Let me introduce you to Amber

In an editorial on the Doha stalemate, the LA Times says:

Much of U.S. agricultural policy is designed to protect the interests of a small number of large and wealthy producers. Laws originally passed to aid small farmers during the Depression now result in astonishing inequities and are often counterproductive. The Washington Post recently revealed that the federal government has paid at least $1.3 billion since 2000 to people who don’t farm at all — they simply happen to own property that was once used as a farm. Meanwhile, real farmers who rent cropland are being forced out of business by landowners who find it more profitable to use their property for other purposes while continuing to collect federal cash for crops they aren’t growing.

Ending these subsidies and lowering agricultural tariffs would boost the U.S. economy, eliminate waste and help farmers in the Third World trade their way out of poverty. It’s a shame Washington thinks that its protectionist farm policies are something to be surrendered only grudgingly, and only if others do so. Good riddance, we say.

While I agree it is absurd to pay $1.3 billion in agricultural subsidies to people who don’t farm at all, abolishing those payments won’t help farmers in the Third World trade their way out of poverty. Poor country exporters are only damaged by subsidies that actually affect their competitors’ level of agricultural output. These trade-distorting payments, which in WTO jargon are classified as “amber box” subsidies, are what the EU and US need to cut more deeply in order to achieve a trade deal with developing countries. Abolishing handouts to non-farmers who live on former farmland is a great idea, but it won’t break the Doha stalemate.

Schwab Demands “Ambitious Outcome”

Bhagwati nailed it. Susan Schwab is being a maximalist:

Those countries’ chief antagonist was the United States, which was represented by Susan C. Schwab, recently appointed U.S. trade representative. Schwab repeatedly maintained that the Doha round, named for the Qatari capital where the WTO started it, must achieve an “ambitious outcome.” That would mean tariff cuts that are deep enough, and with few enough exceptions for special products, to generate significant new trade around the world, including in big developing markets such as India, Brazil, Indonesia and South Africa.

She did not dispute that the United States had emerged as the outlier in the talks, in opposition to most of the WTO membership. “Isn’t that what leadership is about?” she said in an interview. She said she was “dismayed with the number of countries that just seem willing to settle for some least-common-denominator solution.” [WaPo]

Five trade myths you already know are wrong

A number of people have pointed to Alan Beattie’s FT column titled “The truth behind the top five trade myths and why it matters.” You can read most of the article at the New Economist. But if you’re a regular Trade Diversion reader, you’ll find that I’ve already covered each of these myths!

Here are Beatle’s five myths and links my previous posts on the topic:

1. “Ghana is allowed to sell raw cocoa beans to the European Union, but if it exports finished chocolate it gets hit by big tariffs.” No it does not.

2. “Each European Union cow gets $2.40 a day in subsidies, more than what 1bn people each have to live on.” Not really.

3. “The World Trade Organisation is undemocratic and secretive.” Yeah, right.

4. “No economy ever got rich without using tariffs to industrialise.” Hong Kong.

5. “Cutting rich countries’ farm subsidies and tariffs will be a big boost for the world’s poorest.” Sadly, this is not true.

The last link even covers the first comment posted at New Economist, which highlights that cotton subsidies are the exception to that rule. Though I’m already familiar with the nature of these myths, it’s nice to see Beattie offer concise and accurate refutations of them in a publication of the FT‘s renown.

500 Economists vs a Heritage guy

Don Feder spews forth ignorant bile:

The Times claims “500 economists have signed an open letter to Mr. Bush arguing that immigration is a net plus for the nation’s economy.” Doubtless, the same 500 economists believe that tax hikes are a net plus for the economy, increases in the minimum wage are a net plus for the economy and signing the Kyoto Treaty on so-called global warming would be a big boost for the nation’s economy.

Robert Rector, a Heritage Foundation analyst who – unlike the Times standard-issue 500 economists – is invariably right about the impact of legislation on the economy, tells us the following…

It was cruel of Feder to pit Mr. Rector, who holds a M.A. in political science, against five Nobel laureates and two former chairmen of the CEA, but it was outright laughable to imply that these 500 PhDs are a bunch of leftists. I’m sure Deepak Lal and Pete Boettke would be a bit surprised to be labeled as such.

[Hat tip: the letter’s author, Alex Tabarrok]

No Peace Clause in Geneva

Pascal Lamy’s outline of negotiations has excluded the possibility of a new peace clause that would exempt farm subsidies from legal challenge at the WTO dispute panel for a limited time. US farm lobbies have characterized such a provision as critical, and the government has sought this immunity, arguing that it is necessary to protect farmers implementing reforms. I’m glad to see it off the table.

“Artificial States”

Alberto Alesina, William Easterly, Janina Matuszeski:

Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.

Neat.

Is there still a WTO green room?

The International Centre for Trade and Sustainable Development quotes Pascal Lamy as describing “green room” meetings that will happen tomorrow.

I thought that such a procedure was no longer used. T.N. Srinivasan implied so:

[T]he “Green Room” process no longer exists! The last time it was used was at the Seattle Ministerial. At Doha, the chairman structured the discussion around six topics with a “friend of the chair” leading informal discussions on each, with all delegations welcome to participate. The “friend” reported regularly to the full heads of the delegation. At Cancun, the chairman appointed five “facilitators” who played the same role as the “friends” played at Doha. [PDF]

But Martin Khor worries that the green room will cause trouble in Geneva:

Questions still abound as to whether Ministers who come to Geneva can attend the “Ministerial Green Room” that will be convened by Pascal Lamy, presumably in his capacity as Chair of the Trade Negotiations Committee (TNC). Or whether, as expected, the Green Room will accommodate Ministers from only invited members.

The issues of transparency, participation and legitimacy can be expected to arise yet again, as uncertainty swirls around as to who is invited to the Green Room, on what criteria or basis, and on whose invitation. [TWN]

And the WTO itself that the green room plays a critical role in negotiations:

One term has become controversial, but more among some outside observers than among delegations. The “Green Room” is a phrase taken from the informal name of the director-general’s conference room. It is used to refer to meetings of 20-40 delegations. These meetings can be called by a committee chairperson as well as the director-general, and can take place elsewhere, such as at Ministerial Conferences. In the past delegations have sometimes felt that Green Room meetings could lead to compromises being struck behind their backs. So, extra efforts are made to ensure that the process is handled correctly, with regular reports back to the full membership. In the end, decisions have to be taken by all members and by consensus. No one has been able to find an alternative way of achieving consensus on difficult issues, because it is virtually impossible for members to change their positions voluntarily in meetings of the full membership. [WTO]

So it seems that there is still a green room, and that its merits are up for debate.