GHY Tradelines

(Evan Soltas – Bloomberg)

Are free-trade agreements protectionist? It sounds like a silly question, but it’s always worth asking of regional (as opposed to global) trade pacts – like the ones the U.S. is seriously considering with the European Union and the Pacific Rim.

Economists are often mocked for free-trade worship, but they’re skeptical when appropriate. Jacob Viner, a University of Chicago economist, argued in 1950 that free-trade agreements don’t necessarily promote free trade.

Trade deals have two effects, he said: They create trade by lowering the cost of international exchange, but they also divert it by the selective reduction of barriers. Whether the first or the second effect predominates determines whether the deal is good or bad.

To see this more clearly, imagine three countries, Viner wrote, and call them A, B and C. Country A can import a good from B and C. At the beginning, A has the same import tariffs against both. B produces the good less efficiently than C, so A buys the good from C. Then A and B make a trade agreement, but they leave out C. The reduction in tariffs leads A to buy the good from B, the less efficient producer. Now the world is worse off and trade more distorted. Read more here.
 

(FAITC)

The Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, today concluded his active participation in meetings with counterparts from the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO) in order to advance Canadian interests.

“As a government that has put Canada at the forefront of trade liberalization, we believe that trade and investment represent the twin engines of growth for the global economy,” said Minister Fast. “My message to my counterparts this week has been clear: there is no better creator of jobs, growth and long-term prosperity than freer and more open trade. In order to sustain the global economic recovery, our goal as legislators must be to turn border bottlenecks into global gateways.”

While in Paris, Minister Fast also welcomed the joint OECD-WTO report on global value chains, which will help governments gain a better understanding of the interconnectedness of trade and the world economy. Minister Fast also met with WTO Director General-designate Roberto Carvalho de Azevêdo and made clear Canada’s belief that meaningful progress on trade liberalization must be made at the WTO ministerial conference, scheduled to take place in December 2013 in Bali, Indonesia.

“The consequences of a lack of meaningful progress at Bali cannot be overstated,” said Minister Fast. “Essential to the credibility of the multilateral trading system itself is the ability to update rules and negotiate new commitments. Failure to deliver in Bali may confirm to the world that after 12 years of trying, the broader Doha agenda is simply not viable.”

OECD members account for approximately 64.5% of the world’s GDP, 58.5% of total world merchandise trade and 18% of the world’s population. Nine of Canada’s top 10 trading partners are members of the OECD (the exception being China).

Canada’s trade with OECD countries accounts for more than 80% of its total trade – amounting to $748.8 billion in 2012, up 2.6% from 2011.

Canada also welcomed the decision to invite Colombia and Latvia to begin the process toward OECD membership in 2013, and to consider membership for Costa Rica and Lithuania in 2015.
 

(MercoPress)

The Alliance of the Pacific bloc that includes Colombia, Mexico, Peru and Chile on Thursday agreed to eliminate tariffs on most goods to promote free trade between the countries and increase exports to Asia.

The members of the nascent group also aim to promote free market policies as the key to economic growth, attract more foreign investment and integrate their capital markets and energy networks. […] The cluster of nations includes some of Latin America’s fastest-growing economies. They have a combined population of 210 million and their total GDP accounts for more than a third of Latin America’s GDP, said Santos, dubbing the Alliance the “new economic and development motor” of the region.

The Pacific countries are free-trade advocates contrary to what is going on along the Atlantic, where Mercosur states have been more reluctant to drop barriers to trade, have been accused of protectionism and pretend governments should play leading roles in different areas of the economy. Read more here.
 

(Bridges Weekly)

Agriculture committees in the US Senate and the House of Representatives cleared their respective versions of a potential 2013 Farm Bill last week, marking the first major advance in a process that had stalled last year. However, with the full Senate now in the midst of debating the legislation, some members of the chamber are raising questions on the impact of the new bill on trade and whether its provisions will indeed be WTO-compatible.

Although the proposals under discussion have ostensibly cut trade-distorting counter cyclical payments – transfers to farmers when prices fall – a host of new programmes appear poised to take their place. The Senate, for instance, has proposed two schemes in its version of the Farm Bill: Adverse Market Payments (AMP) and Agricultural Risk Coverage (ARC). Representatives in the House, meanwhile, are assessing the merits of Price Loss Coverage (PLC) and the Revenue Loss Coverage (RLC). Read more here.
 

(IndustryWeek – AFP)

Visiting Premier Li Keqiang promised Tuesday to open China’s vast domestic market wider to India and forge a “dynamic trade balance” to deepen economic ties and ease tensions between the Asian giants.

The trade push, which the countries say will supply “new engines” to lift the stumbling global economy, came amid efforts by the nuclear-armed powers to put a military dispute along their contested Himalayan border behind them.

“We have the ability to mitigate the trade imbalance between our two countries,” Li told business leaders in New Delhi, responding to Indian worries over trade that is heavily skewed in China’s favor. “The Chinese side is willing to provide facilitation for more Indian products to access the Chinese market,” added Li, who chose to make India his first foreign stop after taking office two months ago. Read more here.
 

(MercoPress)

Brazil’s Roberto Azevedo vowed to revive the deadlocked World Trade Organisation, as he was confirmed this week as the incoming leader of the body which sets the rules for global commerce.

“I have been working in and with this organisation continuously for the last 15 years,” Azevedo, still officially Brazil’s WTO ambassador, told the 159-country organisation’s assembly which approved him by consensus as its next leader.

“I have seen it in much better days. I pledge to all members that I will work with them, with unwavering and steadfast determination, to restore the WTO to the role and pre-eminence it deserves and must have,” he said. Read more here.
 

(Reuters)

China has raised concerns about European Union plans to negotiate an ambitious free trade deal with the United States, fearing it is a protectionist move, a senior EU official said on Tuesday.

Chinese officials queried EU foreign policy chief Catherine Ashton about the issue when she visited Beijing at the end of April for talks with Foreign Minister Wang Yi and other Chinese leaders. [...]

China worried about whether the plan was “a pulling of the wagons into a circle to … insulate the transatlantic economy from the rest of the world or is it, as we argue, even greater opening of both economies?” the EU official said, briefing journalists on condition he was not further identified. Read more here.
 

(Satyajit Das – MarketWatch)

Commentary: Globalization is in decline, and the world is poorer for it

Evidence of the end of globalization is mounting. Growth in trade and cross border investment, which has underpinned prosperity and development, is being reversed in a major historical shift.

As English politician Lord Palmerston noted: “Nations have no permanent friends or allies, they only have permanent interests.”

In the aftermath of the global financial crisis, these interests dictate a return to autarky — a closed economy with limited international trade or capital flows. Read more here.
 

(Bridges Trade)

The WTO appeals process for the high-profile dispute over the Canadian province of Ontario’s feed-in-tariff (FIT) programme for renewable energy officially kicked off in Geneva last week, as the EU, Japan, and Canada all participated in the first round of hearings on the subject.

The Ontario scheme at issue aims to support renewable energy in the province by guaranteeing domestic electricity generators above-market rates on certain renewable sources of energy, such as wind and solar. The WTO challenge had been tabled by the EU and Japan, who had argued that the scheme violates global trade rules because it requires participating electricity generators to source up to 60 percent of their equipment in Ontario. Read more here.
 

(Reuters – Tom Miles)

The United States launched a blistering attack on fellow World Trade Organization member states on Thursday for failing to do more to cut global barriers to trade, criticizing India in particular for trying to introduce a “massive new loophole”.

“The time has come to speak bluntly,” U.S. ambassador Michael Punke told his counterparts at the Geneva-based body. “We must not sit idly by as the WTO’s negotiating function hurtles towards irrelevance.”

Ambassadors to the 159-member WTO were meeting to review progress towards a possible deal to be signed in Bali in December, which would cut red tape from customs procedures, adding as much as $1 trillion to global trade. Read more here.
 

(PV Magazine)

With the continued growth of trade disputes being reviewed today, the impact on PV industry players (both in the upstream and downstream channels) is expanding to more regions. This comes at a time when potential markets for solar materials/components continue to fluctuate quarter-by-quarter from a PV demand perspective.

Currently, most trade cases involve charges related to (alleged) unfair subsidies either through direct support of domestic manufacturers or through local content restrictions/bonuses. While China features in many of the ongoing trade investigations (both as respondent and petitioner) support of domestic solar PV manufacturing is a far more global issue than it may appear. Read more here.
 

(Reuters)

Japan is not truly interested in opening up its economy to imports and upcoming free-trade negotiations are a “masquerade”, according to a senior executive of Ford Motor Company.

Japan is set to launch trade talks with the European Union later this month and its prime minister said on Friday it would seek to join talks on a US-led Pacific free-trade pact, which could be agreed by the end of the year.

While many EU industries from pharmaceuticals to retail support negotiations with Japan, the car sector has deep reservations, arguing any deal would be a one-way street. Read more here.
 

(RT)

The European Commission has accused Russia of protectionism and threatened to forward the complaint to the World Trade Organization.

The European Commission wants Russia to drop restrictions on exports or face a legal dispute at the WTO ahead of a meeting in Moscow aimed at dealing with a number of troubling matters ranging from Syria to energy, Reuters reports.

EU claims that despite having joined the WTO in August 2012, Russia has kept some protectionist measures, and is even creating new ones, “the majority of which are not in compliance with Russia’s WTO commitments.” These measures place extra barriers to European companies wanting to operate in the Russian market. Read more here.
 

(Don Curren – WSJ)

It’s long been a, well, sacred cow for Canadian policymakers. But amid a raft of trade talks—including negotiations now underway between Ottawa and Asian nations and, separately, the European Union—Canada’s dairy supply-management system is under scrutiny.

C.D. Howe Institute, a pro-markets think tank, said it’s time the system be reformed.

Provincial governments established the regime in the 1960s to balance the interests of small dairy producers and the handful of processors then in operation, and to smooth out the effects of volatility in milk prices. The provincial boards now operate under the umbrella of the federal Canadian Dairy Commission. Read more here.
 

(AP)

American businesses complained to lawmakers Wednesday about Indian trade protectionism, contending that tariff and regulatory barriers are shutting out foreign firms despite the nation’s market-opening reforms.

Advocates for the pharmaceutical, information technology and agricultural industries detailed their grievances to a House subcommittee on trade where lawmakers also grumbled about Indian policies that favor local producers.

“They are for free trade on their terms,” said Democrat Rep. Richard Neal.

There’s strong bipartisan support for deeper U.S.-India ties, which have been pushed by the administrations of George W. Bush and Barack Obama, and trade has grown markedly in the past decade and is approaching the $100 billion mark. But experts say that total is small, considering the size of the two economies. Read more here.
 

(Journal of Commerce)

Eleven national organizations representing dairy farmers and dairy industry workers have sent a letter to eight members of Congress urging them not to approve the Trans-Pacific Partnership trade deal without considering the impact on dairy farms and workers.

The letter states that the pending trade deal could have “tremendous impact” on where and how dairy products are produced and processed and urges Congress to adopt new trade policymaking procedures, rather than reinstating “fast-track” authority. Read more here.
 

(Barry Wilson – Wilson Producer)

New director general/DFC president says countries are choosing regional and bilateral deals

As a longtime British Columbia dairy farmer, Wally Smith knows a thing or two about downer cows.

As a longtime executive player in Dairy Farmers of Canada, the DFC president also knows a thing or two about stalled World Trade Organization negotiations.

Oddly, he finds similarity between the two.

“I compare the WTO talks to a downer cow,” Smith said in a speech and later interview during the DFC’s recent annual meeting in Ottawa.

“You feed it, you look after it, you try to rehabilitate it and it is a drag on all your energy and resources.” Read more here.
 

(Bridges Weekly)

Canada has appealed a recent WTO dispute panel finding that local content requirements for renewable energy generation in the province of Ontario violate international trade rules. Despite the favourable outcome, the EU and Japan – who had tabled the WTO challenge (DS426 and DS412, respectively) – responded last week with cross-appeals of their own, aimed at other aspects of the panel report with which they disagree.

The province’s feed-in tariff (FIT) scheme aims to support renewable energy by guaranteeing electricity generators above-market rates on certain renewable sources of energy, such as wind and solar. The global trade arbiter on 19 December announced that the local content requirement of the scheme – obliging participants to source up to 60 percent of their equipment from Ontario – was a trade barrier that discriminated against foreign companies. Read more here.
 

(Reuters)

Two U.S. biofuel trade groups on Tuesday lambasted a European Union decision to impose a tariff on U.S.-made ethanol as a protectionist move and said they would challenge the tariff “in every way possible.”

The 9.5% tariff on imports of U.S. ethanol was approved on Monday by the Council of the European Union. The imports were worth more than US$930 million, or 700 million euros, a year. Read more here.
 

(IndustryWeek – AFP)

WTO also will review Argentina’s claims that Washington has blocked meat imports

The World Trade Organization on Monday established a dispute resolution panel to probe allegations of unfair trade practices lodged against Argentina by the United States, the EU and Japan. It also created a panel to look into Argentina’s claim that the United States has imposed unfair barriers to its meat exports.

In the first case, the three complainants have attacked Argentina’s import licensing rules, which among other things require firms eager to export goods to the country to import Argentinian goods in exchange. One of the most well-known examples is that of German car maker Porsche, which was forced to commit to purchasing Argentinian wine and olive oil in order to get approximately 100 of its cars into the country.

Canadian mobile phone maker Research in Motion, which makes the Blackberry, meanwhile was forced to open a production unit in southern Argentina in order to continue selling its phones. Read more here.