Listening to Dick Cunningham's talk last week, it seemed to us that his was a tapestry woven from four threads. One was
the changing nature of trade itself, the movement away from trade in goods, toward trade in tasks. In essence this is the anchoring fact of global value chains, GVCs. A second strand was the history of global trade negotiations since the historic summer of 2008. That was when the WTO almost reached agreement on the outlines of a Doha Round deal. But they didn't. (We'll get to that in a minute.) In the wake of that failure much of the world moved on to other negotiations. These are the so-called "mega-regionals," including the TPP and RCEP in the Pacific and TTIP across the Atlantic. They are the sector specific plurilaterals, including the negotiations to upgrade the Information Technology Agreement, the Trade in Services Agreement, and the negotiations, announced this past January, on Trade in Environmental Goods. And there are the FTAs including the now completed Japan-Australia FTA and the almost done agreement between Canada and the EU, with more to follow and many more not listed.
The third strand - and for the August 5 conference the most important- was how developing countries view these developments.
Finally, the fourth strand, the most critical but the hardest to assess, is how developing countries will react to these developments.
This is the trailer, not the movie. We have changed the topic order a bit, but here is a sampling of what Dick Cunningham had to say about these issues:
DEVELOPING COUNTRY ATTITUDES. You can't look at developing countries as a monolith, Mr. Cunningham said, not globally and not in Africa. But there was one generalization he did make, namely, that, as far as the Doha Round or the Doha Development Agenda, DDA, is concerned
"there is a pervasive disillusionment" in developing countries. They believe they were promised things, a round for free, a round devoted to their development, that didn't begin to materialize.
But the disappointment he described goes beyond the failure to deliver the development that was repeatedly promised throughout the DDA. He was also talking about the disappointment of having a WTO and a negotiation that still seems to be dominated by the major economies, the United States, the European Union etc. when, for many in the developing world - especially the BRICS [Brazil, Russia, India, China, and South Africa] - it's their turn to run the show.
Against that background, Mr. Cunningham's description of the WTO's failure to get a deal six years ago is as enlightening as it is discouraging. In part to illustrate the role of geopolitics in maneuvers in the WTO, he said:
"You will see situations in which BRICS members support another BRICS country even though it's demonstrably contrary to their economic interests. A classic example I would give of that is 2008 in Geneva, where the other BRICS supported India in a food security - in an agricultural subsidization plan masquerading as food security - even though it was clearly contrary to their interests as agricultural exporters to have a major country having massive food, agricultural stockpiles put together that would overhang the world market and periodically get dumped off on to the world market.
"But they supported the Indians [then] for reasons of BRICS solidarity and for reasons for moving toward an international regime in which they have at least equal say, even a greater say, than the developed countries."
He made these comments less than a week after India's successful effort to block the WTO's adoption of the next phase of the Bali Trade Facilitation deal. Again the issue was the WTO status of an Indian "food security" program. Only this time, as Mr. Cunningham pointed out, India did not have the support of the other BRICS.
THE CHANGING NATURE OF TRADE. The emergence of global value chains is arguably the dominant reality of the last 15 years, and it is the fact to which all the policy makers and would-be policy makers have to respond. Some developing countries - Lesotho for example - embrace the concept and have had significant success in participating in global value chains. They see trade, including GVC driven trade, as integral to their development. Some, but not all. "The South African government hasn't drunk that Kool-Aid," Mr. Cunningham said.
For South African officials and others, the big multinational corporations, the MNCs, will reap most of the value from global value chains, not their companies. And they are wary of the "behind the border" rules-based negotiating objectives of mega-regionals like TPP, which they see as invading "policy space" best occupied by national governments.
Another problem with mega-regionals for developing countries, Mr. Cunningham said, is the lack of balance in the negotiations:
"The developed countries in these negotiations have relatively little to give - [Their tariffs are already low] -- but [they] are asking a lot from the developing world and a lot in the rules area."
WHERE TO GO FROM HERE. Again, some in the developing world are strongly committed to harnessing trade and trade liberalization to their own development aspirations, but others are at best ambivalent about how to approach a shifting trading environment. On that score, three passages in particular from Mr. Cunningham's presentation seem worth recalling here.
2008 and the Farm Bills. One of these has to do with the future of the WTO, which in part, means the future of the Doha Round. Yes, one can draw some encouragement from the fact that the African Union and African Members of the WTO opted in the end to move forward on trade facilitation. And trade facilitation just might get done. That's up to India. But what of the broader deal. Mr. Cunningham said:
"You might have thought that we were close to an ag deal and only India's opposition, backed by China, skewered that deal in 2008. Whatever may be the truth of that, you can't go home again. You can't go back to that because the United States can't go back to that."
Why? Because the subsidies that could be triggered under the 2014 Farm Bill far exceed the caps that the U.S. was willing to accept in 2008.
AGOA and Preferences. Last week was Africa week in Washington. It was, among other things, the week of the first U.S.-Africa Leaders' Summit, and trade preferences for Africa were a major topic. That means the preferences under the African Growth and Opportunity Act, AGOA, which expires next September, and the preferences under the Generalized System, GSP, which expired last July.
Our assumption is that both laws will be renewed, but Mr. Cunningham looked beyond that. He paraphrased the WTO's Deputy Director-General from Nigeria, Mr.
Yonov Frederick Agah, who told a group in Africa, in effect:
You've got to get over the hang-up of your preferences, because, one way or another, within the next ten years, your preferences are all going to be gone. A FINAL QUESTION. As noted, Dick Cunningham is a confirmed multilateralist. So we were not surprised, but we did pay attention when, near the end of his presentation on August 5, he posed this question:
"Do we have the kind of leadership in the developed countries that can change the perception of the eastern part of Latin America and the perception of much of Africa ... that trade negotiations and trade liberalization is not a game that can work for them?"
