December 24, 2005

'Tis the season...

Please accept with no obligation, implied or implicit my best wishes for a socially responsible, gender neutral, celebration of the winter solstice holiday, practised within the most enjoyable traditions of the religious persuasion of your choice, or secular practices of your choice, with respect for the religious/secular persuasions and/or traditions of others, or their choice not to practice religious or secular traditions at all, together with a fiscally successful, personally fulfilling, and medically uncomplicated recognition of the onset of the generally accepted calendar year 2006, without prejudice for the calendars of choice of the rich tapestry of pre-columbine and extraeuropean cultures.

December 23, 2005

Chacon: Hard at work going soft on crime

Venezuela is one of the most violent countries on earth. Averaging 43 murders every single day, street crime in Venezuela can fairly be said to be totally out of control. The government, alas, doesn't seem to have noticed. Its response to the epidemic of violence has been silence.

Yesterday, finally, Interior Minister Jesse Chacon touched on the issue. His plan? To turn Venezuelan jails into "penitentiary communities" where prisoners can meet their families and work in a "humanized environment."

Now, I'm not generally given to right-wing tirades about coddling criminals, and given Venezuelan jails' tragic human rights record, any move to improve conditions should be welcomed. Nevertheless, Chacon's priorities strike me as bizarrely misplaced. In the midsts of the grinding daily bloodbath that grips the country, the interior minister's big new policy idea is to make jails nicer!

[shameless political aside: when will the opposition start to make political capital out of the government's utter lack of concern for people's safety?]

December 22, 2005

Top 10 reasons why there's no coffee in Venezuela's supermarkets

10. There's no coffee in Cuban supermarkets, either.
9. Chávez drank it all waiting for Evo Morales' election results.
8. They are smuggling it to Colombia and Brazil, where the lack of good coffee is noteworthy.
7. There's a lot of good coffee stuck in La Guaira, they just can't get it over the damn Viaducto.
6. Drinking coffee became imperialistic since we found out Starbucks is not an endogenous cooperative.
5. There's tons of coffee for you - if you didn't sign.
4. It's stored in a mythical chavista place where they store Venezuelan passports, the evidence in the Anderson murder and bi-directional super-spying DirectTV boxes.
3. There's plenty of good coffee in all Venezuelan stores. This is another media conspiracy.
2. It's being given away to the poor people of the Bronx to keep warm this winter.

and the #1 reason there's no coffee in Venezuelan supermarkets is of course...

1. It's a CIA conspiracy!

PS.- Of course, we all know the real reason is that the government, in a brilliant stroke of Soviet wisdom, increased the controlled price paid to growers and forbade the increase in the controlled price earned by manufacturers. Ergo, there is scarcity, as any first-year economics student could have predicted.

Even a broken clock tells the time twice a day

Most chavistas accuse us in the opposition of being rabid lunatics who only see their own side of the story, or something along those lines. So, in the interest of impartiality, and in accordance with the spirit of togetherness that we should embrace during the holiday season, I translate the following note from El Universal.

"On the last working day of the year, the court in charge of the murder of Ms. Maritza Ron has convicted
Yohon Carlos Jiménez Esalas, Henry José Parra Linero and Pedro Celestino Ramos Poche, aka 'the Altamira shooters', to 11 years of prison.

These three men opened fire against a group of demonstrators congregated in Altamira Square a few hours after the Presidential Recall election, to protest against the fraud denounced by leaders of the Democratic Coordinator.

The shooting resulted in the death of Ms Ron, 61,
and in the injuries of José Miguel Acheta, Elio Acevedo, Luisa Amelia Marcano, Hilda Mendoza, Jairo Martínez, Emilio Hernández, Nancy Castro and Ernesto Alvarenga.

The General Prosecutor's office, thanks to Prosecutors Alejandro Castillo and Yoneiba Parra, charges Parra Linero with intentional homicide with corresponding complicity, causing serious and minor injuries and illegal posession of a handgun. Jiménez and Ramos were charged with illegal posession of a handgun and public intimidation." (end of quote)

Now, I don't know where the "locked-up cat" is in all of this, and by no means does this change the overwhelming opinion from this side of the tracks regarding the incompetence and partiality of the Prosecutor General's office and the justice system in general. And I don't even want to comment on the fact that shooting at demonstrators and killing and injuring people only gets you 11 years in prison, which will probably end up being 6 thanks to parole, breaks for "good behavior" and other nonsense. However, credit where credit is due: if this is indeed the case and these guys are going to jail, then justice has been served in a higher measure than most of us expected. So there you go Isaías, Merry Christmas.

December 20, 2005

Taking Stock of Hong Kong

Well, I'm on my way back to Europe now, and I thought I'd write one last WTO post to bring together some of my thoughts about the week. I guess it's the first time I ever blog from a plane - brace yourselves, folks: I have a 13 hour flight ahead of me, so this one is going to be loooooong...

Yesterday's agreement left a lot of people feeling like the ministerial was a big waste of time. The Economist called it "little more than an expensive experiment in sleep deprivation." Even Pascal Lamy, the WTO Director General, accepted how modest progress has been: coming into Hong Kong, he said, the WTO had completed 55% of the work on the Doha Round, and after last week, "it's up to 60%." (Never mind that just two months ago Hong Kong was being billed as the meeting that would settle 99% of the round.)

In the end, Hong Kongers saw traffic go all haywire for an entire week and big chunks of their city trashed by protesters for the sake of a deal that only highlights its own shortcomings.

While the deal itself may be more like a symptom than a cure, it's also true that, diplomatically, all the big players walked away with at least some of what they wanted...

Pascal Lamy got what he wanted: even though the organization can't actually agree on any fundamental issues, the headline from the ministerial was still "WTO reaches agreement." This is important: the WTO's viability as an international organization was very much in the spotlight in Hong Kong, and the pressure to agree on something was immense. Lamy couldn't afford another spectacle like the one they had in Cancun, with incandescently pissed-off LDC ministers walking out left and right. To his credit, Lamy did not try to force a consensus on the developing countries - the tactic that created so much bad blood in Cancun - and instead let the delegations themselves build up an agreement. As a result, though the Doha Round is surely still on life support, it's not quite dead.

Brazil got what it wanted: the long-standing dream of consolidating a no-bullshit developing country block at the WTO - preferably under Brazilian leadership - was finally realized. In fact, the Brazilians did even better than that: they managed to rope in some developed countries - Canada, Australia and New Zealand - into their sprawling, 110-country coalition as well. Though it has a smaller, less dynamic, and slower-growing economy than India, Brazil managed to appoint itself tacit boss of a negotiating block that accounts for 80% of the world's population spread over five continents, from Vanuatu to Cameroon to Indonesia to Mexico to Uzbekistan. Amazingly, though they have very very different interests, the group held together. However crappy the ultimate deal, the summit was a very significant victory for Lula's diplomacy.

The West African Cotton Producers got what they wanted: a deal to end US export subsidies next year, and, in principle, for the US to cut domestic cotton subsidies faster than it cuts other agricultural subsidies (once such cuts are agreed - supposedly by the end of April.) The deal is incomplete - the language on cutting domestic cotton subsidies is vague and non-committal - but still, for four of the weakest, poorest, least powerful countries on earth to wrangle any concessions at all out of the Americans at a WTO negotiation is totally unprecedented - and, again, a testament to the value of Brazilian diplomacy, which put the 110-member developing country group squarely behind the West Africans' demands.

Alas, the EU also got what it wanted: permission to keep screwing African farmers for another seven years. Disgusting though I find it, I have to chalk it up as a success for them. The EU showed conclusively that intransigence and brinksmanship pay off in these negotiations. By holding out until the very, very last minute, they got a deal on agricultural export subsidies so weak it's hard to know what it even means.

It's not just that they extended the use of export subsidies for another seven long years, oh no. Though it hasn't gotten much press, it's also that the EU's commitment to end agricultural export subsidies is conditional - they'll only deliver if the US reforms its food aid program (which the EU sees as a disguised export subsidy) and Australia, Canada and New Zealand end their state marketing monopolies (e.g. the Canadian Wheat Board.) So it's more than the glacial pace of the phase-out, it's that they left the door open to come back and say "no fair! the US didn't reform its food aid enough, we're going back on the deal!" Ugh!

Finally, the US got what it wanted: positioning itself as the "honest partner" for the developing countries that the Europeans will not be: the kinder, gentler economic power at the WTO. The contrast between Portman's relative flexibility and the utter rigidity in Mandelson's position was impossible to miss. And the softly-softly approach got the US some negotiating outcomes they may not otherwise have achieved.

For one thing, the Hong Kong Declaration approved the "Swiss Formula" as the method for cutting industrial tariffs. It gets very technical very quickly, I realize, but the Swiss Formula is a mathematical formula designed to cut higher tariffs more than lower tariffs, leaving tariffs both lower and less dispersed than they started. (Everything you ever wanted to know about the Swiss Formula but were afraid to ask is here.) The Swiss Formula has always been the US's preferred tariff-cutting method (though, in one of those bizarre little WTO asides, it turns out Switzerland doesn't like it!) The detail that the devil is in still has to be worked out, but the Swiss Formula is generally seen as a very aggressive tariff-cutting mechanism.

A lot of people in the lefty-NGO community are horrified about this - and there's no question that, if implemented aggressively, Swiss Formula tariff cuts can be brutal. Personally, I'm holding out to see the details. Whether this is good or bad for development depends on how many coefficients they agree to, and the actual coefficients they decide on. Since the coefficients were the really hairy part of the negotiation, they obviously couldn't agree on them.

I'll say one thing, though. For a long time, one of the major complaints of the antiglobalization crowd about the WTO has been "peak tariffs" and "tariff escalation." Peak tariffs are very high tariff lines applied to just a few selected products - like rice in Japan, which faces a 200% tariff, even though the average tariff in Japan is under 3%. Tariff escalation is the practice of applying higher tariffs to processed products than to raw materials. The classic example of this is cashew nuts produced in Mozambique: if you apply a tariff of 1% on raw cashews but a 30% tariff on roasted cashews, you obviously build in an incentive for Mozambique to export the raw nuts, rather than to roast them in Mozambique. That's bad news for Mozambique's cashew-roasters, and for poor countries' efforts to industrialize in general.

My point here is that the Swiss Formula is the best way to address both of these problems. Its whole point is to lessen the dispersion of final tariff rates. The Swiss Formula makes peak tariffs impossible and tariff escalation ineffective. Since developed countries will likely have to cut tariffs more aggressively than developing countries, there's at least a chance that the agreement will be development friendly. It all depends on the actual coefficients they settle on, and there's a very big fight looming over those in the months ahead. But personally I don't see how these Oxfam types can spend 10 years railing against peak tariffs and tariff escalation and then turn right around and slam the one proposal guaranteed to do away with them.

The other major point where the US got what it wanted was in the so-called "Development Package" - the proposal to give the 32 poorest countries unrestricted access to rich country markets. During the negotiation, the least developed countries kept pushing for the deal to be made permanent, legally binding and to apply to all products coming from all least developed countries. On this issue, if on nothing else, the EU sided with the poor countries. But the US and Japan resisted it for two reasons: textiles and rice.

For the US, the big problem was with Bangladeshi textiles. Though classified as a Least Developed Country for WTO purposes, Bangladesh has become very, very competitive in the textile sector, and the US feared that an uncontrolled import surge from Bangladesh would put US clothes producers out of business. At one point, the US actually argued that, in the textile sector, Bangladesh is a developed country! (The Bangladeshi journalist who told me this tidbit couldn't control the sarcasm: "thank goodness that these Americans let us know about that: all those years I thought I was living in a really poor country and it turns out we were textile-developed all along!") Japan had similar concerns about Cambodian rice.

In the end, Japan and the US got their way: the final deal will give the poorest countries quota free/tariff free access to 97% of rich country markets, allowing rich countries to exempt 3% of their tariff lines. Moreover, the deal is described not as "binding" - meaning mandatory under international law - but as "lasting" - which is a legally meaningless word.

Still, that's something you might read about in the newspaper and think "dang...lasting agreement...97%...that's pretty good!" But, of course, LDC exports are concentrated in very few tariff lines. As the International Center for Trade and Sustainable Development - my favorite think-tank for WTO issues - points out:
This 3 percent reservation would account for some 330 tariff lines, according to Debapriya Bhattacharya, head of the Dhaka-based think tank, Centre for Policy Dialogue. "Given [LDCs'] undiversified export basket, 3 percent of tariff lines may essentially deprive them of market access for all of their products." He noted that 20-25 tariff lines account for some two-thirds of Bangladesh's total exports.

In other words, it's a big, big loophole. It brings to mind the quip from Deepak Patel, the Zambian trade minister who headed the G90 group of African, Caribbean and Pacific countries: "come on, folks, it doesn't do us any good at all to get tariff free market access for products we don't produce...a plan to give us tariff free access to the rich countries' supercomputer market is not very useful to us!"

There's just one thing to say about this aspect of the deal: it stinks. In fact, what they're doing is a long-standing gripe of poor country negotiators, and well-justified at that: "Developed countries keep telling us the WTO is good for us because it will allow us to trade our way out of poverty," they say, "ok, very good. So we start trading...but then, as soon as we start getting good at it, as soon as we find a market where we can really compete and export a lot, they freak out and start putting in loopholes to close those markets!" It's easy to see why Bangladesh feels it's being taken for a ride here.

Actually, as I think of it, the one country that seems to have gotten unambiguously screwed in Hong Kong is Bangladesh...

The big question, though, is whether the deal "preserves the development content" of the Doha Development Round. As you'll have gathered, I think it's too early to tell. That's a question I won't be able to answer until there's a final deal on the table. Certainly, there are some positive aspects. On all the main areas of negotiation, rich countries will have to make stronger commitments than poor countries. Though the cotton deal is limited and the "development package" could be better, they do represent progress.

Probably my biggest gripe about the Doha Round is that the agenda is all wrong. If developing countries wanted to undo some of the damage from the last round, they should've insisted that the TRIPs and TRIMs agreement be retrospectively weakened: those agreements really do place obstacles in the way of development strategies. They block some supply-side policies (like local content requirements, technology transfer provisions, and reverse engineering) that have helped most now-rich countries get rich. But TRIMs is off the agenda, and only very limited parts of TRIPs are being reviewed. On the other hand, the agenda could be worse: in Cancun the EU wanted to bring Investment and Government Procurement into the agenda - issues that would not have played in favor of developing countries. The meeting collapsed and the EU eventually gave up on that.

So, is this still a development round? In the end, I trust Celso Amorim and Kamal Nath more than I trust Oxfam or Action Aid. Developing country negotiators still seem to think that there's some "development content" to the round - and while they'd obviously hoped for more, they still think it's worth going forward with the round.

I do think it's awfully patronizing of the first world lefty NGOs to try to tell us they know what's in the poor countries' interests better than the poor countries' own ministers. It's true that the round will not produce some kind of dramatic sea-change in the trade regime, but then, it was never likely to. Developing country trade negotiators understood this, which is why they're cautiously welcoming the accord. Utopian by nature, campaigners were always bound to be disappointed by the grinding reality of a trade round.

So the negotiations will have to go ahead at WTO headquarters in Geneva over the next four months. Very obviously some significant compromises are needed to bridge the very wide gaps that remain between the various positions. Lamy acknowledged as much on Sunday, echoing something the Brazilians have been saying for months: trade ministers alone will not be able to save the Doha Round, heads of government will have to get involved. It's going to take a tete-a-tete between Bush, Chirac, Blair, Merkel, Lula and Manmohan Singh to bridge some of these gaps. In particular, the Europeans will need to face up to the fact that they can stonewall their way to a deal like the Hong Kong declaration, but that kind of tactic will not yield an overall agreement. In the big scheme of things they can have the Common Agricultural Policy as it currently stands or they can have a new Multilateral Trade Agreement...but they can't have both.

Well, if you've read this far - congratulations! You're procrastinating way more than usual|! Heh. OK. This time I really really really promise to stop ranting about the WTO.

December 18, 2005

WTO Conference Ends in Non-Failure!

Well I'll be danged...they reached a...erm...a deal?...ummm...well, they reached a something in Hong Kong after all!

I don't want to glorify this thing they're about to sign with the word "agreement" because it really isn't everyone expected, the final declaration is 90% hole, 10% cheese. That 10% breaks down into three parts: an agonisingly unambitious compromise on an end date to agricultural export subsidies (2013 - the EU got an eight year stay of execution for those monstruosities), a deal on tariff-free market access for least developed countries (which itself contains very big loopholes,) and an agreement to end US cotton export subsidies by next year, (which the US congress may or may not agree to.)

In his first non-stupid comment this week, Mandelson quipped that the deal is "not enough to make the meeting a success, but enough to save it from failure." Now that's the stuff of stirring headlines!

As I stressed in my previous post, the issues they've agreed on make up a very, very minor portion of the WTO's overall agenda. They still don't have agreement on a formula for how to cut industrial tariffs, much less the details of how much each country would have to cut, how much more rich countries would cut than poor countries, how many exceptions each country could invoke, etc. They don't have an agreement on domestic cotton subsidies. They don't have an agreement on agricultural tariffs, or agricultural domestic subsidies, or even what should constitute a banned domestic subsidy. And the services annex they're agreeing to is more a framework for future negotiations than an actual agreement.

Today's text sets a new deadline of April 30 for the members to agree on all those issues! If they honestly think that's a realistic time frame, I want some of whatever they're smoking. If it took them six days of excruciating negotiations to reach this inconsequential nothing of a draft, it's very hard to see what could change between now and April to unblock the negotiations. Maybe trade negotiators are less grouchy in spring...

Suddenly, it's very quiet...

It's 1:15 p.m. in Hong Kong. Officially the conference has less than 4 hours to go, and ministers are still locked in confidential "green room" negotiations trying to work out a deal. It's very quiet in the press center now - nobody is talking to us, which may be a sign that negotiations finally got serious at the very-very-very-last-minute.

Early this morning the Indian Trade Minister, Kamal Nath came out to announce they had a deal, only to be contradicted by the Europeans minutes later. I guess ministers have gone from tired-and-cranky to exhausted-and-delirious.

Since there's nothing to do today but sit and wait, I thought I'd share my thoughts on some of the specific matters being negotiated here.

I think it's funny how the dynamics of these negotiations seem to push ministers into spending huge amounts of effort on issues that, in the end, don't really matter that much. As some disagreements drag on, they take on a symbolic dimension entirely out of proportion with their economic importance.

Cotton is a case in point. While the issue is very important to a few very poor countries, cotton is far from a major world market. Besides the Sahel, it's not even very important to the rest of the Least Developed Countries. But cotton has become very important symbolically, on two levels. First, it's just such a stark symbol of iniquity: 50,000 coddled gringo farmers get an astonishing $4 billion dollars a year in cotton subsidies, subsidies that aren't even WTO-legal under the existing agreements, huge subsidies for a tiny constituency that create serious problems for millions of the poorest farmers in the world. Whatever its grand-scheme importance, there's just no defending the current cotton regime, and there's no chance of persuading people the WTO is fair if it continues to allow this kind of tom-foolery.

But cotton is also important in terms of the cohesiveness of the developing country block. While Brazil has an interest in cotton, most of the other G20, G90, and G33 countries do not. So cotton became a kind of test-case for the solidarity of the developing country block. Would countries without a direct-stake in the negotiation stand firm in solidarity with the West African producers, or would they quietly let the cotton dossier slide as they negotiated agreements that mattered to each of them directly? So far, they've stuck together - which sends a strong signal to the US and the EU that the developing country coalition is sturdier than it has been in the past.

Another largely symbolic issue - and the one that negotiators seem to be spending most time on - is the call to set a definite deadline to end agricultural export subsidies. The issue is symbolically important because the use of export subsidies is such a blatant violation of the whole spirit of the WTO: their entire purpose is to distort world prices, they are inherently unfair. And, indeed, export subsidies have been banned in every market EXCEPT agriculture for ten years. So their continued use in the US and the EU is a grating form of trade injustice - to the developing country block there's just no plausible excuse for continuing to use them. What's more, all WTO members have agreed, in principle, to end agricultural export subsidies. It's just that they keep dragging their feet on setting an actual date. The developing country block has turned the end-date into a point of honor.

I'll grant that agricultural export subsidies are not economically insignificant, but it's also clear that they are far from the most significant distortion in agricultural markets. Domestic subsidies - the ones that aren't explicitly linked to exports - are much bigger than export subsidies, and far more trade-distorting. What's more, depending on which study you believe, first world agricultural tariffs are either as distortionary as export and domestic subsidies put together, or they're much more distortionary than domestic and export subsidies put together. Nobody disputes that: everyone knows that export subsidies are a pretty minor piece of the agricultural distortion puzzle. But the issue has acquired this symbolic significance in the negotiation, and so it takes center stage.

But the out-of-all-proportion issue that really stands out for me is services. Here, the gap between the significance of what's being negotiated and the superheated rhetoric surrounding it is really bizarre. In particular, the lefty NGO community has decided that Service liberalization is where the neoliberal onslaught is going to come in this round, so they're going all out to oppose a deal. In fact, the text being discussed is pretty damn innocuous, but they still attack it ferociously.

The fear is that bringing WTO disciplines to services could force countries to privatize essential services like public utilities, schools, hospitals, that sort of thing. But there is no element of compulsion in the text. All the EU was asking for was that countries commit themselves to negotiate bilaterally or in groups if another country (or group) expressed an interest in accessing one of their service markets. There was no "benchmarking" in the proposal, no requirement that countries liberalize a given number of markets, in fact, no requirement that they liberalize anything at all. Just a requirement that they negotiate.

This, if you listen to ATTAC, is the end of the world. The thin end of the wedge. Poor countries forced into negotiations would not be able to withstand the pressure to liberalize. Neoliberalism gone wild. Frankly, I find that attitude pretty patronizing: if there's one thing developing countries have shown in Hong Kong is that they can and will stand up for their interests in tough negotiations with developed countries. Getting your panties all up in a bunch over "compulsion" when all you're being compelled to do is negotiate seems like overkill to me. But, again, the service negotiation has a symbolic dimension that blows its importance out of proportion.

However, enough G90 (Africa, the Caribbean, and the Pacific Island States) members were concerned about this to take a tough negotiating stance that managed to get the "shall" changed to a "should" - developing countries, in the current draft, would not be compelled to negotiate if they don't want to. That seems to have been enough to mollify most of the G90 countries' concerns...which leaves Venezuela alone in taking a hard stance against the services agreement. But then, I guess it's not surprising Venezuela would take its lead from the PSF left in these negotiations.

I guess the reason these issues end up looming so large is "outrage displacement." Agreeing on agriculture broadly is very hard; agreeing on cotton and export subsidies narrowly seems much more doable. Given the mood of despair over the difficulties involved in the broader negotiations, countries tend to focus on "deliverables" - specific issues where agreement seems more likely. But the negotiating energy lavished on these deliverables gives them a symbolic dimension, and pretty soon negotiators start talking about them as though they were fundamentally important.

They're not, but in the Cabin Fever atmosphere of a ministerial it's easy to lose sight of that.

December 17, 2005

Point taken

Maybe the French Agriculture minister had a point after all. Chuck Grassley, the powerful head of the US Senate's Agriculture Committee, has just said the US Congress is unlikely to approve the deal being hammered out in Hong Kong. After 48 hours of intensive, sleep-deprived negotiating, his comments did not go down well here.

Credit where it's due: a lot of European delegates (off the record) and lefty NGOs (on the record) here have been questioning US Trade Representative Rob Portman's ability to deliver the kind of deal he's been promising, noting that he seems to have been going well beyond his Fast-Track negotiating mandate and making promises to the developing world the US congress would never agree to.

It's a slightly bizarre argument, however, because the draft Grassley is pledging to kill in Congress is not likely to even be signed here. Peter Mandelson - Hong Kong's Dr. No - spent the night taking shots at it, and taking the EU's isolation here from "near-total" to total.

If nothing else, this week has made me incredibly cynical about the EU. These bastards spin with such brazen disregard for the truth, it's staggering. A lot of their statements are just near-Orwelian reversals of what happened - Eurasia has always been at war with Eastasia and the meeting is failing due to developing country intransigence. Right.

If the Euro chingo doesn't get us, the US congressional sin-nariz will. Meanwhile, Portman keeps making concessions. One interpretation is that he is so confident the EU won't sign anything like what they're talking about, he feels emboldened to make "concessions for free" - knowing he won't really have to take them to congress. Hey, why should the US share the bad-guy spotlight when the EU is willing to hog it all to itself?

Beyond all the tactical posturing, the big losers from all of this will be West Africa's cotton producers. A group including Burkina Faso, Mali, Chad, and Niger - really the poorest of the poor countries on earth - came excruciatingly close to reaching a hard fought for agreement with the US on cotton subsidies. To these countries Cotton is a bit like oil is to Venezuela - 70% of their export earnings, basically their only export commodity. Their producers' inability to compete with subsidized US producers had become a kind of symbol of the iniquities in the trade regime: millions and millions of desperately poor Africans shut out of world markets by the US determination to keep paying subsidies for 50,000 gringos to farm cotton. This week, Brazil, India and the G110 went to bat for the West African cotton producing countries, pressuring the US as a block to make cuts in cotton subsidies faster than cuts in any other sector.

They were just about there...the US had just about conceded the point...they were so, so close. But no cigar, cuz the EU won't sign.

Fussing over ag subsidies...

Confused about what the big WTO fight over agriculture is all about? Pietra Rivoli writes a lucid little summary of the main issue and the way it's gotten distorted in negotiations. She exaggerates when she says the talks have become "single issue", but other than that her exposition is flawless...

December 16, 2005

Mandelson's Straightjacket

[Sorry to stay stuck on the Hong Kong thing, everyone, but I thought it was time to demonstrate I can be obsessed with more than one thing at a time!]

It's day four of the Hong Kong WTO Ministerial and the conference has officially entered the tired-and-cranky stage. Hey, it's not me saying it, that's how the Deputy US Trade Representative put it at her press conference today. In her view, you need to get to this point before people start negotiating in earnest. If so, we're primed for some earnest negotiatin', cuz tired-and-cranky fits the atmosphere here to a T.

Fact is, nobody is really expecting a breakthrough here today. It's now painfully clear that the EU is just not going to improve its offer, and its offer is very far from acceptable to the developing country block. It's not that Peter Mandelson, the EU Trade Commissioner, doesn't want to sweeten the deal, it's that he can't: the whole institutional structure of the European Union conspires against it.

See, unlike all the other negotiators here, his crankiness Peter Mandelson is not a minister. He's more like a gofer for the 25 EU trade ministers, who are the ones who ultimately get to set EU trade policy. The ministers meet, they set out a harmonized EU negotiating mandate, and they hand it to him. The EU mandate itself is the outcome of a long, difficult, involved negotiation between 25 very different countries with very different interests. By the time the 25 have worked out a common position, there's basically no wiggle room left. Mandelson can't change even the details of the EU's offer without upsetting the delicate balance embodied in the mandate: take out one comma here and the French throw a fit, switch a "shall" to a "should" there and the Hungarians go ballistic.

So there's a strange imbalance between the way the EU "negotiates" at a WTO ministerial and the way everyone else does. When the Australians and the Americans sit down to discuss State Trading Enterprises, for instance, both sides have leeway to explore creative solutions to their disagreement. They can haggle, they can give and take, they can explore different possibilities. But the EU can't do any of that. When Mandelson walks into the negotiating room, all he's really allowed to do is restate his mandate. Which is why I put "negotiate" in scare-quotes above: the EU doesn't really negotiate at all at these things. It reiterates. Often at great length, and with some top grade spin, granted, but its underlying position never changes. As I'm sure you can imagine, this is incredibly frustrating for all the other delegations.

Certainly, things have come to a head when the Financial Times, the FT ferchrissake, is running stories about the EU facing "near-total isolation" in the talks.

At one of the press conferences today, one journo who'd obviously reached the tired-and-cranky stage asked the French trade minister what the point is of even having ministerials if the EU can't and won't change its offer. The guy answered, a bit lamely in my view, that at least the other countries know that it's a credible offer since it's been pre-approved by all the EU member governments, whereas anything the US offers could still get shot down when it goes up for congressional approval in Washington. Perhaps. But it remains hypothetical because, as long as the EU remains lost in its own private bureaucratic laberynth, there won't be a trade agreement for the US congress to vote on.

Venezuela electoral results watch, Day 12 or how I stopped worrying and learned to love the CNE.

Venezuela has no final electoral results so far. This, despite the fact that the Venezuelan Ministry of Electoral Affairs, which is controled directly by the Vice-President's office, touts the Venezuelan Electoral system as being the safest, most transparent, fastest and fairest of them all worldwide. This, despite the fact that the Venezuelan M.E.A. (the artist formerly known as CNE) spent Millions of dollars on machines the SENIAT (another one of the new weapons of mass coercion the government has put in use against who oppose it) deemed too unsafe to be used as lottery terminals. This, despite the fact that by Sunday Dec. 4th at night the M.E.A. had supposedly tallied 75% of the vote. This, despite the fact that only one faction was disputing seats in the Assembly. This, despite the fact that the first round of Chilean elections had tallied a national final result by the evening of the very same day the election took place.

The Minister of Electoral Affairs, the Spa-loving, massage-receiving, objective-criticism-only-accepting 'straight arrow' Dr. Jorge Rodríguez, has made miryad public appearances these days. He has even given press conferences where he has attacked the EU/OAS observator mission report as biased, and has left possibilities open to accept "objective" criticism. He has yet to give final, final numbers.

Celso Amorim's Ministerial

Brazilian foreign minister Celso Amorim is having the time of his life this week. After a quarter century of grandiose but empty declarations of developing country unity on trade issues, Hong Kong has finally sealed the deal. Amorim is acting as the de facto leader of the Brazil-India alliance, which is at the heart of the G20 group of developing nations, which has roped in the G33 and G90 groups of developing nations and includes 110 countries and 80% of the world population. India and Brazil have been deliberate about working out common negotiating positions with the other developing country groups, and they seem to have overcome the poorest countries' initial reticence in this regard.

The outcome of all this coordinating is that for the first time the developing countries really are negotiating as a block...and Amorim is at the center of it all. More and more, he speaks not for Brazil but for the whole of the developing world here. And, having gotten control the agenda, Amorim is driving one hard bargain. He's not giving an inch to the EU, and he has outflanked the EU so comprehensibly in the PR war surrounding the negotiations that when the meeting fails, it'll be the Europeans who take the fall. Honestly, I think it's marvelous...

Again, the outcome of this will not be a development-friendly agreement, at least not immediately. There's no chance for "full negotiating modalities" to be agreed here and there may not even be any agreement at all. The difference this time around is that the EU is going to take the blame, not the developing countries. It's never happened before, and it sets up a very different atmosphere for the rest of the Doha Round. The developing countries will keep the initiative while Europe take a defensive position, making increasingly unconvincing excuses for blocking progress. Given that that the ministerial was never really likely to succeed in producing a complete outline agreement, this is the best outcome the developing world could have hoped for. And Amorim deserves a lot of the credit for that.

December 15, 2005

The WTO Turned on its Head

It's day 3 in Hong Kong and I have to say this conference is full of surprises. Figuring I'd been spending enough time with third world types, I decided to go to the International Manufacturers' Association press conference. I walk into the room and realize I am the only "journalist" who's turned up. So I sit down and there they all are, the heads of every major employers' federation in Europe and North America, lined up in front of me. Undeterred, the chairman launches straight into the "press conference" except, well, there are about 20 of them and only one of me. So I get to ask all the questions, these guys just take turns answering.

It was totally bizarre, really: a press conference in reverse. Still - and even though I was totally unprepared to be put on the spot like that - it's not a chance you pass up. So I started asking questions. And let me tell you, I got a lot of frustration in response.

See, these guys came to Hong Kong to talk about industrial tariffs, about service liberalization, about the stuff giant multinationals care about. But nobody's talking about that. All the negotiations are focused on agriculture. The big employers' federations are totally sidelined, and seemingly at a loss as to how to get a handle on the agenda again. It's definitely not a good sign when they call a press conference and the only news organization that turns up is VenEconomy.

It's symptomatic, though: what we're seeing is the WTO turned on its head. All the old cliches about the WTO as multinational conspiracy look more and more out of touch. When I started researching this stuff, one of my professors told me that 90% of the trick to multilateral negotiations is taking control of the agenda. The multinationals used to have it, but they lost it, and they seem totally bewildered about what went wrong. In Hong Kong, the big developing countries have taken hold of the agenda and they're just not going to let go. It's fascinating.

The big story of the day is definitely the increasing isolation of the EU, though. More and more the US position on agriculture sounds like the developing countries' position. You can see this in the language negotiators are using when they talk to the press: Brazil and India have been describing agriculture as the "key that could unlock the negotiations" and, this morning, US Trade Representative Rob Portman used exactly that phrase. Brazil and India insist that the first priority is establishing 2010 as a definite deadline for eliminating all agricultural export subsidies. Portman agrees emphatically.

The Europeans, meanwhile, keep insisting on "balance" between agriculture and other issues, and they keep dithering on a deadline on agricultural export subsidies. Thing is, nobody's biting.

All of this is unprecedented. Never had developing countries taken the lead in a WTO ministerial like they're doing this week. Never had the big developed countries looked as divided as they do now. And, certainly, never had we seen the US take sides - in general terms, if not on the details - with the developing countries rather than with Europe.

At the same time, India and Brazil are very much aware that many developing countries - and especially the least developed countries - are worried they'll get sold out. In 2004, the US and the EU clearly tried to engineer an agreement that took on India and Brazil's concerns, but nobody else's. India and Brazil are not playing along this week. India's trade minister, Kamal Nath, is spending a lot of time coordinating with the other developing countries to make sure they present a unified position. The LDC delegates I've spoken to seem, if not exactly comfortable, at least reasonably reassured that India and Brazil are not going to cut a deal without consulting them first.

In the end, it doesn't really change anything, because the EU is totally entrenched in its stance and it's not going to budge without big concessions. So nobody really expects a deal on full negotiating modalities to come out of this, which was supposed to be the point. What's clear, though, is that when it's all said and done the EU is going to have to take the fall for the failure of the talks.

Which is why Celso Amorim, the Brazilian foreign minister, is one happy camper in Hong Kong. The Europeans thought they could divide the developing country block, picking them off with selective concessions. A lot of LDCs see their offers on "aid for trade" in just that light. It's emphatically not working. If nothing else, Hong Kong is decisively consolidating the joint Indian-Brazilian leadership of the developing country block.

Is there anything he can't do?

In his spare time from trying to save the World Trade Regime, WTO Director General Pascal Lamy is blogging the Ministerial...

Beginners' Guide to WTOese: "A Balanced Agreement"

I think a big part of the reason people find the WTO so hard to understand is that trade diplomats refuse on principle to speak plain English. Now, I know every specialized organization breeds its own specialized lingo, and the more specialized it is the more convoluted it gets...but at the WTO this dynamic has gone totally haywire.

Some of it is downright oxymoronic. It takes some immersion in this absurd little world before you realize that "most favored nation" (MFN) status means exactly the opposite of what it says: you're allowed to treat a given trade partner better than MFN (by signing a free-trade agreement with that partner, for instance) but you're not allowed to treat a partner worse. So actually, your most favored nation trade partners are the ones you favor the least.

Some of it is just mystifying: I have no clue at all why they have to say "full negotiating modalities" when what they mean is "an agreement."

Other elements of WTOese are really just bureaucratic euphemisms: "sensitive products" means roughly "whatever I'm being lobbied not to liberalize." "An ambitious agreement" means "you liberalize what I want you to liberalize but I get to protect my sensitive products." "Frank discussions" seems to mean "ministers tiresomly reiterating positions they've held for years." So if you see a WTO talking head on the news saying "ministers held frank discussions on full negotiating modalities for sensitive products aimed at reaching an ambitious agreement" you can just throw your hands up in utter despair.

But the particular linguistic deformation that caught my eye today is that most slippery of WTOese formulations: "a balanced agreement."

Every single delegation here claims to be working towards "a balanced agreement." Needless to say, no two ministers mean the same thing by the phrase. For the rich countries, "a balanced agreement" means "you liberalize your manufacturing markets and we'll liberalize our agricultural markets." For developing countries it means "we already liberalized our manufacturing markets last, so now you have to liberalize your agricultural markets." They use the exact same phrase, but they mean diametrically opposed things.

The reason I think, is something I alluded to yesterday. During the last round of trade negotiations - the famous Uruguay Round that dragged on from 1986 to 1994 - developing countries made major concessions on a whole range of issues and got pathetically little in return in terms of agriculture. The rich countries considered the Uruguay Round agreements "balanced" just because, for the first time, they introduced some (weak) rules on agricultural trade. More or less all the developing countries now believe the Uruguay Round agreement was seriously unbalanced - "forced consensus" at its worst.

Now the consequences of that unbalance are being worked through the system. Call it Uruguay Overhang. From the developing countries' point of view, the whole point of the current round of negotiations is to "balance" the iniquities of the previous round. Really, what the developing world wants is not so much a "balanced agreement" as a "balancing agreement"

Initially, the rich countries implicitly agreed, officially calling the current round the "Doha Development Agenda" in recognition that Uruguay was not exactly development friendly. But in the four years since Doha, calls for a "balanced agreement" have come back with a vengeance, especially in the EU. Sure, they still talk in terms of development, but more and more they're demanding a quid-pro-quo.

India and Brazil put the developing countries' position pretty succinctly yesterday. What they say, in paraphrase, is "hey, every time we meet them, the Europeans ask us what price we're willing to pay in exchange for them to stop doing things they shouldn't be doing in the first place."

The EU is desperate to spin its way out of this bind. Every time Peter Mandelson, the EU trade commissioner, comes anywhere near a microphone he says "balance" at least once sentence. The developing countries have to balance their demands for better agricultural market access with concessions on manufacturing tariffs. The US has to balance its call for dramatic farm tariff cuts by reforming its Food Aid programs. Canada, Australia and New Zealand need to "balance" by reforming their State Agricultural Trading Enterprises.

"Balance", in this context, means roughly "what's in it for me?!" Fluffy development rhetoric aside, the EU won't seriously consider farther farm trade concessions until they've extracted their pound of flesh on other issues. Some of the US delegates I've met put it even more bluntly: "they know if the conversation is about agriculture they're screwed, they're desperate to change the subject."

The funny thing is that the US is arguably closer to the developing countries' position than to the EU on all of this. The reason is not any newfound philanthropic thrust to the Bush administration: it's just that American agribusiness is big enough and efficient enough to compete in a low-or-no tariff world. European farmers, by and large, are not. For the US, a liberal farm market is a business opportunity. For the EU, it would be a bureaucratic dust bowl.

Which, I think, is pretty interesting. Most people tend to assume that the US is the baddie at the WTO. Bush country and all that. But the reality is that if anyone looks isolated in all this it's Europe. The difference between the US and the Brazil/India proposals are mostly technical in nature - if it was up to them, they could sit down and work out a compromise in half an hour. The real, substantive gap in agriculture is between the US/Brazil/India on the one hand and the EU on the other.

December 14, 2005

Not your grandfather's WTO

Well, I know most of you don't come here looking for WTO news, but I'm in Hong Kong now so WTO news is what yer gonna get! Sorry to the ghosts for this, but this stuff is too interesting, I can't hold back.

I spent the morning hanging out with a group of Least Developed Country delegates. It didn't take long to realize the dynamics have changed dramatically for them since the last WTO Ministerial Conference in Cancun two years ago. What's remarkable is that you don't hear any more complaints about process from the LDCs. This is definitely new. In Cancun, the poorest countries were furious about the process: the Mexican organizers presented drafts for agreement at the last minute, texts negotiated behind closed doors by the big trade powers that uniformly ignored LDC concerns and bore no relation to what had been negotiating in the months before the conference. The bad blood this "forced consensus" tactic generated had a lot to do with the collapse of Cancun. India, Kenya and Brazil refused to play along and just walked out. It was a fiasco.

The contrast this time around is startling. The Bangladeshi Trade Minister spoke glowingly of the "bottom-up" approach now in place - the texts presented for agreement this week are the same ones they have been negotiating since July 2004. The question is no longer whether to substantially liberalize agriculture at all, but how much, and how fast. "Trade for aid" has received a lot of attention in the first two days - with the US, the EU and Japan all offering substantial new sums of money to help LDCs take advantage of the new market opportunities an agreement would offer.

This doesn't mean the LDCs are thrilled about the way the negotiations are going: there are still very wide differences with the rich countries on basically all the issues, and some LDCs are suspicious that the trade for aid stuff is just an attempt to buy them off. But it does mean that LDCs no longer feel railroaded into signing stuff they've barely read. This is a lot different from the situation two years ago.

One sign of the improved atmosphere is the relatively small scale of the demonstrations outside. While there have been some protests, and a couple of fairly rowdy ones, the city itself feels normal. Certainly there's been nothing like the disruptions in Cancun or the utter chaos in Seattle. As the Zambian trade minister said, a big reason for this is that, this time around, most of the pro-south NGOs are inside the negotiating hall lobbying delegates rather than outside protesting - a shift that's both substantive and symbolic.

Most of the credit for this goes to Pascal Lamy - the former EU Trade Commissioner who's now the Director General of WTO. Lamy is one smooth operator, obviously way more competent than his predecesors. The conference is teeming with NGOs big and small, north and south. A lot of LDC ministers seem to genuinely appreciate the way he's handled the issue.

Unfortunately, Lamy tiene razon pero va preso. Trouble is, as soon as you stop trying to "manufacture consensus" you're left with the uncomfortable fact that there isn't really an underlying consensus - Europe and Japan are just not willing to liberalize their agricultural market to anything like the extent developing countries want to see, and developing countries are not willing to re-edit their mistakes from the last round, when they made specific commitments to liberalize manufacturing trade before securing specific commitments on agriculture.

Cancun showed that forced consensus is just not acceptable to developing countries anymore. Lamy deserves credit for understanding that much - but that doesn't magically shift the negotiating positions closer together somehow. The paradoxical result is that at the same time that LDCs praise the new, more transparent process, there's universal gloom about the prospects of signing anything meaningful this week - and a real sense that the Doha Round as a whole could fail. The alternative to forced consensus is not genuine consensus - it's deadlock.

Lamy, the sneaky frog, is determined to avoid a repeat of the embarrassment in Cancun. Counting the mess in Seattle back in 1999, a collapse this week would be the third WTO fiasco out of the last four ministerials. There's real concern that the WTO system would not recover from yet another P.R. disaster on that scale, so Lamy's watchword is "recalibrating expectations" - meaning he wants everyone to agree on something, even if it's not the "full modalities" they were originally supposed to hammer out in Hong Kong. ("Full modalities" is WTOese for "an outline agreement that resolves all the really difficult issues.") Given Lamy's near rock-star status around here, I bet he'll get his way. Come Sunday, you'll probably see ministers lining up to sign a piece of paper. It won't be the piece of paper they came here to sign, but it'll be something.

December 13, 2005

Casualties of War

I got an email today summarizing violence statistics in Venezuela and figured they were worth running with. See, the Chávez administration claims to care much about people dying overseas in US-led wars, but yet the deaths of tens of thousands of Venezuelans in unexplained ways does not even cause a blip in El Comandane's radar. It is so not an issue for the Bolivarians that there is not even a Mission to address the issue of crime. But numbers speak louder than words.

Crime is the second problem in the minds of Venezuelans after unemployment.

Government statistics say that between 1999 and 2003, 58,519 people were murdered.

In 2003, there were 15,738 murders, an average of 43 murders per day, almost 2 per hour.

Projections indicate that by 2005, the total number of murders since Chávez came to power will number 95,570 people. Say that out loud: 95 thousand murders.

By 2003, the increase in the murder rate was 244.11% relative to 1998. By 2005, the same increase is projected to be 301.76% relative to 1998's rate.

Murders are the third cause of death in Venezuela. Among adult males, they are the first cause of death. Think about that: Venezuelan males are more likely to die murdered than by heart disease or automobile accidents.

Of the 58,519 murders committed, 23,606 (roughly 40%) of these were of people between 15 and 24 years of age.

94.03% of the 23,606 young people murdered were young men.

6 out of 10 people between 15 and 24 who die in Venezuela are murdered. 7 of every 10 young men between the ages of 15 and 24 who died were murdered.

Of all the murders committed between 1999 and 2003, 82% of them were caused by firearms. Think about this: Faced with this context, Mr. Chávez has decided to purchase hundreds of thousands of weapons to arm his personal militias.

95.28% of the murders of young men between 15 and 24 were caused by firearms.

Brazil was a distant second.According to UNESCO, Venezuela is ranked first worldwide in terms of deaths by firearms. Venezuela is also ranked first worldwide in terms of deaths of young people due to firearms, with rates much higher than Puerto Rico (second) and Brazil (third). Something to chew on for all those who saw the excellent Brazilian film "City of God".

Now, I challenge any PSF to convince me this is something the government is actually doing something about. Well, something other than blaming the CIA.

(Thanks to Raul Fatarella for the numbers)

Hong Kong Chronicles: Damn farmers

Well, it's day 1 of the WTO ministerial conference, and my first Hong Kong insight comes in the form of a question - how did farmers get so damn powerful?

It's really strange...we're here in this super high-tech city, surrounded by ultramodern skyscrapers, chips, factories, computers, and you gather 149 of the most powerful people in the world to talk about the sparkling, gleaming hyperglobalized world economy of the 21st century and what do they talk about? They talk about Cain and Abel's profession! They talk about a business that's reached maturity roughly 3000 years ago!

The whole organization has been stuck on the agriculture issue for years. Big agricultural producers in the third world want much better access to first world markets - particularly Europe and Japan. Europe, Japan, and to a lesser extent the US want to continue protecting their farmers with subsidies and high tariffs. The issue has been festering in the trade negotiating world for at least 30 years...but only since 1999 has it become clear that big third world food producers are willing to block everything until the rich countries liberalize their food markets.

The silly thing is that food makes up a small and shrinking portion of world trade. Think about globalization and you think computers! Biotech! Information technology! New, shiny things made in fancy factories and flown all around the world. Not a sack of potatoes! Alas...the sack of potatoes is what the negotiations are about.

What's clear is that farmers worldwide are incredibly powerful in their own countries. Coming into the conference I'd assumed that countries that import most of their food would not be particularly interested in being allowed to continue agricultural subsidies. Wrong! This morning I went to a press conference by the G10 group of net-food importing countries. The Mauritius trade minister made an impassioned speech against moves to liberalize the sugar market, describing the role of sugar cane farming in traditional society. This is Mauritius we're talking about, a bunch of tiny islands in the middle of the Indian Ocean that imports virtually all its food...even their delegation is basically held hostage by the farm lobby. The Norwegian and Swiss delegates made similar arguments about dairy farming.

The funny thing is that, in the end, all countries take more or less the same position on farm talks: lets liberalize everything...except my traditional sector! It's a sort of twist on NIMBYism...Not in My Traditional sector! Of course, every agricultural market is a market in the product of someone's traditional sector, and ministers are amazingly touchy on proposals that threaten their ability to protect their traditional producers. Not surprisingly, the overall result of so much aggregated touchiness is inaction.

How did it come to this? I think the reason is that agriculture has always been the most difficult issue, and since the Tokyo Round, back in the 70s, negotiators have been avoiding it. For thirty years now, serious negotiations on liberalizing agriculture have always run into major trouble, and the fall-back position has always been "well, farm issues are hard, so lets set them aside for now and concentrate on issues we can agree on."

The problem is that, by now, they've dealt with the whole rest of the agenda! Manufacturing tariffs are low worldwide, anti-subsidy and anti-dumping agreements are well developed, Intellectual Property Rights has its own side agreement, even Investment Measures proved easier to negotiate. There are still negotiations on each of those issues, but clearly those markets are nowhere near as distorted as farm trade. When it comes to major liberalization opportunities, agriculture is all that's left - and the mismatch between the general liberalism in most markets and the massive distortions still in place in farm trade are increasingly glaring. But every delegation here seems to be totally under the foot of its domestic farm nobody here seems to think the meeting is going to succeed...

Is that fear I smell?

In my first ghost blogger collaboration in a long time, I thought I'd keep it short and sweet:

Is it just me, or has the abstention (admittedly as high as 75%, although final numbers have yet to be released) really scared chavismo shitless?

Hugo was nowhere to be found for a couple of days after the election, same as every time he is facing a reversal of fortune. Then he pops up in Montevideo for the Mercosur thing, and again BAAAM canceled "Aló Delincuente".

And then today, this?

Exactly how scared is he by what happened, and how far is he willing to go to discredit any hint of criticism? Weren't PSF's and chavistas everywhere using this same report Chávez is in arms about to prove how free and how fair elections were?

Silbando en la oscuridad para espantar el miedo, dicen por ahí, huyendo hacia adelante.

December 12, 2005

Chilean elections, or a contrast in style

(My apologies to Quico for this CNE-related guest post...)

Chile held Presidential and Parliamentary elections this Sunday, and I wanted to take the opportunity to highlight differences with our current Venezuelan system which, quite frankly, leaves the chavista-led CNE without many arguments.

I don't want to dwell on the results (check Chilean newspapers like El Mercurio or La Tercera), but I can't continue without saying that, while the Parliamentary elections gave a big win to outgoing (and very popular) Pres. Ricardo Lagos' ruling coalition in both chambers, there will be a Presidential runoff in January. This election will be quite an anomaly for Latin-American politics, pitting the front-runner, Michelle Bachelet, a member of the not-so-Socialist Party, an agnostic, single mother and former victim of human rights abuses (and a woman, in case you're wondering), against center-right businessman and former Senator Sebastián Piñera, owner of a big chunk of LAN Airlines and TV station Chilevisión. What makes this election curious is that it pits two types of politicians that have made inroads the world over but had yet to make an appearance in LatAm politics in quite this way: a woman and a self-made billionaire.

But I digress. What is interesting about these elections for Venezuela is the process itself.

1. In Chile, everyone voted with a pen and a piece of paper, deposited their ballots in glass urns, and in the end, all votes were counted. If you believe Chávez and the CNE, you would think that this means that elections in Chile are rigged, that ballot-stuffing is common and that the system has all the problems the old system in Venezuela allegedy had. Think again. So far, there is not a single credible claim of fraud presented. The vote count was done in public, in front of numerous witnesses from all sides, with minimal interference from the Armed Forces and it was even televised nationally before the government announced any results. In other words, Chilean media was not submitted to any gag rule and the actual vote counting was broadcast to the entire country. (Granted, it made for boring TV since they could only transmit one voting table at a time, with zero representativeness).

The ballots themselves were quite simple and austere. It listed the names of all the candidates in an order that was previously determined by a public random draw. All the voter had to do was scratch a vertical line next to their candidate's horizontal line. Ballots themselves were small and understandable.

2. Final results were given by 11:30 PM. Given the complexity of this election, in which 120 deputies, 20 Senators and a President were selected, you would think the results would have taken days to come in. I mean, if the CNE, with the super-high-tech Jorge Rodríguez and the Tramparent Francisco Carrasquero could not give partial results until 5 am for a simple referendum in which the only options were "yes" and "no", surely Chileans would be counting votes until March. Not the case. As soon as tables were done with their tallying, which by the way began at 5 pm (no suspicious extension of the voting schedule to benefit government candidates like in Venezuela), they transmitted their results to the central government who then performed a simple duty: counting the results and announcing them to the country promptly.

Compare that to Venezuela, where in spite of having spent tens of millions of dollars on machines that few people believe in and even fewer know how to operate, the official tally of "results" takes several days to come in and the audit of 129 boxes takes up to a week to do.

This is important because one of the reasons the CNE argues that machines cannot be done away with is that this is the only way results can be given in time. Yet the Chilean experience proves this is not the case. But, it your intent is to cheat and/or you're incompetent, both qualities in abundance with our current CNE board, then you probably need some sort of gadget to fall back on.

3. All voters used their identity cards, which were created using a high-technology system that everyone trusts. Contrary to the quasi-rudimentary voting process, ID cards in Chile incorporate the latest technology to ensure nobody has duplicate ID cards and that voter rolls are not misteriously altered or sold on the streets. Aside from that, it takes three weeks to get your ID card and you can obtain one (providied you meet all requisites) in more than 300 offices nation-wide. Although there were problems with voters not appearing in actual rolls, none of them were significant enough to merit cries of fraud from anyone participating.

Contrast that with Venezuela, where ID cards are handed out without a proper backup of documentation, mysterious voter registration is commonplace and clandestine Colombian irregulars are free to vote at will. Every year, government after government promises to fix the Identification procedure to make it transparent, safe and quick, and every year we continue to have the worst ID system in the continent. The Chávez administration, for example, has created something called "Misión Identidad" which literally means issuing ID cards, Venezuelan nationalities and voter registration from the back of a pickup truck in selected spots that shift around from day to day (provided, of course, that you did not sign for recalling Chávez, in which case you get nothing).

4. The participation of the government, as well as candidate's advertisements, are strictly monitored. When Pres. Ricardo Lagos went to vote yesterday, he did not say who he wanted people to vote for. He basically said this was a great democratic feast in which everyone was free to express their opinion. In fact, the only times the President ventured into the electoral debate, he was sharply criticized. Basically, he took an institutional pose, not a blatantly propagandistic one like Mr. Chávez.

Advertisement only began in earnest a couple of months ago, but it had practically disappeared last Friday, in accordance with the law. Political parties were alloted free air time on TV every day to transmit their messages, but aside from that most publicity was in the form of signs out in the streets and paid advertisement in newspapers. In fact, even Chilevisión, Piñera´s TV station, was remarkably impartial during the campaign. (Note: Piñera has vowed to sell all of his holding, including LAN and Chilevisión, if he is elected. Take that, Berlusconi).

Contrast that with Venezuela, where... well, this is so obvious, I will not even expand on it.

What the Chilean process proves is that a Latin American democracy can thrive without needing to resort to highly-questionable high-tech voting gadgets, shabby ID systems, delayed announcements of results that create unnecessary tension or blatant use of government funds for the promotion of a single option. The current system espoused by the CNE is not credible for a large chunk of the population and does not even protect the secrecy of the vote, as has been correctly pointed out by international observers, and yet none of the excuses provided by the CNE to maintain its existence are necessary. The system is broken, and it has to go if we are ever to have fair elections again.

December 10, 2005

Savage Neoliberalism Chronicles

Folks, for the next nine days I'm going to be away from the blog - tomorrow I fly off to the one shindig PSF's love to hate the most: the WTO Ministerial Conference in Hong Kong. I'll be covering it for VenEconomía, and doing some networking for my dissertation research.

I'm actually really looking forward to it. Oh to be at the epicenter of the world economy! A WTO Ministerial is a trade policy researcher's shangri-la. 148 ministers along with their delegations and thousands upon thousands of lobbyists, journalists and NGOs...everyone who is anyone in trade politics all in one place at one time. Lemme tell you it was a MESS trying to get a hotel room!

But never fear: Pepe Mora and Katy have agreed to ghost blog while I'm away. Now, you two...don't blog anything I wouldn't blog...

December 9, 2005

Just Priceless

OAS Secretary General: The Election was fair!
Chavez: The guy is a liar and a conspirator!

oh brother...

...doesn't revolutionary discipline demand that we take our comandante at his word and conclude the election wasn't fair?!...digo yo...

Chavista Trade Policy: Something for nothing...

I can't say I really get it. Not two months ago Chavez was denouncing Mercosur as a "failed neoliberal experiment" and now we're about to join it. Though I know most of you don't believe it, I really am working on a PhD dissertation on trade policy in between breaks from blogging, so this is one issue I can claim expertise on.

Conventional economic theory tells us two basic things about what happens when you liberalize imports. First: the economy as a whole is made better off. Second, the gains are not evenly distributed. While everyone is made a little bit better off, some are made much worse off.

To see why, take a simple example. Say our farmers can produce corn for 100 per kilo. Foreign farmers can produce it for 95. When you liberalize imports, the price of corn to our consumers drops, so everyone is made a little bit better off. At the same time, our corn farmers suddenly find they can't compete, so they're wiped out of the market.

In the lingo, gains from import liberalization are diffuse, but costs are concentrated.

This explains why countries rarely liberalize unilaterally even if economic theory shows that the diffuse gains are bigger than the concentrated losses. Governments, in general, pay more attention to organized groups that mobilize to lobby for a given policy than they do to calculations of overall welfare or economics textbooks. Since each consumer is made only a little bit better off by import liberalization, consumers as a group find it difficult to organize themselves to petition the government for liberalization. But since producers stand to lose a lot, they have a much easier time banding together to lobby for protection.

Of course, that tells only half the story, because countries also have sectors that stand to gain from trade. If, say, our producers can make neckties for 95 a kilo, but it costs their producers 100 to produce that many neckties, our necktie producers obviously stand to gain a lot from access to their market. Liberalization would make neckties slightly more expensive in our country, but the costs to our necktie consumers are diffuse, while the gains to our necktie producers are concentrated. The equation is exactly reversed.

In that case, our necktie producers have every incentive to lobby our government for better access to their market. But when our government sits down to ask their government to open up their necktie market, it has to offer something in return. Since their corn producers are interested in better access to our corn market, there's a fairly obvious bargain to be struck: we'll liberalize our corn market if you'll liberalize your tie market. This, in extreme shorthand, is the reason trade negotiations happen.

The whole point of trade negotiations, then, is to overcome a problem of collective action by making sure someone in our country has a strong interest in seeing our own markets liberalized. If our government tries to liberalize corn unilaterally, corn farmers will work hard to block it, and there'll be no other group similarly organized to argue in favor of liberalization. By bargaining off access to our corn market against access to their tie market, trade negotiations set up a situation where our tie producers have a strong incentive to push our government to liberalize our corn market - as an indirect way of gaining access to their tie market. It's a pretty nifty trick.

This little framework is enough to explain why Chavez's decision to join Mercosur is puzzling to say the least. In effect, Venezuela will be opening up its market to Argentina and Brazil's world-beating agricultural producers. Not surprisingly, Venezuela's agricultural producers are none too happy about this. Venezuelan manufacturers are similarly freaked out. In exchange for their sacrifice, though, we'll get access precisely? Venezuela's major export commodity is oil, but we already have free access to their energy markets! If there is some Venezuelan export sector chomping at the bit for better access to Southern Cone markets, I haven't heard about it. So, in effect, Chavez proposes to give them access to our farm market in exchange for...nothing!

It's true that there are a number of sectors where Venezuela has a potential comparative advantage, and joining mercosur provides new opportunities for those sectors. However, a pile of economic research - most of it from left-leaning academics - argues convincingly that better access to foreign markets is very rarely enough to turn potential comparative into actual export success. To do that, you need a whole raft of government measures - from R&D tax credits and export credit to specialized training institutes and improved property rights - to help boost domestic producers' competitiveness to the point where they actually can crack foreign markets. Needless to say, those supply-side policies are not in place in the Bolivarian revolution.

In practical terms from Venezuela's point of view, joining Mercosur is a lot like liberalizing our imports unilaterally. Now, there's an old and venerable economic argument in favor of unilateral liberalization. I'm not going to get into that debate here, but I will point out that it's an argument one associates more with Adam Smith, Milton Friedman and Jagdish Baghwati than with Ezequiel Zamora, Jorge Giordani, or Martha Harnecker. How, exactly, the decision to enter Mercosur fits in with Chavez's whole verbal diarrhea about food security, endogenous development, land reform, etc. etc. I haven't the slightest clue. It's more like neoliberalismo del siglo 21, really...

December 8, 2005

That Useless Election for the Red Caudillo

By Guido Rampoldi in La Repubblica
Translated by me

This article caught my eye for several reasons. For one thing, it's rare to see foreign journalists grasp how hollow Chavez's claim to be leading a revolution really is, and Rampoldi is unsparing on that point. For another, it's always significant when a left-wing paper turns on Chavez, and this piece appeared in La Repubblica, which is sort of like the Italian version of The Guardian.

The hot gift in Caracas this Christmas is the chavito, an action figure depicting Hugo Chavez in his movement's red uniform. The buyers are both those who love the president, who buy it so their kids will also learn to love him, and those who hate him, who buy it perhaps to skewer it with needles. Saturday night, on the eve of the parliamentary election, an entertainer on State TV showed the cameras two chavitos, and said "tomorrow, you can vote either for this one or this one" to laughter from the chavista candidates around him. They chatted about the opposition - all of it "coup-mongering and fascist," and, why not, anti-patriotic - and later about the empire, imperialism, in short, the US, the opposition's alleged benefactors. Then we saw video links from various rallies, with fireworks, patriotic and revolutionary songs and people in red shirts chanting: fascists, golpistas, imperialists, enemies of the people. Finally Chavez himself turned up, reciting a poem along with a guitar player. Then it was back to the studio, and the chants again: fasicsts, golpistas, imperialists.

Seeing all this, just hours before the start of voting, you had the impression they had just defrosted that South American left that never learned anything from its own mistakes. Tenacious, unhinged, incorregible.

Add to that the fact that in Washington you have the Bush administration and that the Venezuelan opposition is remarkably dim, and it's not hard to imagine where the sum of so much ineptitude was going to lead: to the Nth disaster.

Sunday's parliamentary elections were certainly a step in that direction. The biggest Opposition parties decided to boycot them when they discovered the electronic voting system made it possible to identify voter's choices. But a technical compromise was possible, and the choice to abandon the elections was determined by fear. They were headed for a humiliating defeat, according both to the polls and to the state of mind of an antichavista electorate that believes neither in the deformed democracy you see on state-TV nor in an Opposition lacking a coherent identity.

So Chavez will no longer be restrained by parliament. Up to now, his partisans had enough votes to govern, but not to change the constitution. After Sunday, he'll be able to get his way on the most far-fetched of projects, even becoming president for life as one of his parliamentarians has proposed. Worse yet, with the Opposition absent from parliament, the country now lacks the only institution that might mediate the conflict between two Venezuelas unable to build a single national community and convinced that the other side is a tool of foreign interests: of Cuba, or of the United States.

When you ask the red shirts how Chavez's six years in power have changed their lives, they speak first of Mercal. These are stores in poor neighborhoods where anyone can buy, at political prices, food imported by the government...with the following results: the poor finally eat top grade Argentine and Uruguayan beef, the rich pay half as much as they used to (since access to Mercal is open to all), and Venezuelan ranchers are in crisis.

In the ranking of gratitudes, after Mercal you hear about health care, which has been overhauled thanks to a massive influx of Cuban doctors, and later about schools where adults learn to read and write or get training for a job. Moreover, Chavez has given a small push to programs for refurbishing poor neighborhoods - which, however, were started decades earlier - and has restarted land reform, though not truly aggressively.

According to the propaganda, this would amount to Bolivarian Socialism, a new, revolutionary economic model. But if that's case, we would also have to consider Italy's Christian Democrats to be Bolivarian Socialists, for everything they did in the 20 years after the war, and using the same method as Chavez: privileging first and foremost their own electorate.

The fact is that it's easy to be bolivarian towards your own supporters when you govern the world's fifth oil exporter at a time when oil is above $50 a barrel. Probably, the old social democrats and christian democrats who used to rule the country would have been just as generous: the crisis that brought them down reached its peak in the late 90s, when oil sunk to $9 per barrel.

What would have made a real difference would have been deep structural reforms, especially in the public administration. Yet even chavistas admit that the public administration has not changed.

For instance, those sections of the police widely feared for their rapacity and violence. Hundreds of complaints accuse them of fighting crime with torture and premeditated murders.

This happened in the past also. But today, the atmosphere is even more favorable to such abuses. After all, a former member of the Caracas police special forces - in fact, death squads - is a chavista mayor of a part of Caracas and uses "we will take back the city" as a slogan - you can read it painted on walls just steps from the presidential palace.

The opposition didn't much care about this variable-geometry legality until it realized it was tremendously exposed. The chavistas have taken control of the Supreme Court boosting its membership from 20 to 32, and the chief judge qualifies as "revolutionary" the justice it imparts. The number of judges with temporary appointments has grown to a full 75% of the total, keeping them nice and tame.

Made public by a pro-government web site, the list of the 3 and a half million Venezuelans who signed the petitions for a referendum against Chavez has become a tool of political discriminition in the hands of the public administration. Through new laws, they've tamed the fury of the private TV stations, which until two years ago were arguably even worse than state TV, but are now either circumspect or indifferent (because they risk hyperbolic fines and shut downs.) They've also aimed straight at the journalists: they risk 30 month jail sentences if they criticize too strongly even a National Assembly member or a general, up to five years if they publish news that "disturb public order." In the new Penal Code, blocking a street can land you in jail from 4 to 8 years, and according to the Supreme Tribunal there is nothing illegal about prior censorship.

Until now, the government has resorted these pointed weapons only rarely.

But when the time comes, they'll be ready. In October, the Bush administration added Venezuela to the list of five enemies of the United States, even if it's on the third tier. In response, Chavez ordered his armed forces to prepare for "asymetrical warfare", to be taken to the enemy through "non-conventional tactics, such as guerrillas and terrorism." Whether or not he really believes in the prospect of a power play by Washington, trumpeting the possibility is extremely useful as a way to keep his country underfoot, and, in a few years time, to launch a more explicit authoritarianism: if the nation is under attack, who could protest if the president arrests the traitors, crushing the enemy's fifth column?

Opinion Duel: Day Four

Alek doesn't care how people react to vcrisis? Yeah, right...

December 7, 2005

Venezuela Opinion Duel: Day 3

Alek Boyd shoots back. Have a look...

The EU Electoral Observation Mission's Preliminary Report

is here.

Key Findings:

  • Wide sectors of the Venezuelan society do not have trust in the electoral process and in the independence of the electoral authority.

  • The legal framework contains several inconsistencies that leave room for differing and contradictory interpretations.

  • The disclosure of a computerized list of citizens indicating their political preference in the signature recollection process for the Presidential Recall Referendum (so-called “Maisanta Program”) generates fear that the secrecy of the vote could be violated.

  • The CNE, in a positive attempt to restore confidence in the electoral process, took significant steps to open the automated voting system to external scrutiny and to modify various aspects that were questioned by the opposition.

  • The CNE decision to eliminate the fingerprint capturing devices from the voting process was timely, effective and constructive.

  • The electoral campaign focused almost exclusively on the issue of distrust in the electoral process and lack of independence of the CNE. The debate on political party platforms was absent.

  • Both State and private media monitored showed bias towards either of the two main political blocks.

  • The EU EOM took note with surprise of the withdrawal of the majority of the opposition parties only four days before the electoral event.

  • Election Day passed peacefully with a low turnout. While the observers noted several irregularities in the voting procedures, the manual audit of the voting receipts revealed a high reliability of the voting machines.

  • These elections did not contribute to the reduction of the fracture in the Venezuelan society. In this sense, they represented a lost opportunity.

  • This bit, in the inside pages, is just priceless:
    The use of the electoral technique known as Morochas, which allows the duplication of parties in order to avoid the subtraction of the seats gained in the plurality-majority list from the proportional list, certainly defies the spirit of the Constitution, but it is technically allowed by the mixed system of representation laid out in the Basic Law of Suffrage and Political Participation.
    So the morochas are legal but unconstitutional...WTF!?!??

    JVR's Election

    Another one for the Chavez-as-Pinky, JVR-as-The-Brain archive, this time from Phil Gunson's piece in the Miami Herald:

    Western diplomats in Caracas meanwhile criticized what they said were last-minute changes to soften the wording of the OAS report -- and alleged that the changes were made under strong pressure from the Venezuelan government.

    The Herald was told by diplomats from both EU and OAS member states that OAS observer mission chief Rubén Perina received calls from Venezuelan Vice President José Vicente Rangel and electoral council chairman Jorge Rodríguez after the draft report had already been prepared.

    The OAS had planned to present its report at a news conference early Tuesday. But it canceled the conference at the last minute and the report was distributed on the Internet.

    At times I really get the sense we underestimate JVR's role in Chavez's success. The guy is brutal but incredibly effective. The events of the last two weeks can be seen as a kind of monument to José Simiente's political instincts. Nobody on our side is anywhere near as macchiavelian or effective...

    December 6, 2005

    More on Dec. 4th as seen from abroad...

    As we await the International Observers' preliminary reports on the December 4th vote (due out this afternoon), we can chew on some of the foreign media coverage of the election.

    There's finally a bit of comfort for the opposition in this understatedly scathing article by Andy Webb-Vidal in the Financial Times:

    Hugo Chávez, Venezuela’s president, on Monday awoke to hear the type of election result usually reserved for the most power-hungry of dictators: 100 per cent of the seats.

    The unofficial result, from polls held on Sunday to select the composition of the single-chamber legislature, signals a victory of sorts for the militaristic, left-leaning ruler of the world’s fifth-largest oil exporter.

    But critics said it was a hollow victory that left Venezuela in a twilight zone between democracy and dictatorship - and a result that would catapult the country towards Mr Chávez’s model of “21st century socialism”.

    Preliminary results from the National Electoral Council (CNE), which on Monday was still calculating the final tally, showed that only 25 per cent of eligible voters cast ballots in polls boycotted by opponents. A fifth of ballots cast were blank.

    But the extremely influential and unmistakably antichavista Economist runs a lead paragraph straight out of Jose Vicente Rangel's wet dreams

    A FREE and fair election in which the president’s supporters win all of the seats in the legislature? It sounds more like the kind of contest Saddam Hussein used to “win” in Iraq with 99% of the vote. But on Sunday December 4th, the party of Venezuela’s president, Hugo Chávez, and groups close to him seem to have done just that, after all but one of the opposition parties pulled out of the election. Mr Chávez’s Fifth Republic Movement (MVR) won 114 seats out of 167. Allied parties took the rest.

    Meanwhile, Spain's El Pais runs a tough editorial criticizing the opposition withdrawal, but also blasting Chavez's antidemocratic tendencies. Opening graf:

    The Venezuelan Opposition has made a mistake in boycotting Sunday's legislative elections, overwhelmingly won by partisans of president Hugo Chavez. The formidable abstention, at 75%, undoubtedly undermines the representative nature of the new, monochrome National Assembly, but it does not invalidate its decisions. The basic result of the vote is that the opposition has ceased to exist in politically organized form. The parties opposed to Chavez - promised an unmitigated defeat by the polls - have taken cover behind the scarce credibility of the voting procedure and the unmistakable pro-government bias of the electoral authorities to justify their boycott. As we await preliminary reports from the international observers, nothing right now suggests serious irregularities.

    Opinion Duel: Day Two

    Well, Alek was pretty unsparing in his first post, so I went ahead and responded pretty strongly.

    Though, we obviously don't agree on much, I've always appreciated Alek's willingness to engage in proper debate. We'll see what he writes back...