Shrinking the Gap:
Potential Roles of the WTO
& Trade Agreements
Parr Rosson, Professor & Director
Center for North American Studies
Department of Agricultural Economics
Texas A&M University
C
NAS
US Trade Strategy
• Multilateral Trade Negotiations

World Trade Organization
• Regional Trade Agreements

Central American Free Trade Agreement
• Bilateral Trade Agreements

US-Australia Trade Agreement
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CUSTA, ‘89
NAFTA ‘94
Jordan ‘03 Bahrain ‘04
Israel ‘85
Morocco ‘04
CAFTA ‘04
Thailand ‘05
Panama ‘05
Andean FTA
‘05
Chile ‘04
FTAA ‘06
Singapore ‘03
Southern African
Customs Union ‘05
Australia ‘04
U.S. Trade Agreements-3d Largest Market
Why Regional Agreements?
• 2d Best Solution After MTN
 Slow
Progress in WTO
 Cancun Ministerial Derailed Progress
 FTAA ‘Lite’ Not As Appealing
• Economic Incentives
 Open
Markets
 Create Economies of Scale
 Increase Business Efficiency
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Strategic Considerations
• Stem Illegal Immigration
• Secure Strategic Materials
 Oil/Natural
Gas
 Fertilizer
• Create Buffer Against Terrorism
 ‘Seam
State’ Argument, Thomas Barnett,
U.S. Naval War College (New Rule Sets
Project2000)
http://www.nwc.navy.mil/newrulesets/
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World Population
Billions
ME
NA
8
AFR
WE
CSA
I. ASIA
TOTAL
EE/FSU
7,570
D. ASIA
Ind. + 8%, Dev. + 31% 6,310
8
6
6
4
4
2
2
0
0
1990
2000
2001
F2005
F2010
Energy Information Administration, Annual Energy Outlook, 2003.
F2015
F2020
World Economic Output
GDP, Trillion 1997 Dollars
$70
NA
WE
I. ASIA
EE/FSU
$60
D. ASIA
ME
AFR
CSA
$50
Ind. + 64%, Developing + 140%
$40
$30
$20
$10
$0
1990
2000
2001
F2005
Global Insight, Inc., World Economic Outlook, 2002.
F2010
F2015
F2020
World Energy Consumption
Quad. Btu
700
600
Ind. + 28%, Developing + 69% (2001-2020)
NA
D. ASIA
WE
ME
500
399
400
I. ASIA
AFR
404
EE/FSU
CSA
583
532
481
434
1
348
2
300
200
2
1
100
0
1990
2000
2001
2005F
2010F
2015F
Energy Information Administration, Annual Energy Outlook 2003, www.eia.gov/iea
2020F
World Oil Production Capacity, 1990-2020
113.5
120.0
Million Barrels/Day
103.3
93.9
90.0
79.2
69.4
71.2
84.2
106.6
96.0
86.1
76.4
63.7
60.0
30.0
0.0
1990
Total OPEC
China
2001
F2005
United States
Former Soviet Union
F2010
F2015
Canada
Total Other Non-OPEC
F2020
Mexico
Total World
Source: EIA/International Energy Outlook 2003, Oil Production and Capacity Projections
U.S. Oil Imports by Source
NAFTA
14.00
Non-OPEC (Ex. NAFTA)
12.03
11.02
11.24
10.16
10.00
8.02
8.00
11.46
MillionBarrels/Day
Barrels/Day(Avg.)
Million
12.00
OPEC
8.33
8.84
7.71
6.91
5.07
6.00
4.00
2.00
0.00
1980
1985
1990
1993 NAFTA 1995
1997
2000
2001
2002
2003
Petroleum Imports by Country of Origin, 1960-2003. USDOE, EIA, Annual & Monthly Reports
U.S. Crude Oil Imports by Country, 2002
1.80
1.60
1.70
Million Barrels/Day
1.51
1.49
1.40
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Source: Energy Situation Analysis Report
0.98
0.78
0.59
0.43
0.21
U.S. Fertilizer Imports
Canada
20.0
W. Europe
ROW
18.1
16.6
Million Metric Tons
13.6 13.7 13.9
15.0
14.6
17.0
15.3 14.9
12.2
10.8 10.8 10.4
10.0
5.0
0.0
1990
USDA, FAS
1993
1995
2000
2002
U.S. Fertilizer Imports from ROW, 2002
1600
1400
1291
1,000 Metric Tons
1200
1000
800
600
400
200
0
438
394
289
216
178
160
88
72
31
Background
• The Pentagon’s New Map & Esquire
March 2003
• Security in a Post Cold War Era
 New Operating Environment
• Post September 11, 2001 World
 Role of Security in Global Age
• Global Disconnect: Gap Between
Functioning Core & Nonintegrating
Gap Nations
NAS
C
Globalization: What Does It Mean?
Integration of Economies
& Societies
 Global
Rule Set
 Democracy
 Transparency & Rule of Law
 Free Trade
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Globalization & Development
• Does Globalization Have Binary
Outcomes?


Great, Everyone Better Off
Horrid, Failing Humanity
• Neither, But In Between?
• Where Has Globalization Worked?
 China, India, 22 Others, + 5% PCI, 3 Billion People
• Where Has It Not Worked?
 Sub-Saharan Africa, Middle East, Former Soviet
Union, Declining PCI, 2 Billion People
Source: World Development Report, 2001
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Globalization & Security
• New Security Paradigm:
Disconnectedness Defines Danger
• Outlaw Regimes Disconnected
from Globalizing World
Few or No Rules
Different Societal Norms
Lack Ties of Mutual Dependence
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Assumptions: Old & New
 US
Military Capable of Handling
Threat from Great Power Can
Handle Threat from Minor Conflicts
in LDCs
 September 11 Redefined Perception
of the Threat
 US Military Response Inversely
Related to a Country’s Global
Connectedness
NAS
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Conditions in The Functioning
Core
 Free
Media & Press
 Open Financial Transactions
 Collective Security
 Stable Governments
 Rising Living Standards
 More Deaths by Suicide than
Murder
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Conditions in The Non-integrating
Gap
 Politically
Repressive Regimes
 Poverty, Hunger & Disease
 Routine Mass Murder
 Young Population
 Chronic Conflicts, Spawning Next
Generation of Terrorists
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Implications
• Global Disconnect Means Foes Not
Near Peer, Not Even a Nation
 ‘Super
Empowered Individuals’
• They Are Products of ‘The Gap’
• To Thwart Threat, ‘Seam States’ are
Critically Important
 Mexico,
Central America, Brazil, Thailand,
Malaysia
• Seam States Are the “Firewall”
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Implications
• Shrinking the ‘Gap’ is Crucial
• Middle East Is the Starting Point
• Policy Goals and Role of Trade?
Security-within nations
 Increased Aid (Military, Food, Infrastructure,
Development)
 Democracy
 Freer Trade
 Rule of Law
 Education (Human Capital)

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The Doha Work Program
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U.S. Average Tariff, 1789-2002
70
Percent
70
Tariff of Abominations, 1828
Smoot-Hawley Tariff, 1930
60
60
Morrill Act, 1861
50
50
Generalized System
of Preferences, 1968
40
30
WTO,
1995
20
10
40
30
20
Fordney-McCumber
Tariff, 1922
10
GATT, 1947
0
1789
1789 1816 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
Statistical Abstract of the United States
0
World Average Agricultural Tariffs, 2000
Percent
140
Bound Average
World Average
115
120
100
85
80
62%
55
60
40
20
0
40
30
25
12
Doha Development Agenda
• Economic Development Issues Affecting
Less Developed and Developing
Countries at Forefront of Negotiations
• Agriculture Negotiations Began in 2000
 Uruguay
Round Agreement on Agriculture
• After Setback in Cancun-September
2003, Consensus Reached on Work
Program, July 31, 2004
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Doha Work Program (DWP)
• Provides Framework for Negotiations
•
to Proceed
Modalities To Be Negotiated

Procedure & Degree of Trade Liberalization
• For Agriculture, Negotiations Center
on DDA Reform of the Three Pillars



Market Access
Export Competition
Domestic Support
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Market Access
• Tiered Approach
High Tariffs Reduced the Most
• Tariff Reductions from Bound Rates
Harbinson 2d Draft Likely Starting Point
• Designation of Sensitive Products
• Special & Differential Treatment for
LDCs & Developing Countries
Longer Time Frame, Less Reduction
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Export Competition
• Reduce & Phase Out Export Subsidies by
Date Certain

Export Credit Guarantees > 180 Days
 $4.7 Billion/year in Recent Years

t.b.n. Interest Rates, Premiums, Payment
• Eliminate Trade Distorting Practices of
State Traders, such as Canadian Wheat
Board

Subsidies, Govt. Financing, Loss Coverage
• Food Aid that Displaces Commercial
Sales to Be Eliminated
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Domestic Support
• Biggest Spenders Take Biggest Cuts
Tiered Formula Using Total AMS
 EU ($71 Billion), Japan, US ($49 Billion)

• 20% Reduction in Allowable Trade
Distorting Support in Year 1




Amber Box + De Minimis + Blue Box = $49 Billion
$9.8 Billion Reduction for US
No Impacts on US Farm Program Spending at Current
Levels ($23 Billion/Year)
If Prices Fall & Spending Exceeds $39.2 Billion, then
Program Impacts
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Domestic Support
•
Blue Box: Direct Payments, Production
Limiting Programs or Decoupled Payments


•

Direct Payments, Fixed Area & Yield Base or 85% of
Fixed Base
Create a ‘New’ Category (Shelter CCPs)
Other Changes t.b.n.
Green Box: Minimally Trade Distorting



Criteria Reviewed & Clarified
Ensure Only Minimally Trade Distorting Policies
Included
Likely Remain a Shelter for Non-trade Concerns
(Multifunctionality, etc.)
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Issues
• Are More Trade Agreements a
Desirable Outcome?
• Without Trade Agreements, U.S.
Market Access Limited

With Agreements, No Guarantee of Market
Growth
• Investment & Economic
Development Crucial for Central
America & Many Other Trading
Partners
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Conclusions
• U.S. Market Much More Open
than Others
• With Trade Agreements, Tariffs
Will Fall, U.S. Access to
Foreign Markets Will Increase
• Opportunity for Input On
Agreements
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Thank You!
Center for North American Studies
C
NAS
Informed Decisions for Global
Change”
Parr Rosson
Ph: 979-845-3070
E-mail: prosson@tamu.edu
Http://cnas.tamu.edu
Video of WTO & Trade Agreements