Unequal Exchange: Developing Countries in the International Trade Negotiations

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UNEQUAL EXCHANGE: DEVELOPING COUNTRIES IN THE INTERNATIONAL TRADE NEGOTIATIONS

Julio J. Nogués
Revised Draft April 2002
Paper prepared for the Murphy Institute Conference on “The Political Economy of Policy Reform” in honor of J. Michael Finger.

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UNEQUAL EXCHANGE: DEVELOPING COUNTRIES IN THE INTERNATIONAL TRADE NEGOTIATIONS Table of Contents I. INTRODUCTION II. ECONOMIC INTERESTS OF EFFICIENT AGRICULTURAL PRODUCERS IN TRADE NEGOTIATIONS 1. 2. 3. 4. 5. Agricultural protection and exports Agricultural protection and financial costs Agricultural protection and growth Agricultural protection and export prices Summing-up

III. THE UNBALANCED URUGUAY ROUND 1. The UR promise 2. The unbalanced UR outcome 2.1 Market access 2.2 Implementation issues 2.3 Services 2.4 Intellectual property 3. Broken promises and principles 3.1 Promise of agricultural liberalization 3.2 Promise of transparency 3.3 Promise of reciprocity 4. Summing-up IV. MANAGEMENT, KNOWLEDGE, AGENDA, AGRESSIVE UNILATERALISM AND OTHER HANDICAPS OF DEVELOPING COUNTRIES 1. Some developing countries’ handicaps 1.1 Experience and management arrangements 1.2 The pros and cons of negotiating as a member of a regional agreement 1.3 Knowledge and trade negotiations 1.4 Private sector-public sector linkages 1.5 Financial problems and trade negotiations 1.6 Summing-up 2. Aggressive unilateralism and negotiating agendas 2.1 Aggressive unilateralism

3 2.2 Negotiating agendas and ambitious demands 3. Tentative conclusions V. MERCOSUR-EU NEGOTIATIONS 1. Background 2. Differing negotiating goals and strategies 3. The EU proposal 4. Interpreting the EU proposal 5. Illustrating the working of thenegotiating handicaps 6. Summing-up VI. DRAWING SOME LESSONS 1. 2. 3. 4. 5. 6. 7. 8. Principles in trade negotiations Blocking negotiations: a defensive strategy Management arrangements, knowledge and other domestic reforms Congressional oversight Aggressive unilateralism Other actions by developing and industrial countries “Smoke and mirrors” of trade negotiations vs. unilateral reforms Learning more about decision mechanisms

BIBLIOGRAPHY

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UNEQUAL EXCHANGE: DEVELOPING COUNTRIES IN THE INTERNATIONAL TRADE NEGOTIATIONS Julio J. Nogués +∗ Revised version Only for comments April 2002 “Developing countries have to have the courage to insist that all reasonable doubt as to the economic effects of a proposed agreement be removed before they allow a decision to be approved” J. Michael Finger I. INTRODUCTION

The history of the first rounds of multilateral trade negotiations shows that the exchange of market access concessions was a process characterized by reciprocity and mutual benefits among participating countries. More recently however, the results of the Uruguay Round, where for the first time developing countries negotiated actively, shows that the concessions given by them were more valuable than those they received. In these negotiations, developing countries did not achieve the degree of reciprocity expected from the previous history of the trading system. This outcome has been explained in part by increasingly aggressive demands by industrial countries and in part, by the lack of adequate resources of least developed countries. These and other “structural factors” such as lack of negotiating experience and inadequate knowledge on economic impacts, weaken the negotiating capacity of developing countries and suggest that in multilateral or regional trade negotiations with industrial countries, they are at a disadvantage. The thesis of this paper is that these exchange of concessions are most likely to be “unequal exchanges”. Unequal exchanges result in unbalanced outcomes and this can have serious consequences for developing countries and the trading system. For developing countries, an unbalanced outcome as measured by the difference between the value of concessions given and received, has two economic costs: (a) the costs associated with a I want to express my...
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