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.