Topic: Trade and Immigration

U.S. Posturing for a Fight at the WTO

Regarding the antidumping dispute concerning “zeroing,” which I’ve argued could shake the very foundations of the multilateral trading system, we have this development (see last item).  It is becoming evident that the United States will attempt to discredit the WTO Appellate Body’s logic in its latest rebuke of U.S. zeroing practices. 

It may take a year or more before we get there, but we appear to be headed for a confrontation with the dispute settlement system that could leave that institution weakened and U.S. credibility further damaged.  And that could invite consequences far worse than a stalled or derailed Doha Round.

More to come.

Trade Showdown Looks Inevitable

Yesterday I argued that Congress’s unflinching devotion to the antidumping law poses a real threat to the world trading system.  As the WTO dispute settlement mechanism renders more decisions against U.S. antidumping actions and procedures, Congress will grow more inclined to question the efficacy and legitimacy of the WTO in public.  And that is a slippery slope.

I wrote:

To Congress, trade remedy laws are not the problem.  Dumping and subsidization are.  And the latest Appellate Body decision against zeroing makes it that much harder to combat “unfair” trade.

Accordingly, Congress is highly unlikely to go quietly into the night after the WTO’s latest indictment of zeroing. Thus, confrontation–perhaps intractable confrontation–between the United States and the WTO dispute settlement system may be in the cards later this year.

Well, judging from this news release and letter, written by the two highest ranking legislators on trade issues, “later this year” is here.  Stay tuned.

Trade is Much Bigger Than the Doha Round

There have been whispers of late regarding prospects for a last minute resurrection of the WTO’s Doha Round of multilateral trade talks.  My colleague Sallie James does a great job discussing those prospects with polite skepticism in a recent Cato podcast.  Let me be a little more direct: Doha’s dead, yadda yadda yadda, now let’s move on!

Ok, that sounds a bit cavalier.  So please allow me to clarify.  To be more precise, Doha is not dead permanently; it is in a cryogenic state, available for resuscitation under different circumstances. 

Atop the many reasons to conclude that Doha’s time has passed for now is this: the Bush administration has neither the will nor the resources to engage in the type of horse trading necessary to produce an agreement that would be simultaneously acceptable to our trade partners and our Congress (and worthy of the negotiating efforts expended thus far).  As with every other policy initiative “championed” by the Bush administration (and trade was never really a priority), trade’s oxygen has been consumed by the Iraq inferno.

Judging from the commentaries I’ve read and conversations I’ve had, I am less inclined than most to view Doha’s deep freeze as some colossal economic setback.  Certainly it is a(nother) foreign policy setback for the United States, which will undoubtedly be accused of perpetuating poverty and misery the world over.  To the extent there is some small truth in that (some U.S. trade policies have acute, adverse impacts on people in developing countries), Doha’s failure carries real costs.  But by and large, there is no reason to assume that international trade and foreign investment will suddenly slow or reverse course.  In fact, trade and investment are likely to continue to grow handsomely and the world economy will continue to expand, as more and more people from more and more countries partake of the global economy.  And furthermore, I suspect that some, if not many, of the reforms and liberalizations proposed in the Doha Round will be adopted, ultimately, without need of agreement, by countries (including the U.S.) that recognize it is in their interest to reform regardless of what other countries do. 

What concerns me more than the failure to reach a new accord is the potential for marginalization of the old agreements and institutions.  The agreements that culminated in the creation of the World Trade Organization in 1995 and the quiet success of its dispute settlement system (which has “handled” 357 disputes) have a lot to do with trade’s contribution to world economic growth.  Long-standing rules and familiar processes have helped reduce and eliminate some of the uncertainties (and therefore, risks and costs) traditionally associated with trading and investing with foreigners.  If member countries were to begin questioning the efficacy of the system or the wisdom or propriety of its adjudication process when it becomes politically convenient to do so, calls to skirt the rules and ignore the verdicts might not be too far behind.  And that behavior could prove contagious, leading to new uncertainties, greater risks and costs, and ultimately, degradation and a potential collapse of the rules-based trading system.

That scenario, should it unfold, is a long way off.  But the seeds of discontent are sowing.  U.S. policymakers have from time-to-time expressed skepticism about WTO rulings.  That skepticism is memorialized in Section 2101(b)(3) of the legislation that gave President Bush trade promotion authority in 2002:

Support for continued trade expansion requires that dispute settlement procedures under international trade agreements not add to or diminish the rights and obligations provided in such agreements. Therefore-

(A) the recent pattern of decisions by dispute settlement panels of the WTO and the Appellate Body to impose obligations and restrictions on the use of antidumping, countervailing, and safeguard measures by WTO members under the Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards has raised concerns; and

(B) the Congress is concerned that dispute settlement panels of the WTO and the Appellate Body appropriately apply the standard of review contained in Article 17.6 of the Antidumping Agreement, to provide deference to a permissible interpretation by a WTO member of provisions of that Agreement, and to the evaluation by a WTO member of the facts where that evaluation is unbiased and objective and the establishment of the facts is proper.

Reactions in Congress to WTO dispute settlement decisions have been most acerbic when the subject has concerned U.S. application of its trade remedy laws.  As I reported last month, the WTO Appellate Body’s indictment of the U.S. antidumping calculation practice known as zeroing led to a rare change in practice at the Commerce Department.  However, some in Congress were not very pleased, suggesting the administrative actions circumvented congressional authority.Just last week, the Appellate Body ruled again on the issue of zeroing in the United States, but this time the ruling was even more encompassing, forbidding the practice under almost every conceivable comparison methodology.  Compliance with the ruling would be a landmark achievement in the realm of antidumping reform because the practice of zeroing is the single greatest systemic inflator of dumping margins.  And therein lies the problem.  In terms of the practical effect on the bottom line, banning zeroing entirely is akin to fairly ambitious antidumping reform, which Congresses past (and presumably present) have opposed.

When Congress granted President Bush trade promotion authority in 2002, it did so with strings attached. 

(14) TRADE REMEDY LAWS.-The principal negotiating objectives of the United States with respect to trade remedy laws are-

(A) to preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty, and safeguard laws, and avoid agreements that lessen the effectiveness of domestic and international disciplines on unfair trade, especially dumping and subsidies, or that lessen the effectiveness of domestic and international safeguard provisions, in order to ensure that United States workers, agricultural producers, and firms can compete fully on fair terms and enjoy the benefits of reciprocal trade concessions; and

(B) to address and remedy market distortions that lead to dumping and subsidization, including overcapacity, cartelization, and market-access barriers.

To Congress, trade remedy laws are not the problem.  Dumping and subsidization are.  And the latest Appellate Body decision against zeroing makes it that much harder to combat “unfair” trade.

Accordingly, Congress is highly unlikely to go quietly into the night after the WTO’s latest indictment of zeroing. Thus, confrontation–perhaps intractable confrontation–between the United States and the WTO dispute settlement system may be in the cards later this year.

Antidumping is not the only area where the United States is on the defensive in the WTO.  Without an ongoing negotiating round, new cases concerning agricultural subsidies are likely to be brought (Brazil and Canada have already done so). 

If the United States refuses to comply (or is seen dragging its feet for a long time), other WTO members might follow the example, and eventually the dispute settlement mechanism could become a dead letter. These are the risks to the multilateral trading system. 

The failure of Doha to bear fruit in the form of a new ambitious agreement is disappointing, but hardly catastrophic.  However, to the extent that the absence of an ongoing negotiating round (indeed, in the wake of the first failed multilateral negotiating round ever) might liberate politicians to call for unilateral actions that contravene trade agreements, it will be more important to be vigilant in the face of threats to global commerce.

Identity Crisis Book Forum Thursday at Cato

On Thursday, the Cato Institute is having a book forum on my book Identity Crisis: How Identification is Overused and Misunderstood.

Commenting on my presentation of the book will be James Lewis from the Center for Strategic and International Studies and Jay Stanley from the ACLU.

The REAL ID Act is under siege from state leaders who are bridling at this unfunded surveillance mandate, and legislation was introduced at the end of the 109th Congress to repeal REAL ID. But the immigration debate this year will surely fuel the push for a national ID with the demand for “internal enforcement” of immigration law. Identity Crisis lays the groundwork for all these discussions.

The event is streamed for those not in the area. To register, go here.

The National ID Debate, Part II

“It is the policy of the United States that the Social Security card shall not be used as a national identification card.”

So reads the last line of the Illegal Immigration Enforcement and Social Security Protection Act of 2007. The bill would put an encrypted machine-readable electronic identification strip on each Social Security card, which would enable employers to access an “Employment Eligibility Database” at the Department of Homeland Security. The database would include the citizenship status of every Social Security card holder.

Employers who hired someone without checking this … national Social Security identification card … against the Department of Homeland Security’s database would be punished. (Must remember: “It is the policy of the United States that the Social Security card shall not be used as a national identification card.”) 

So goes the push for “internal enforcement” of immigration law — sure to be an important topic in the immigration debate this year. 

The national ID law that is now in place, the REAL ID Act, is a reaction to the terror attacks of 9/11, and the assumption that knowing who someone is tells us what that person plans to do. 

But the REAL ID Act is in retreat. With states bridling at the burden they’ve been asked to bear in order to implement the act, legislation to repeal REAL ID was introduced late last year, and it is likely to be re-introduced soon.

The next wave of the ID debate will be about immigration.

On Thursday, January 18th, we’ll be having a lunch-time book forum here at Cato on my book, Identity Crisis: How Identification is Overused and Misunderstood. I will present the book, and I have invited two interesting commentators — skeptics of different parts of my theses — to weigh in. 

Please join us for what I hope will be an interesting discussion of identity issues, and a preview of an important part of the coming immigration debate. 

Register for the book forum here.

Subsidies Fail to Save French Farms

French farmers harvest billions of euros every year in government support through the Common Agricultural Policy (CAP). Yet those lavish subsidies and trade barriers have failed to achieve one of their primary objectives: saving the French family farm.

According to a study just released by the French Statistical Institute (INSEE), and reported in today’s Financial Times, an average of 100 French farms have gone out of business EVERY DAY for the past 50 years. The number of farm workers in France has dropped by two-thirds in the past 25 years. France’s farm exports have been declining by 3.4 percent per year since 1999, and farm household income has actually fallen during the past decade, while the incomes of non-farm households in France have been going up.

The decline of the French farm has occurred despite, or perhaps because of, the generous support of the CAP. France’s farmers receive the equivalent of $11.6 billion a year in handouts, more than one fifth of total European Union spending on agriculture. Those subsidies have arguably kept French farms from becoming more competitive and thus contributed to their long-term decline.

When the EU’s farm commissioner, Mariann Fischer Boel, warned that French farmers should seek second incomes outside the farm sector to survive, the French farm minister denounced her comments as “an insult to the social model to which European citizens are profoundly and legitimately attached.”

Is an agricultural “social model” that costs billions of euros a year and only adds to the decline of the French farm worth holding on to?

Rock on, Canada

I realize I have already blogged about agriculture today, and normally I would spare you a second blog entry, but there has been an important development in agricultural trade circles. Canada has requested consultations (the first step in a full-blown trade dispute) with the United States over U.S. farm programs.

Specifically, the Canadians want to discuss the subsidies given to U.S. corn farmers, and the damage they did to other world corn producers because of price suppression effects. Enquiring minds in Canada also want to know more about the amount of trade-distorting support that the United States paid to its farmers overall in “certain years” (the press release doesn’t specify which).

It’s hard to say at this point what effect, if any, this development will have on the U.S. farm bill debate, or the WTO negotiations in the Doha round. But it would be a stupid brave Congress indeed that paid no heed to the WTO effects (in litigation or negotiation) of American farm subsidies when drafting a new farm policy. History has shown that the costs of farm welfare to consumers and taxpayers tend to get short-ish shrift when juxtaposed with the farm lobby, but firms facing possible retaliatory sanctions or failed market access ambitions as a result of an adverse ruling against the United States might carry more weight.