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September 25, 2007

Multilateral trade agreement and the Doha Round.

There is little doubt that the WTO is struggling with respect to securing closure of the Doha Round. Unlike earlier ‘rounds’ of multilateral trade liberation, the Doha Round was intended to focus on issues relating to economic development. The Round was supposed to have been concluded by January 2005. Attempts to ‘kick-start’ the process have stuttered. Why is it proving to be so difficult to achieve agreement? What are the implications of failure?

The really significant issue is trade in agricultural produce. For many reasons, some beyond the reach of reason, agricultural sectors in most countries are subject to subsidies and protection. This is true of the United States. This is true of the European Union. This is true of India. The subsidies to agricultural production in both Europe and the United States seriously distort international markets by preventing imports and the export subsidies paid to dispose of unsold surpluses, cause problems for producers elsewhere. Agricultural subsidies in total are vast. India has started to successfully open up its domestic market in other commodities and has reaped the benefits of growth. When it comes to agriculture the old concerns of self-sufficiency in food stuff (held by some to be the essence of ‘national sovereignty’), fear of insecurity in rural areas, fear of foreign corporations in agricultural development have all lead to popular political skepticism about the Doha proposals. The EU and the United States have agreed to cut tariffs and eliminate export subsidies and to allow more competition in their domestic markets: in neither place has this been an easy process. This is good for domestic consumers and good for exporters from the global south (less protection, say, for maize and maize extracts opens up the possibility of increased importation of cane sugar). Their domestic agricultural sectors are also politically sensitive areas but some cuts in subsidies are better than no cuts. For this to go through the developing countries must also open up their markets. India and Brazil have rejected this proposal. India is very unwilling to face the changes in rural areas that trade would bring in its train. Few countries accept the idea that agriculture is a business like any other. There are some valid reasons why this is so though much of the special pleading for agricultural protection is emotional. The reality is that if world trade in agricultural produce is to increase then each country will need to make domestic adjustments of one sort or another.

India and Brazil are not willing to have the US-EU agreement simply imposed on the global south. At the same time, the problem is not so much with fundamental issues but with achieving closure. If the Doha Round fails then what is at issue is the whole notion of multilateral trade negotiations. There are huge advantages to multilateralism including simplicity and the promotion of better resource allocation world-wide. A net-work of bilateral trade agreements is costly and cumbersome. The United States has indulged in the creation of such a net-work regionally in an effort to protect itself from any failures at the multilateral level. It is not really in anyone's interests of the Doha Round to fail. At the same time the negotiations require a number of decisions and changes to take place simultaneously.

If no country or group of countries is willing to own the process of finding a basis for closure then it is up to Pascal Lamey, Director of the World Trade Organization. The WTO is the outcome of a reform of the GATT. The GATT was established as a result of the Breton Woods agreement and it’s the first of the major institutions to be fundamentally reformed. If it fails to achieve the developmental aims of the Doha Round, this would be a serious failure. Lamey has come up with strategies in the past including suspending the talks (a high risk strategy) and holding regional and technical meetings out of the public eye, in order to keep the negotiations away from sudden death. He will need to do the same again. His credibility is at risk as is that of the WTO, an institution not popular with those who are against globalization (whether this be those India politicians in favor of quantitative restrictions or anti-capitalist groups or alliances supporting sustainable development). He cannot do this alone.


September 17, 2007

France, Iran and all options open.

France under Sarkozy is pushing itself back on to the world stage. In a major foreign policy speech given in August, an annual event for the French Presidency, he has warned of a possible military attack on Iran. It is clear that he was outlining a disastrous scenario that he hoped would be avoided by diplomacy, including tougher sanctions. When the warning was repeated on television by the foreign minister, Bernard Kouchner, the man charged with raising France’s foreign policy profile, the tone was starker. He is reported as saying, ‘We have to prepare for the worst, and the worst is war’. What is going on?

Sarkozy’s speech was to the French diplomatic corps. He saw the Iranian nuclear issue as ‘serious’ though he was careful to avoid giving the impression that he would commit France to any plan to undertake military efforts against Iran. He was painting what could be called ‘the worst possible scenario’. However he was also making it clear that all alternatives remained open and under possible consideration and did so in a dramatic figure of speech: ‘an Iranian bomb or the bombing of Iran’. In this sense the speech was both dramatic and blunt and no doubt designed to be music to the ears of President Bush. The French are clearly attempting to improve relations with Washington and to recover long-lost ground. But Sarkozy made it clear that France wanted resolution of the Israel-Palestinian conflict and that the country is in continued opposition to the American-led invasion of Iraq.

Kouchner, a man with a reputation for being unable to hide his feelings, has had to apologize for calling for the replacement of the Iranian Prime Minister (Kamal al-Maliki). Kouchner clearly has the backing of Sarkozy and with his backing recently visited Iraq. He has called on significant French companies not to bid for business in Iran. He has reinforced Sarkozy’s message by calling on others to be prepared for the worst. The Iranians found Sarkozy’s remarks ‘unhelpful’ and seem to be incandescent about those of Kouchner, indicating that ‘The occupants of the Élysée have become the executors of the will of the White House’. France’s case in support for tougher sanctions is being taken to Moscow (where there is no agreement with respect to new sanctions) and Washington.

The wider context is the re-assertion of a French foreign policy that engages with the issues of the world in a more pro-active way. The specific context is United States frustration with the progress of the talks between Iran and the International Atomic Energy Agency. The Iranians no doubt feel that they can string out negotiations whilst pursuing their nuclear policy since the United States is stretched in Iraq and Afghanistan. The French declaration is a simple message reminding Iran that others can be involved, others who may have ruled themselves out earlier. France is clearly making sure that its voice will be heard in the meeting on Iran that will be held in Washington later this month. The official line is that Tehran feels that Sarkozy is ‘trying too hard’ to be the new man on the block but whatever the public line there must be some consternation in Iran. France is not an insignificant military power and could ease US strategic constraints if it chose to do so.

September 5, 2007

Gordon Brown and the next UK General Election

The press, in Britain and in the United States (where some curiosity still exists concerning the man who replaced Tony Blair), has been speculating over whether or not Gordon Brown will call a ‘snap-election’. Some headlines for the same speech from Brown concerning his plans for the future (Brown was content to say, ‘I’m getting on with the business of governing’) closed the issue of an election down and others left the possibility open. This is an ideal outcome for Brown. What are the issues and how does this political process work?

In the United Kingdom, the Prime Minster is not directly elected. The system is that of a Parliamentary democracy, the voters elect MPs and the leader of the majority party (known in advance) forms the Government and becomes Prime Minister. Gordon Brown became Prime Minister when he became leader of the Labour Party in the House of Commons. He was not leader at the time of the last General Election and voters had no direct say in the transfer of power which was essentially a matter for the Labour Party. Brown is widely held to have been the disciplined strategist behind Blair and one much given to the pursuit of prudence and balanced support within the Labour Party. As Prime Minister he has the power to call a General Election. The law requires an election every five years (no Parliament can sit for longer) but a Prime Minister can call a snap election anytime within that time period.

It is widely thought that the power to call an election gives the sitting government an advantage. Brown is unlikely to blow that advantage by revealing his hand too early. Of course, the advantage may be a delusion. An unpopular government is unlikely to win a snap election just because it is suddenly presented to the voters. This present government is not hugely popular nor is it hugely unpopular. Brown is still stamping his authority on the ‘tone’ of political life (he was held up by the terrorist activities earlier in the summer) but he has not really distanced himself much from his predecessor’s policies on Iraq and that may irritate some voters. Although Prime Ministers do change during the course of a Parliament, the new comers can test out their legitimacy by calling an election fairly soon after taking office. This seems ‘fair’ somehow but it is not constitutionally necessary.

The decision is bound to be based on a sense of political advantage. Brown will not wish to squander the element of surprise, whatever the speculation is. It is an advantage that has diminished significance as the legal limits on the life of a Parliament kick-in. A confident government is bound to call an election earlier rather than later.

Will he or wont he? Brown has some political problems to deal with. Labour has been for many years the predominant party in Scottish political life. But in the last election for the Scottish Parliament, the Scottish Nationalist Party challenged Labour’s position. Scotland returns to the UK Parliament mainly Labour Party MPs. It is not clear that this will happen if the election were to be called quickly. Brown needs to think carefully about this one. The ‘Brown bounce’ (the increase in popularity that comes just from the fact of a change at the top) has come and is now probably waning nationally. The Leader of the Opposition seems to be recovering in the most recent poll (the Conservative Party is not wholly united on a number of policy issues) and stands neck-and-neck with Brown. This causes journalists to rush into print but it is not likely to influence Brown much. His policy plans have been upset by the terrorist attack, floods and foot-and-mouth but he is someone who works steadily towards his goals. Harold McMillan, a former Prime Minster and friend of President Kennedy, referred to the problems of political life as experienced by a Prime Minister as ‘Events, dear boy, events’. Once called elections are decided by the effectiveness and popularity of policies, and by how unpredictable events are being, or have been handled, and not by the turn of an opinion poll. Brown needs time to get his fundamental policies across. He also needs to think about his own Party’s financial position: elections cost money.

We can say that Brown is unlikely to wait for the Parliament to run its course. But it would be foolish for him to give away his potential advantage by saying too early what he is going to do. He can leave them all guessing whilst taking steps to consolidate the policy initiative and get his Party’s machine into running order. If he is going to have a snap election, spring would seem more likely than the autumn, but who can say? Contradictory headlines about the same concerns suits his present purpose. It is his call. Only he can say. That is how British political life works and it is what makes it interesting.