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International Political Economy #8

The World Trade Organization

W. K. Wineco | IPE #7: The Doha Round

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William Kindred Wineco
Indiana University Bloomington

September 24, 2013

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Length of Negotiating Rounds

W. K. Wineco | IPE #7: The Doha Round

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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 of the Core, not the Gap.

Heavy reductions in manufacturing taris; fewer in agriculture. Capital-rich countries benet from trade in manufactures; land-rich countries benet 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.

W. K. Wineco | IPE #7: The Doha Round

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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 taris/supports still average over 60%.

This kills farmers in the developing world. Also expensive (and sometimes unhealthy) for those in the developed world.

W. K. Wineco | IPE #7: The Doha Round

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Agriculture Taris

W. K. Wineco | IPE #7: The Doha Round

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Agriculture Versus Non-Agriculture, 2008

W. K. Wineco | IPE #7: The Doha Round

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WTO Politics

The WTO, like all institutions, both reects and restrains power. Rich countries have leverage in negotiations, and capabilities in adjudication.

Comparative (dis)advantages vary across countries, denitionally; 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?

W. K. Wineco | IPE #7: The Doha Round

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Where We Left O & 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.

W. K. Wineco | IPE #7: The Doha Round

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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.

W. K. Wineco | IPE #7: The Doha Round

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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:
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Outcome of Uruguay round, which has new agreements on agriculture and textiles. In exchange, U.S. (with support from E.U. and Japan) demands inclusion of TRIPS. Developing countries dont like strict interpretation of TRIPS, particularly on pharma. Their protests lay foundation for the initiation of the Doha round. Deadlock in the Doha round, now in its 12th year.

W. K. Wineco | IPE #7: The Doha Round

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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.
Dierent preferences: U.S./E.U. wants open manufacturing and closed agriculture; G-20 wants closed manufacturing and open agriculture.

W. K. Wineco | IPE #7: The Doha Round

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Bargaining in One Dimension Agriculture

Simple spatial model: prefer outcomes closer to your ideal point. Purely distributive bargaining: zero-sum.

W. K. Wineco | IPE #7: The Doha Round

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Complicating the Interaction

W. K. Wineco | IPE #7: The Doha Round

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Mapping Out the Negotiation - No Joint Gains

W. K. Wineco | IPE #7: The Doha Round

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Mapping Out the Negotiation - Lots of Joint Gains

W. K. Wineco | IPE #7: The Doha Round

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Mapping Out the Negotiation - Joint Gains

W. K. Wineco | IPE #7: The Doha Round

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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 nd 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:

W. K. Wineco | IPE #7: The Doha Round

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Mapping Out the Negotiation - Joint Gains

W. K. Wineco | IPE #7: The Doha Round

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The Trade Dilemma

U.S./E.U.

Open Agriculture

Protect Agriculture

W. K. Wineco | IPE #7: The Doha Round

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G-20 Open ManufacturingProtect Manufacturing 2 0 3 1 2 3 0 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 that requires consensus, this makes agreement dicult. There are dierent kinds of members now, with dierent interests.
Are we seeing a weakening of U.S. hegemony? Is this the inevitable consequence of a successful multilateral liberal order?

W. K. Wineco | IPE #7: The Doha Round

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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 identies, is that possible? Is the U.S. now in the same position as it was at the end of WWII? What would Ikenberry say?

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