Milling & Baking News - January 21, 2014 - 28

Washington 

Trade deals: M.T.N.s or F.T.A.s?
BY ROBBIN JOHNSON

On Dec. 9, 2013, trade ministers meeting in Bali, Indonesia, concluded a deal
that consisted largely of a "trade facilitation" agreement to ease customs
procedures. While any agreement represents progress under the 12-year-old
Doha Round, it is far from clear that
ministers can develop a further work
program over the next year that will
yield more substantive reforms. Multilateral trade negotiations (M.T.N.s), in
other words, remain largely dormant.
Meanwhile, the North American
Free Trade Agreement (NAFTA)
celebrates its 20th anniversary in
2014. The Obama administration has
launched a Trans Pacific Partnership
(T.P.P.) negotiation with Pacific Rim
countries that initially did not include

its NAFTA partners Canada and Mexico and that appears to exclude China
purposefully. And, it has initiated a
Transatlantic Trade and Investment
Partnership (T.T.I.P.) negotiation with
Europe while rebuffing Canadian and
Mexican participation.
Free trade agreements (F.T.A.s), in
contrast to M.T.N.s, seem alive but very
selective. What should the agricultural
community make of all of this?
Reasons for optimism
The frustrations with M.T.N.s are real
and well-grounded. The World Trade
Organization (W.T.O.) and globalization
have been emasculated by a variety of
forces: continued reluctance to address
agricultural protection; the Doha emphasis on universal consensus around
any agreement; and the multiplication of parties to and points of view on
M.T.N.s. Regional F.T.A.s have gained
momentum because they largely bypass
sticky domestic agricultural support issues, bring together "coalitions of the
willing" and promise forms of integration that strengthen the export competitiveness of regional supply chains.
Though F.T.A.s typically minimize
28 / January 21, 2014 Milling & Baking News

their agricultural content, U.S. agricultural interests stand to gain indirectly
from them without paying much of
a price in terms of reduced domestic
supports. F.T.A.s may spur economic
growth, which in turn raises per capita incomes and related demands for
more animal protein, fruits and vegetables and fats and oils in the diet.
Such income growth and dietary diversification will stimulate demand
for exports of grains, oilseeds and animal products - land-intensive goods
in which the United States enjoys a
comparative advantage.
At the same time, regional specialization develops across supply chains
and product mixes. Under NAFTA,
for example, beef production has become more streamlined across Mexico,
Canada and the United
States, making North
American beef production more globally
competitive. And fruits
and vegetables production has integrated to
be more efficient and
less seasonal.
It may be hoped that
these income and integration effects would
develop further, if the
T.P.P. negotiations with
selected Asian partners and the T.T.I.P.
negotiations with Europe succeed. Approximately 40% of global trade would
be swept up in them, spurring income
growth and preferred access for U.S.
farm products in some key markets.
Reasons for concern
There are several reasons for concern about this movement from global
to regional trade negotiations. For
one thing, agriculture presents some
sensitive issues within both T.P.P. and
T.T.I.P., with no assurance that those issues will be resolved favorably. Differences over bioengineered products and
sanitary/phytosanitary standards are
prominent examples, but so are many
traditional market access issues involving high tariffs or non-tariff barriers.
Moreover, as trade liberalization
progresses in manufacturing and services, the lack of progress in reforming
domestic farm programs and border
protections further isolates agricultural issues. Though the W.T.O. requires
that "substantially all" trade must be
liberalized within an F.T.A., there is a
good chance that agricultural reform
shortcomings will be overlooked in

the enthusiasm for progress on other
fronts.
A third source of concern is broader.
Multilateral trade reform in manufacturing and services has promoted
greater specialization along lines of
comparative advantage in these sectors, spurring productivity gains and
lifting millions out of poverty. The
continuation of food self-sufficiency
strategies - especially in developing
countries - will retard their rates of
economic growth and poverty reduction. It also leaves many of the chronically poor, hungry and malnourished
vulnerable to supply disruptions or
price spikes. In many ways the largest
failure of Doha has been its inability to
secure sufficient agricultural reforms
to ensure greater food security and
supply resilience.
A final concern is less economic
than geopolitical. The commitment
to multilateral trade reform that grew
out of Bretton Woods was motivated
in large part by a desire to avoid a balkanized world and competing spheres
of economic and political influence.
The effect of T.P.P. and T.T.I.P. could
well be to re-create just such a disjointed world. Countries like China, Russia
and India that get excluded from such
arrangements may justifiably feel discriminated against. These and other
more advanced developing countries
also are pursuing F.T.A.s of their own.
The resulting complex web of tariff
preferences, rules of origin and trade
diversion is a potentially serious
burden on and distortion of world
commerce. And, if these F.T.A.s are
not open to broader participation by
those willing to assume their obligations - what some call "open regionalism" - the result could be dangerous rivalries.
Regional F.T.A.s need not turn out
to be discriminatory, if they include
provisions for openness. They need
not turn out to exclude agricultural
reforms, if negotiators press hard for
them. But they create these risks. And
where they do, they may purchase regional prosperity gains at the expense
of rising global tensions. This is why
it remains important to find ways
forward on a substantive multilateral
trade reform agenda. MBN

Robbin S. Johnson, a fellow
with the Hubert H. Humphrey
Institute of Public Affairs,
is a contributing editor at
Sosland Publishing Co.
bakingbusiness.com / world-grain.com

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Milling & Baking News - January 21, 2014

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