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May 14, 2008



It would be nice to know which countries the professor has in mind.

Does he include Brazil as a "poorer" or a "developing" country? Would he suggest that Brazil bears some responsibility for the difficulty in concluding the current negotiating round?

Ricardo Hausmann

I find the proposed list of demands for a new Doha Round either dated or unappealing.
1- Given the current price levels, policies are now shifting towards lowering, not raising food prices.
2- Supply management in a trade agreement sounds weird. I wonder what you have in mind. I do not know how individual countries could commit to a certain international market structure.
3- I agree with more policy space for developing countries, but this is pretty much already there for poor countries. The biggest problems for middle income countries come from concessions they already made, such as the agreement on subsidies and on intellectual property.
4- Adjustment lending is not a contentious issue. The WB is looking for customers to lend money to.
5- A moratorium in bilateral agreements is good for those who already have agreements and bad for those who do not. I am not sure that this is generally good for development.

In sum, if the alternative to Doha is this 5 point list, I would vote for Doha and pocket the 0.2 percent of GDP gain.

Peter Gallagher

Although he has a distinguished name, I think the Professor hits only one-and-a-half targets in these five recommendations. I don't think anyone could disagree with (1) but the idea that implementation of their WTO obligations would actually change market conditions for African farmers is naive. (2) is a crock--a zombie from the '70s--and a recipe for making things worse for almost everyone (cf. Rubber, Tin, Cocoa, Grains... ); (3) is not as simple or as helpful as the Prof. seems to think (I've read his RIS report). He should study the WTO's 2007 World Trade Report closely for an expert and sympathetic examination of what S&D is supposed to mean, and is intended to deliver, but doesn't. (5) is a waste of effort and a bit arrogant. N-S RTAs exist because governments, in the South too, want them. People who say that they believe in the autonomy of developing countries in setting development policies have to resist trying to 'run the world' on their behalf with 'moratoriums'. That leaves (4), where the Prof. scores, in my view, by recommending a facility that is already available.


Gallagher responds:

I'm glad these ideas sparked some debate. Very honored to get a response from Ricardo Hausmann, arguably one of the most creative thinkers on development today. Here are my responses to some of the comments:

1. Two comments on the response I received regarding my call for the developed countries to honor their WTO commitments. First, the main point is that if the US and EU continue to appeal and not implement previous WTO rulings (such as the Cotton subsidy case) then the legitimacy of the institution is called into question. Why then should Brazil and others negotiate if they think that the developed countries will not honor their commitments? The Farm Bill that passed the US today further calls the extent to which the US is a genuine negotiator.

Equally, dismissing actual AFrican proposals that want to deal with the extreme nature of oligopsony in world agricultural markets is yet another reason to question the legitimacy of developed country negotiating positions.

Secondly, yes the wave now is about lowering prices but price volatility and the overall downward trend in food prices will continue (see IMF World Economic Outlook, 2008).

3. It is questionable whether a moratorium is on bilaterals is good for those who have them and bad for those who don't. Such a statement assumes that the benefits of market access (which are much smaller than the 0.2 percent of GDP increases under Doha and in sometimes negative as in the case of the Colombia agreement) outweigh the costs in terms of lost policy space, terms of trade changes, tariff losses, and de-industrialization.

NAFTA, the largest N-S trade deal, has been far from a ringing success. Per capita incomes have increased just over 1 percent annually, gross fixed capital formation as a percent of GDP is actually lower than during the "lost decade" of the 1990s. What holds the economy up are foreign firms exporting to the US that have little to no linkages to the rest of the economy, and the state-run oil company that supplies 40 percent of the government budget each year (though known reserves of oil in Mexico will only last 5-7 years).

China, Brazil, India, South Africa all lack FTAs with developed countries, have much more policy space under the WTO and are in much better shape than Mexico.

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