Events

Second International Trade Symposium

February 24, 2006 // 8:00am5:00pm
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Latin American Program
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Panel 1 - Agriculture, NAMA and the Future of the Doha Round

Moderator: Sergio Sobral, Partner, Castro Barros Sobral Gomes Advogados
Speakers: Gary Clyde Hufbauer, Senior Fellow, Institute for International Economics; Clodoaldo Hugueney, Permanent Representative of Brazil in Geneva; Dorothy Dwoskin, USTR Senior Trade Negotiator; Timothy Reif, Chief Trade Counsel, Subcommittee on Trade, House Ways and Means

Gary Clyde Hufbauer highlighted the limited progress made during the WTO Ministerial Conference in Hong Kong and Doha Round of the WTO negotiations to date, including the pushing back from 2010 to 2013 of the promise to drop all agricultural subsidies. All previous deadlines in the Doha round have been missed, and approaching deadlines will likely be missed as well. Hufbauer expects that the United States will need to renew its trade promotion authority (TPA) before conclusion of the round. Hampering movement is Europe's desire for non-agricultural market access (NAMA) and services concessions from developing countries before it agrees to reduce its own agricultural subsidies. Equally as troubling, the U.S. Congress is currently debating the renewal of the Farm Act, which would ensure the continuation of distortionary subsidies for years to come. However, the demand for agricultural liberalization from developing countries is hypocritical, according to Hufbauer, as some engage in protectionist measures themselves, notably India, and to a lesser extent, China. Brazil, however, is much more enthusiastic to trade liberalization.

Hufbauer said that the difficult negotiating circumstances, lack of enthusiasm from the business world, and resistance to globalization in general result in little chance for a satisfactory result. A summit, such as the one proposed by President Lula of Brazil to include countries other than the G-8, may be able to raise the enthusiasm level enough to bring Doha to a successful conclusion. However, if it "slides to a shallow conclusion," he expects that bilateral and regional agreements will gain momentum over the next decade. While regrettable, Hufbauer concedes that this would not be the worst possible outcome.

Dorothy Dwoskin took issue with Hufbauer's eulogy for the Doha round. She believes that Doha can get back on track in the next couple of months. After five years of negotiation, there is a determination to meet the end of the year deadline. The Hong Kong meeting was a milestone in clearing away development issue brush. Overall, she said that the negotiations are not "stuck" but that "we're not moving as fast as we'd like to," especially given Brazil's elections and the U.S.'s TPA.

There is much common ground between the U.S. and Brazil, Dwoskin argued, such as consensus over anti-dumping, rules, trade facilitation, and even fish subsidies. Brazil has shown the willingness and commitment to work hard for a saleable result, acknowledging that the U.S. partnership with Brazil is very valuable. To move forward, Dwoskin advocated playing the "what-if game", increasing trust between parties, and understanding that NAMA should not be predicated upon agricultural concessions. She criticized Brazil's request for "policy space," which would give it freedom to make it own development decisions. The United States has the freedom to make its own development decisions without asking for a blank check from its WTO partners, so Brazil should be able to do the same. Additionally, NAMA's framework already has flexibility provisions for special products and safeguards. Too much flexibility, she warned, could undermine the liberalization process.

Echoing calls to complete negotiations by the end of 2006 not only for the sake of the world economy, but also because the Round's failure could put multilateral negotiations in jeopardy, Clodoaldo Hugueney argued that an agricultural agreement is vital, as agriculture embodies the development dimension of trade. The agricultural sector needs to follow the footsteps of the industrial sector, which has been gradually abolishing trade distortions for the last 40 years. Hugueney reminded the audience that Doha "should be, and was launched to be, a development round."

NAMA and services, Hugueney countered, are directly linked to agricultural market access. He acknowledged developing countries have to give in to some concessions, and offered that the larger developing countries such as Brazil are willing to contribute even more. However, the United States and European Union have billions of dollars of trade-distorting processes that need to be addressed. He joked that the United States has been enjoying a lot of "policy space", equaling about $70 billion in trade-distorting measures. Meanwhile, Europe has only made 39 percent of its market accessible through Central Agriculture Policy cuts, while asking for 76 percent cuts for NAMA. For services, Brazil already has an open market in services and there is no need for any major political decisions in this area. Brazil finds the domestic regulation and rules to be very important, especially in regards to anti-dumping and fishery subsidization.

The Capitol Hill has fully embraced liberalization, Timothy Reif argued, offering some background observations about the mood and stance of the U.S. Congress. He expects that within the year there will be pressure to renew Fast Track legislation or to finish the Doha Round, both of which he said are difficult to predict, but will result in greater Congressional engagement. Among the challenges is the need for a broad-based coalition, in spite of the "shredding" of the bi-partisan alliance on trade issues. Reif, clarified a misperception about Congress' perspective on globalization and protectionism. He noted that difficult fights, such as the one over CAFTA, are not over free trade, but instead on the regulation of trade. Both political parties pro-liberalization; it is labor laws and standards that are the subject of debate.

Reif portrayed Capitol Hill as susceptible to additional agricultural market access, but tempered by the lack of prospect because the European Union is farther behind. Concerning rules, anti-dumping is the only one open for broad negotiation, and a greater use of dispute-settlement mechanisms should be encouraged. Reif also emphasized concern among congressional leaders that even successful agricultural concession might not help the poorest developing countries, and that perhaps the World Bank should become involved to better promote poverty alleviation.

Sergio Sobral closed the discussion by noting the challenges of organizing market access and the dangers of subsidies, which can lead to over-farming and its detrimental side effects. Overall, the panelists shared a concern for development and the desire to move forward on the negotiations, though with varying levels of optimism about the prospects.

Panel 2 - Disputes and Dispute Settlement in the WTO: Evolution and Perspectives

Moderator: Tito Amaral de Andrade, Partner, Machado, Meyer, Sendacz e Opice Advogados
Speakers: Flávio Marega, Head of the Dispute Settlement Division of the Brazilian Foreign Ministry; James Bacchus, Senior Partner,Greenberg Traurig LLP; David Palmeter, Senior Counsel, Sidley Austin LLP; Gawain Kripke, Senior Policy Advisor,Oxfam America.

Brazil has participated in WTO dispute settlement since 1995 and according to Flavió Marega, has been a party to 51 disputes, a number only exceeded by the United States, the European Community, and Canada. Most Brazilians believe that the dispute settlement system has worked well over the years, despite its flaws, thereby leading Marega to question why the system is being reviewed. One answer might lie in the implementation of dispute panel rulings. As a developing country and also a major actor in disputes, Brazil has encountered the challenge of implementation; in the case of the United States., Brazil has still not seen the implementation of their victory in the 2004 cotton case brought to the dispute settlement body. This has caused Brazil to join onto Group of Seven (G-7) initiatives in DOHA in order to develop proposals related to problems of implementation.

In reviewing the dispute settlement process, Brazil seeks solutions that are trade-enhancing, not trade restricting. The country also supports the adoption of new rules that would expedite all parts of the processes. Marega emphasized that while Brazil will continue to support trade-enhancing solutions, they are not afraid to exert their rights in the dispute settlement system if the problems of implementation are not solved.

Most developing countries have not had the same level of success as Brazil when it comes to resolving disputes within the WTO. According to Gawain Kripke, Oxfam International uses the Dispute Settlement Understanding (DSU) system to raise awareness of the inherent inequities caused by trade, particularly through disputes concerning agriculture – an industry relied upon by the global poor. Disputes brought against larger countries, like the United States and those of the European Community, by poorer nations can offer a "teaching moment" to the rest of the world, explained Kripke. The case brought against the United States by Brazil contesting cotton subsidies allowed by the 2002 Farm Bill, for example, showed the U.S. public and Congress that the bill itself was not sustainable under current trade rules. Kripke observed that while the political enthusiasm for the DOHA Round is relatively weak, the cotton case has influenced internal U.S. policy, has led the Department of Agriculture to promote a new farm bill, and has become a driver for changing the rules of the game.

Oxfam has determined that there are at least eleven more cases that could be brought against the United States. and European Community similar to the cotton and sugar cases brought by Brazil. They plan to use these cases to pressure the offending countries to reform their trade practices.

David Palmeter noted the enormous feat that was accomplished in the creation of the DSU during the Uruguay Round of the WTO; 150 nations now submit themselves to the jurisdiction of this international tribunal. However, complaints have arisen regarding three "perceived imperfections" in the system. One such imperfection is a drafting error found in the rules governing the sequencing of events that occurs after a case is decided. The losing party is usually given about 90 days to implement the finding of the panel, but, a loophole allows the winning party to take action or "retaliate" against the losing party if they have not implemented the findings of the panel within 30 days, thus negating the previous rule. While this glitch is generally resolved on a case-by-case basis, it does indicate the reluctance of the WTO to implement large-scale changes through a legislative process. While no one has a stake in preserving this mistake, it has proved almost impossible to address politically in Geneva.

Pinpointing yet another problem within the dispute settlement system, Palmeter criticized the DOHA round for not producing "remand authority" for the court, thus denying cases reversed by the appellate body the opportunity to be reviewed again by the lower court. In Palmeter's opinion, this leads to the belief that decisions made by the appellate court are, in the words of former Supreme Court Justice Robert Jackson, "not final because we are infallible, we are infallible because we are final."

Lastly, Palmeter criticized the premise of using sanctions as a way to coerce nations into compliance with the rulings of the dispute settlement body. Countries must be convinced that the benefits of complying with the rulings outweigh the cost – particularly since many rulings are against economic superpowers that would not be greatly impacted by sanctions placed on them by smaller nations. Non compliance serves to undermine the credibility of the WTO.
The appellate body is "a human institution with human failings," said Jim Bacchus, who reiterated the lack of urgency felt by countries for a review of the DSU. Bacchus echoed Palmeter, calling for the WTO to make changes instead of allowing the system to "improvise" on a case by case basis, but that negotiations are needed to facilitate rule making so that less issues are dumped into dispute settlements. Bacchus believes the issues of sequencing, remand, and third-party rights can be agreed upon in order to finish the review of dispute settlement. However, he also pointed out inconsistency in other procedural rules decided by panels on a case by case basis. These can be seen in the variation of standards used to define evidence and facts in each case. Outside of the WTO, Bacchus called for the political will of politicians to uphold free trade and stop blaming the WTO, which, in any event, is composed of whomever member states appoint.

Panel 3 - Antidumping Practice and Rules Negotiations

Moderator:Aluísio de Lima-Campos, Economic Advisor, Brazilian Embassy
Speakers: Gilberto Ayres Moreira, Manager, Gaia Silva Rolim & Associados; Lyle Vander Schaaf, Partner, Bryan Cave LLP; Dan Ikenson, Trade Policy Analyst, Cato Institute; Terence Stewart, Partner, Stewart and Stewart; Renê Medrado, Senior Associate at Pinheiro Neto Advogados.

Gilberto Ayres Moreira expressed concern for antidumping rules, which he considers outdated and limiting. The rules, created with the General Agreement on Tariffs and Trade (GATT) in the 1950's, no longer reflect the world economy, as Article 2.7 leaves no leniency for transitional economies. GATT had a methodology to differentiate free-market economies from those with state intervention to ensure that dumping was not practiced by checking prices from planned countries against those of others. Transitional economies with partially open markets, such as China's, should not be treated as planned ones and so should stop being targeted for antidumping practices.

Brazil, along with 50 other countries, has recognized China as a market economy, leading to higher trade flows. As it is, the GATT methodology is meaningless; Moreira proposes changing Article 2.7 to allow for more negotiating room, which would benefit both Brazil's economy and also free trade in general. For instance, recognition of only certain sectors could be used as a bargaining chip for better accountability, transparency, and rules

Lyle Vander Schaaf warned trade negotiators to be careful what they ask for in the Doha Round, for they just might get it. For instance, the Uruguay Round demonstrated that negotiators opposed to antidumping got their way, only to end up worse off from the implementation. Likewise, the United States was a key advocate of strict enforcement of dispute resolutions, only to become the target of DRU actions more often than not. Although perhaps, Schaaf added, this was an intentional effort by the U.S. government to better comply with trade rules while sidestepping confrontation with powerful domestic interest groups likely to lose out from foreign competition.

Measures to address injurious dumping have been part of the multilateral trading system since the creation of the GATT. Article 6 of the agreement, which provides members with basic rights to protect against antidumping, has benefited developing countries more than developed countries, Terence Stewart argued. Indeed, of the 2,743 antidumping cases initiated in the first eleven years 1,643, or almost 60 percent, were initiated by developing countries. 119 were initiated by Brazil. To be sure though, the volume of trade in dispute in these cases tends to be very small – typically less than 1 percent of total trade is affected.

One of the areas for negotiations within Doha has been antidumping rules. Stewart argues that the system be trimmed of unnecessary costs and standing requirements eliminated to increase effectiveness. Likewise, duties should be permitted to be assessed against the first unrelated party, whether it is the importer or not. Small developing countries should be able to establish joint investigating bodies that receive WTO assistance to better protect their interests. Finally, underlying causes of international price discrimination must be addressed, such as the lack of solutions for situations of global excess capacity.

Dan Ikenson looked at the prospects for real reform, given new emerging constituencies' demand for changes in antidumping measures. The United States, for example, argues that an antidumping law is necessary to enforce order and better enable companies to increase productivity. Ikenson thinks that an antidumping law would be unnecessary as safeguard rules are already successfully in place. Nevertheless, problems exist, such as zeroing, the cost of litigation, and the fact that not all countries implement the antidumping provision.

Several missions have been formed to go over a variety of themes on the concerns and corrections to be made in the rules. Some reform will come about in the Doha Round, but Ikenson does not expect anything too dramatic. He believes the focus of reform should be on making the measures more user friendly.

Not being a part of the negotiations, Renê Medrado was able to present a perspective from the outside, showing the impact these negotiations have on the practice itself. Antidumping rules negotiations are highly importance for the success of the Doha Round. Countries are calling to prohibit zeroing, the United States wants the non-attribution rule to be clarified, and investigated exporters must be freed of undue burdens.

The impact of negotiations on Brazil will be mixed, as the country has both offensive and defensive interests between the top ten imposers of antidumping cases and the top ten investigated exporters accused of dumping.

Medrado echoed Stewart's calls for a focus on causation. He recommended that injury should not be proven through the general practice of just laying out numbers, but that an analytical examination of the effects of dumping must occur as well. Finally, rules on the effects of imports must be improved, between price depression, suppression, and undercutting.

Alusio de Lima-Campos reiterated the importance of rules negotiation and highlighted its importance in fully understanding market access. He mentioned the case of the US investigation of Brazilian shrimp exports as a case in which discretion has been visibly abused.

Panel 4 - Bilateral Relations between Brazil and the United States

Moderator: Ambassador Roberto Abdenur.
Speakers: Ambassador Sergio Silva Amaral, Counselor, Felsberg e Associados; Whitney Debevoise, Partner, Arnold and Porter LLP; Susan P. Cronin, Director for Western Hemisphere Economics and Brazil and the Southern Cone at the National Security Council.

The United States and Brazil should have closer economic and political relations given their similarities and shared values, such as concern for the environment, democracy, and market economics. However, Sergio Amaral argues, divergences on Iraq, the War on Terror, and drug trafficking prevail over convergences. Silva is not optimistic about trade bringing the two countries together, as the stakes are too high for success in the WTO and FTAA multilateral negotiations, and the United States is displaying worrisome signs that it is veering more and more towards protectionism. To be fair, such a reality is typical of the region as a whole, Silva claimed, with recent trends in Argentina and Uruguay further signaling a need for a rejuvenation of regional integration measures. What the United States and Brazil needs, Amaral contended, is a revised road map that incorporates more of Brazil's demands, acknowledging its needs beyond security, the awakening of social movements, and the rise of numerous new lefts.

Whitney Debevoise focused on economic reforms that could better bilateral relations by calling attention to the need for a US-Brazil tax treaty and for Brazil to adhere to international instruments for the protection of foreign investment. A bilateral tax treaty would set stable rules, prevent double taxation, and discourage tax evasion. Brazil's future growth depends on the protection and promotion of foreign direct investment, mainly from U.S. firms. Debevoise argued that signing the International Centre for Settlement of Investment Disputes would be an asset for Brazil, to help convince the global investment community that Brazil is a lucrative and stable destination for investment.

According to Susan Cronin, good bilateral relations exist between the United States and Brazil, judging by the UN stabilization mission in Haiti, science and technology cooperation and joint ventures in Lusophone Africa. Likewise, Cronin described the trade relationship as quite healthy, with a significant portion of trade representing U.S. components send to Brazil to put together into aircraft. She agreed with Deveroise in the need for a tax agreement, especially given the dramatic increase in foreign direct investment not only of U.S. companies in Brazil, but Brazilian companies in the United States as well. Cronin did concede to divergent interests between the two countries in regards to regional trade agreements. She pointed out that Brazil is one of the few countries in Latin America that do not have some form of preferential access to the U.S. market, and because of this Brazil's agenda is largely different than its neighbors in regards to the FTAA. In short, bilateral relations between the United States and Brazil were high, as the two have agreed to disagree.

Roberto Abdenur called into question Silva's negative assessment of bilateral relations, emphasizing the evolution of Brazil – U.S. interest convergences and mutual efforts to find a common ground on the environment, security, and trade. Changing public perceptions have reflected this change. Likewise, bilateral trade has been increasing; a smaller overall percent of trade with the United States signals the success of Brazilian export diversification efforts, not trade deterioration. Abdenur clarified Brazil's anti-FTAA stance at Mar del Plata as more a concerted effort to preserve the unity of Mercosul than an attack at hemispheric trade liberalization. Brazil, he claimed, is waiting for the results of the Doha Round before pushing forward with FTAA negotiations, and in any case would prefer to negotiate "4 plus 1" talks between Mercosul's four countries and the United States.

Written by Daniel Budny, 691.4087

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