in Colombia.

One topic that we did not address in our introductory sessions was the role of government in corporate governance. A Business Week article discusses the potential for the direct role that could influence trade and investment decisions made by companies: Sovereign Wealth Funds Top Davos Talks. The topic was the focus of a panel at the annual meeting of the World Economic Forum in Davos.

Large state pension funds (e.g., NY and CA) have exercised some muscle with respect to their holdings, what impact could these national funds, with their estimated $3 trillion, have? You can find out some basics in the IMF magazine Finance & Development or at the Economist.