Lecture 8 Doha

7/27/2019 Lecture 8 Doha

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International Political Economy #8

The World Trade Organization

William Kindred Winecoff

Indiana University Bloomington

September 24, 2013

W. K. Winecoff | IPE #7: The Doha Round 1/21
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Length of Negotiating Rounds

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The Old Club

Developing countries either dont participate or do so reluctantly from

1945-1985.

Think the rules are stacked against them (mostly because they are).

Rich countries negotiate among themselves, then tell the poor countries

to take it or leave it. Therefore, rules largely represent the interests ofthe Core, not the Gap.

Heavy reductions in manufacturing tariffs; fewer in

agriculture.

Capital-rich countries benefit from trade in manufactures;

land-rich countries benefit from trade in agriculture.

The Doha round is intended to restore some balance; bring developing

countries more into the liberal order. But politics gets in the way.

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The Problem of Agriculture

U.S.: Farm Bill (subsidies and other supports for U.S. farmers).

E.U.: Common Agricultural Policy (ag. subsidies).

Japan Agricultural Cooperatives (subsidies).

Worldwide agriculture tariffs/supports still average over 60%.

This kills farmers in the developing world. Also expensive (and

sometimes unhealthy) for those in the developed world.

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Agriculture Tariffs

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Agriculture Versus Non-Agriculture, 2008

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WTO Politics

The WTO, like all institutions, both reflects and restrains power.

Rich countries have leverage in negotiations, and capabilities in

adjudication.

Comparative (dis)advantages vary across countries, definitionally;politicians in each country want to protect their disadvantaged

industries. This leads to political battles.

The WTO has been at a stalemate for a decade.

WTO: undemocratic? tool of corporations? anti-environment? engine

of inequality? agent of imperialism by the Core?

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Where We Left Off & Where Were Going

Prior rounds of GATT/WTO negotiations had been dominated by rich

countries.

Increasing protest against the WTO from advocates of LDCs, as well as

scarce factors in the Core.A shift from major power competition to development following the end

of the Cold War.

Increasing transnational terrorism, culminating in 9/11.

The consensus is that the next WTO round should focus on

development, and integration of LDCs into the global economic order.

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The WTO As a Political System

Process through which governments make decisions about who gets

what.

Bargaining as the collective decision-making mechanism.

Each government seeks to liberalize its comparatively-advantaged

industries and protect its comparatively disadvantaged industries.

Thinking this way emphasizes distributional consequences of

trade, and the existence of domestic politics.

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Changes in the Political Process

Transformation of pivot around which bargaining revolves from

1984-2001, from a club of Core to a forum including the LDCs.

This transformation is observable by:

1 Outcome of Uruguay round, which has new agreements on

agriculture and textiles.

2 In exchange, U.S. (with support from E.U. and Japan)

demands inclusion of TRIPS.

3 Developing countries dont like strict interpretation of TRIPS,

particularly on pharma. Their protests lay foundation for the

initiation of the Doha round.

4 Deadlock in the Doha round, now in its 12th year.

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Bargaining and the WTO

Lets think about this using tools we already have.

Two players: the Core (i.e. U.S./E.U.) and the Gap (i.e. the G-20).

G-20 includes Brazil, Argentina, South Africa, India, etc. But

not China.

Different preferences: U.S./E.U. wants open manufacturing and closed

agriculture; G-20 wants closed manufacturing and open agriculture.

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Bargaining in One Dimension Agriculture

Simple spatial model: prefer outcomes closer to your ideal point.

Purely distributive bargaining: zero-sum.

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Complicating the Interaction

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Mapping Out the Negotiation - No Joint Gains

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Mapping Out the Negotiation - Lots of Joint Gains

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Mapping Out the Negotiation - Joint Gains

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Which State of the World Exists?

The shape of those preference circles is private information.

In a negotiation, you want to get as close to your ideal point as you can.

To do that, you need to keep your private information private. (Or find

it out yourself, since these come from domestic politics.)

It can take a long time to uncover the others private information.

Maybe there are no joint gains possible.

In a consensus-based system, the hegemon cant just impose its will.

For a real-world discussion of all this as it applies to Doha, see Paul

Blusteins excellent Misadventures of the Most Favored Nations.Lets assume there are joint gains:

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Mapping Out the Negotiation - Joint Gains

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The Trade Dilemma

G-20

U.S./E.U.Open ManufacturingProtect Manufacturing

Open Agriculture 22

30

Protect Agriculture0

3

1

1

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States of the World Christy (2008)

Maybe there arent joint gains; at least not many.

Much of the low-hanging fruit has been picked in earlier

rounds.

There are more members now than ever. In a system thatrequires consensus, this makes agreement difficult.

There are different kinds of members now, with different

interests.

Are we seeing a weakening of U.S. hegemony? Is this the inevitable

consequence of a successful multilateral liberal order?

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States of the World Mattoo & Subramanian (2009)

Doha doesnt go nearly far enough. We need a Bretton Woods II.

Malthusian pressures on food and energy need to be addressed too.

The WTO cant do that.

We need a new exchange rate rule, like we had in Bretton Woods I,

enforced by the IMF. (Well learn about them later.)

All these culminate in the creation and exacerbation of macroeconomic

imbalances, which is what well talk about after Spring Break.

Given the pressures that Christy identifies, is that possible? Is the U.S.

now in the same position as it was at the end of WWII? What wouldIkenberry say?

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Lecture 8 Doha