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Guest post (the real thing)

November 17th, 2003

I mucked up the first guest posting, putting up what was intended as a comment-length version. So here’s the full version of Brian Bahnisch’s thoughts.

The steel decision and the WTO

While the WTO steel decision poses a significant domestic dilemma for Bush, the implications for international trade relations are interesting. Pascal Lamy of the EU was very quick to remind the Americans about their taunts by saying that the cheese eating surrender monkeys are now biting back. You’d have to think they will hit hard with retaliatory tariffs.

Australia usually follows the correct pure free trade line, even against the US. On this one we did special deals, so can afford to sit back.

Japan, though, is considering sending a shot across the bows with a few hundred million dollars worth of sanctions against the US. It’s symbolic, but very significant.

The WTO has been a joint project of the US, the EU and Japan. With Canada, they make up the famous “Quad”, which calls the shots in the WTO. Dangerous cracks have opened up in Quad solidarity prior to Cancun and were unsuccessfully papered over. It was Japanese and South Korean intransigence above all that sunk Cancun.

Now there is a new kid on the block, the G20+, led by Brazil, India, China and South Africa. This is a powerful grouping within the WTO, and one that is thinking really long term.

The US has been ferociously trying to splinter the G20, with some success. They peeled off El Salvador at Cancun, and subsequently Columbia, Peru, Guatamala and Costa Rica. This they do through bare-knuckled bullying. So G20+ is now G20- but don’t write it off yet.

The EU tried to peel off Nigeria and failed. Also there were 70 countries outside G20 that point blank refused to accept new issues (investment, competition, government procurement etc) unless the big guys opened up agriculture and reduced domestic subsidies. Hell will freeze over before Japan agrees. Probably ditto for the EU.

On agriculture, the US seems to favour open markets over a decade or more, but only if Japan and the EU do so too. They see their agriculture as trashing EU and Japan agriculture in the longer term.

The failed Cancun agenda was passed on to the WTO General Council for further consideration. This they must do in Geneva by 15 December. It is urgent because the “peace clause” expires on 31 December.

The “peace clause” was injected into the Uruguay Round, which had been bogged down over agriculture. Its effect is to prevent trade wars between the big guys in agriculture. The poor countries, especially in Africa, where large sectors of their agriculture have been trashed by subsidised US and EU product, want it to go. They are pretty much beyond bullying or buying as the Security Council vote on Iraq and then Cancun showed.

Interestingly, Australia has let it be known that they want the peace clause to go also. Under the WTO consensus voting system it only takes one piker to stop a proposal being approved.

The US will vigorously pursue bilateral and regional trade deals, which they see as setting a proper standard that can later be generalised in the WTO. For this reason they are unlikely to withdraw from or trash the WTO. But they must also like you before they screw you, as trade deals are part of their geopolitical push. New Zealand need not apply.

Of particular interest will be the FTAA (Americas) meeting in Miami presently. That will show how Brazil is surviving in the maelstrom, or whether Zoellick’s prophetic words to Brazil’s President Lula before he was elected will come to be: “Either you trade with us, or you trade with Antarctica”

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