Washington Insider -- Monday

End of Multilateral Trade Deals

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Congressional Leaders Again Plan Last-Minute Strategy to Avert Government Shutdown

Having failed during the first seven months of the year to come to grips with their constitutional responsibility to appropriate funds for the federal government, congressional leaders now say that they will devise a strategy in September to prevent yet another government shutdown. Senate Majority Leader Mitch McConnell, R-Ky., last week told reporters that he has no plans to take up President Obama's invitation to start negotiations on a budget deal that could remove the threat of budget sequestration and instead will wait until lawmakers return Sept. 8 to determine how to provide for government spending when current funding runs out Sept. 30.

"We're not talking about negotiation today," McConnell told reporters. "When we come back after August we'll discuss the way forward on getting the government funded."

Many Capitol Hill watchers believe that those discussions should have begun last January and been concluded by now. But since they haven't, the expectation is that Congress once again will be required to pass at least one –– and more likely a number of –– short-term stop-gap spending measures to avoid a government shutdown when the 2016 fiscal year begins Oct. 1.

Some Republican members of Congress currently appear willing to shut large portions of the federal government unless they get their way on several controversial issues. However, another GOP-led government shutdown would not give the party much of a boost in the November 2016 elections and therefore will be avoided.


Sugar Users Urge Higher Level of U.S. Imports

U.S. food manufacturers that have long sought access to greater quantities of lower-cost sugar are calling on U.S. trade negotiators to listen carefully to the urging of several Trans-Pacific Partnership (TTP) nations to allow more sugar to be imported into the U.S. market.

In a letter to U.S. Trade Representative Michael Froman, the Sweetener Users Association urges U.S. negotiators to "grant Australia commercially meaningful access for sugar, in the same way that American negotiators are –– properly –– insisting that other TPP countries give market access for our exports." Froman and the trade ministers from the other 11 TPP nations attended a four-day negotiating session in Hawaii last week.

Sugar-producing countries such as Australia want the United States to increase the amount of sugar that can be imported at a relatively low tariff rate. Froman previously indicated some support for Australia’s request, but also said any such additional market access would not and could not disrupt the operation of the U.S. sugar program. Just how the United States will achieve that delicate balance may be revealed in coming days, along with other details of last week's TPP discussions.


Washington Insider: End of Multilateral Trade Deals

Trade is inherently complicated, requiring expertise in widely separated markets including the mysterious currency and transportation markets and many others. So, identifying some kind of “defining moment” in global trade approaches is almost incomprehensively complex. Nevertheless, changes in trade negotiations are well underway and may mean that the multilateral deals of the past that helped organize international economic relations during the post-World War II era no longer can be achieved.

As a result, trade negotiators in Geneva are taking increased interest in piecemeal, sectoral trade deals among smaller groups of willing parties. With less than five months until the WTO's biennial ministerial conference in Nairobi, Kenya, many trade observers say they doubt the World Trade Organization’s ability to liberalize multilateral trade rules as proposed by the 2001 Doha Development Agenda.

This is leading some trade observers in the United States and Geneva to argue in the press that it is time to end the Doha round — which has been stalled for years over disagreements on both agricultural and non-agriculture market access issues. They propose pursuing more limited trade deals that would be easier to negotiate.

Trade policy wonks, like wonks everywhere, tend to invent new languages where they can, and one term gaining popularity now is “plurilateral” — smaller, more modest efforts focusing on areas of deeper agreement that could fill part of the void created by the Doha impasse. These also are seen as playing a much stronger role if key negotiators withdraw entirely from the Doha Round.

In July, a group of more than 50 WTO members agreed to expand and update a plurilateral accord that eliminates tariffs on an array of technology products and applies them on a most-favored-nation basis to all 161 WTO members. The economic result of the proposed deal is valued at $1.3 trillion in global trade — as much as annual global trade in iron, steel, textiles and clothing combined.

The trend toward plurilateralism reflects something of a fallback effort by the United States and others to increase market access and harmonize trade rules through mega-regional free trade agreements like the proposed Trans-Pacific Partnership and smaller deals. "These plurilaterals and agreements that don't require unanimous consent will be the wave of the future," Jake Colvin, vice president for global trade issues at the National Foreign Trade Council told the press. Though trade negotiators in Geneva readily agree that multilateral efforts are more powerful and thus preferable to any sort of plurilateral deals, they also are harder to hammer out.

One obvious problem is that when unanimity is required, one or a small handful of the WTO's 161 members can block consensus on multilateral trade deals, WTO spokesman Keith Rockwell told the press recently.

In fact, there is a long precedent for plurilateral trade deals in Geneva and language in the broader WTO agreement that defines how members can engage in plurilateral deals. These types of accords impose trade obligations upon participating members but not on the non-participating members. Participants are subject to the WTO's dispute settlement system.

Still, the emergence of plurilateral trade deals has a significant downside for some of the WTO's poorest and least developed countries, experts say. Even though these agreements are open to new members to join and even though they are offered on a most-favored nation basis, they fall short of the objective of the multilateral agenda, Rockwell notes.

So, the global economy faces the problem of relying increasingly on narrowed trade negotiations with the likely result that well-dug in protections will be more difficult to track down and eliminate. One likely reason is the predictable slip toward protection during the recent global recession. But another likely is the loss of political will to lead efforts toward better market access by the United States — in spite of the importance of global markets to U.S. producers.

These shifts in global trade policy are difficult to define and assess, but have enormous importance for major markets. Even narrowed talks face increased tensions now, and have become a renewed test of U.S. leadership, a very important development for U.S. producers and one that should be watched carefully as it emerges, Washington Insider believes.

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