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Elliott was with the Peterson Institute for many years before joining the Center full-time. Her books published there include Can International Labor Standards Improve under Globalization? (with Richard B. Freeman, 2003), Corruption and the Global Economy (1997), Reciprocity and Retaliation in US Trade Policy (with Thomas O. Bayard, 1994), Measuring the Costs of Protection in the United States (with Gary Hufbauer, 1994), and Economic Sanctions Reconsidered (with Gary Hufbauer and Jeffrey Schott, 3rd. ed., 2007). She served on a National Research Council committee on Monitoring International Labor Standards and on the USDA Consultative Group on the Elimination of Child Labor in US Agricultural Imports, and is currently a member of the National Advisory Committee for Labor Provisions in US Free Trade Agreements. Elliott received a Master of Arts degree, with distinction, in security studies and international economics from the Johns Hopkins University, School of Advanced International Studies (1984) and a Bachelor of Arts degree, with honors in political science, from Austin College (1982). In 2004, Austin College named her a Distinguished Alumna.
The problem is not that the United States doesn’t “win” when it negotiates trade deals. Take the Trans-Pacific Partnership (TPP): US negotiators generally got what they wanted out of the deal and gave up little. That’s because, outside a handful of sensitive sectors, US tariffs are already low.
But policies aimed at protecting sensitive sectors do have an impact. One clear example of how US trade policy pits the poor at home against the poor in other countries is in the clothing sector. Vietnam is the poorest of the 12 TPP signatories, by far, and it is a major clothing exporter. Clothing is a labor-intensive industry in which developing countries often have a comparative advantage. It is also an important avenue for women to enter the formal labor market, which can bring a range of social and development benefits. Clothing is also a necessity, and lower prices due to trade help poor consumers as well.
As I discuss in a new paper, however, Vietnam will gain very little new market access in this key sector for at least several years. Even after US tariffs disappear, Vietnam may not be able to take advantage unless the country is able to adjust to the very restrictive rule of origin for clothing that US negotiators insisted on including in the TPP.
While US tariffs overall are in the low single digits, the average tariff on clothing imports from Vietnam is 18 percent. In 2014, US Customs and Border Protection collected $2.4 billion in duties on imports from Vietnam, more than any other country in the world except China. While US negotiators agreed to lower the high tariffs for most of Vietnam’s major clothing exports by one-third when the TPP enters into force, the remaining tariffs will remain in place for 10 to 12 years.
Table: US Import Duties by Source Country* in 2014 (million dollars)
Other top ten
* Excludes countries with which the United States had a trade agreement before TPP.** This figure understates the degree of US protection against New Zealand exports because the tariffs on over-quota imports of dairy products are so high that they prevent additional imports, while the tariffs on in-quota imports are relatively low.
Reducing and eventually eliminating tariffs will lower the cost of importing clothing from Vietnam. Even then, rules of origin, which determine the eligibility of goods for TPP benefits, will at least partially offset that gain. As I explain in the new paper, the TPP rule for clothing, as in other US trade agreements, requires that all of the major inputs, from the “yarn forward,” must originate from one or more of the TPP parties. Currently Vietnamese producers import most of the textile inputs they use in clothing from outside the TPP region. If shifting those sources raises costs enough, exporters may have to forego the TPP tariff benefit, and along with it the potential to create more jobs.
Trade is not costless, but the gains are generally larger than the losses, both domestically and internationally. Rather than pitting “us” against “them,” I hope the next president will do what desperately needs to be done to improve American competitiveness and ensure that the gains from trade are broadly shared—at home and abroad.
The Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership, if completed and implemented, will cover a large portion of global trade and investment, but they will exclude the majority of developing countries. American and European negotiators also want these deals to be “gold standard” agreements that establish the new rules of trade for a new century. The biggest concern arising from these mega-regional agreements is that they will undermine the rules-based multilateral trading system.
Stitches to Riches is motivated by South Asia’s urgent need to create more and better jobs for a growing population. This book investigates the region’s potential for expanding and improving jobs in the labor-intensive apparel sector. It estimates the effects of rising wages in China on apparel exports, employment, and wages in South Asia, and provides policy recommendations to leverage the sector for greater job creation.
EU Trade Minister Cecilia Malstrom has been in Washington, meeting with US Trade Representative Michael Froman and trying to give the Transatlantic Trade and Investment Partnership (TTIP) negotiations a nudge. Developing countries are watching closely and assessing the potential implications for exports to what are the two largest markets for many of them. But should they be rooting for Malstrom and Froman to fail?
Policymakers for the United States and European Union all say that they want to complete negotiations this year, “provided that the substance is right,” in the words of EU chief negotiator Ignacio Garcia Bercero. (Minister Malstrom used exactly the same phrase in a speech at the Peterson Institute on Thursday.) President Obama and US Trade Representative Michael Froman would like to have one more achievement to burnish their trade policy legacies. European leaders would like to complete the deal this year because they cannot be sure that the next US president will place the same priority on getting it done.
And herein lies the conundrum. There isn’t enough time to wrap up all the difficult outstanding issues on agriculture, services, investment, government procurement, and energy, and sign an agreement this year. The negotiators could try to reach an agreement in principle, but it would be up to the next US president to sign it. Why would EU negotiators make the politically difficult decisions that would be needed to get an ambitious deal when there is no assurance that a President Trump, or even a President Clinton, would stand by the deal?
Given the ambivalent (at best) congressional reaction to the Trans-Pacific Partnership agreement, why would EU negotiators put their best offers on the table until after they see the vote on the TPP deal? That vote almost certainly will not take place until after the election, especially with trade having become such a political hot potato this election cycle.
In my view, there is no chance of a TTIP deal, even in principle, this year. And the outlook beyond this year is cloudy at best. Should the rest of the world be happy about that? On the one hand, no TTIP means no new sources of trade discrimination against third countries, something that developing countries in particular fear. On the other, lack of a deal might signal that the United States, one of the most open economies and a leader of the global trading system, is turning inward. Nobody wins from that.
Data on Feed the Future's results are just becoming available, and there is strikingly little independent analysis of the program. While we cannot yet assess the impact on poverty alleviation or improved nutrition, we can assess how Feed the Future performs against its stated objective of offering a new, more effective approach to food security. The integrated agriculture and nutrition approach emphasizes increased selectivity in aid allocations along with country ownership and capacity building to increase the effectiveness and sustainability of the initiative’s impacts. We find the initiative has led to an increase in the share of overall US assistance for agriculture and nutrition, and that the Obama administration has increasingly concentrated this aid in selected focus countries.
Ethiopia is facing one of the worst droughts in decades, a painful reminder that food security challenges remain despite low food prices globally. Feed the Future—the Obama Administration’s global food security initiative—has been supporting Ethiopia and 18 other focus countries with projects that aim to boost farmer productivity and improve nutrition. Since its launch in 2010, Feed the Future has invested $1 billion each year in these 19 focus countries, as well as in support for agricultural research and development and other cross-cutting activities that address food insecurity. How has the initiative performed in its first five years?
Given impact data is just beginning to become available, we take a preliminary cut at that question in a new CGD Policy Paper. Most poor people around the world live in rural areas and agriculture contributes significantly to their meager incomes. So we broadly agree with Feed the Future’s focus on strengthening agriculture and improving nutrition as key pathways to alleviate poverty and improve food security.
When the Obama administration unveiled Feed the Future, it promised the initiative would employ a new approach to global food security built on principles of aid effectiveness. The initiative has succeeded in targeting resources to 19 focus countries that have high levels of need, demonstrate commitment to strengthening their agricultural sectors, and score above average on several institutional quality measures for their income level. In addition, each focus country has a concrete Feed the Future strategy aligned with country priorities, improving odds that changes on the ground will stick.
But when it comes to prioritizing other key elements of aid effectiveness, particularly transparency and country ownership, the initiative has, so far, come up short. Data specific to the initiative remains limited, making it difficult to track how the money is being spent. And Feed the Future is below the USAID average of funds directed to local actors, despite early assurances of a strong push for broad country ownership. As a result, the initiative’s approach to delivering aid doesn’t appear as innovative as initially advertised.
With the aim of seeing Feed the Future build on and sustain early gains we offer six practical recommendations. If implemented, these recommendations would contribute to a strong and lasting US commitment to global food security informed by principles intended to improve both the quality of aid and its impact.
Recommendations for Congress
1. Authorize Feed the Future. This would sustain investments and keep agriculture in the development spotlight. And moving away from the whole-of-government approach and designating USAID to lead implementation would increase accountability for the initiative’s performance.
2. Use authorizing legislation to increase support for institution building in focus countries. Only a small share of investments are channeled through country systems. Giving agencies more flexibility to direct funding to local actors like governments, civil society, and private sector organizations would promote country ownership.
3. Authorize the continuation of GAFSP. As an important multilateral component of Feed the Future, GAFSP helps leverage resources from other donors. But better coordination is also needed in countries where both GAFSP and Feed the Future operate.
Recommendations for the administration
4. Feed the Future should not expand to new focus countries. The initiative is committed to rigorously evaluating its investments. But results from impact evaluations and cost-effectiveness studies are only just becoming available. For now, the initiative should focus on better understanding what types of interventions work (and do not) in current focus countries.
5. Feed the Future should explain what it is doing to sustain results. Considering the initiative’s budget is unlikely to grow and activities will not continue indefinitely, the initiative should report on how it is ensuring results will have long-term impact.
6. USAID should increase transparency of investments and their results. To paraphrase our colleague, you cannot monitor what you do not track and you cannot evaluate impact without a counterfactual. It is impossible to link US funding for agriculture and nutrition to specific Feed the Future activities. Tracking where investments are allocated is an essential first step in monitoring progress. We commend the initiative’s efforts to report annually on its progress. But as we have previously argued here, reporting impact data with a counterfactual helps understand the initiative’s contribution to reducing poverty and improving nutrition.
These practical recommendations would contribute to making Feed the Future a genuinely new approach to food security and poverty alleviation. We urge Congress and the administration to leverage this opportunity to include reforms that ensure Feed the Future delivers attributable impact going forward.
There are now reports that the parties to the Trans-Pacific Partnership will formally sign the deal on February 4 in New Zealand, and President Obama is expected to make a push for congressional ratification in his State of the Union address. I’ve written here and here about some of the elements in the TPP that are positive steps forward in US trade policy, and others that raise concerns, particularly as they affect developing countries. I’ve also written in our White House and the World series about how US trade policy could be more development-friendly overall. One particular concern with the TPP that President Obama could address without reopening negotiations is the negative impact on other poor countries in the region. He would need Congress’ help, however.
Vietnam is a major clothing exporter to the United States and will, eventually, get duty-free access to the US market under TPP (albeit with strict rules of origin). Vietnam is by far the poorest country joining the TPP, and improved access for a major export will help create jobs and reduce poverty in that country. But that shouldn’t, and needn’t, come at the expense of other poor countries in the region, notably Bangladesh and Cambodia. All the other high income countries already provide duty-free, quota-free market access on most or all products for the UN-designated least developed countries, including clothing exports from Bangladesh and Cambodia. The United States is the only hold-out, and now is probably the last chance to act.
So, when President Obama pushes for Congress to ratify the TPP sometime this year in his speech, I hope he also asks Congress to join with the rest of the developed world and extend duty-free, quota-free market access to the world’s poorest countries as part of the package.
Trade ministers, while attending the World Trade Organization (WTO) meeting in Nairobi, again managed to pull a rabbit out of the hat. Faced with the prospect of complete failure, ministers worked overtime to cobble together a package of mostly small, symbolic agreements at the WTO’s Tenth Ministerial Conference. India’s leaders deserve kudos for standing up to intense political pressure and not blocking the agreement. But even though they identified a few areas of consensus, developed and developing countries remain deeply divided over the future of the WTO negotiating agenda and how to move forward. So, while the outcome is not being greeted with the same dismay, Nairobi looks more like the Copenhagen summit on climate change than the recent session in Paris, which managed to bridge North-South differences.
Director-General Azevêdo hailed the deal on agricultural export competition as the “most significant outcome on agriculture” in the WTO’s history—less impressive praise when you realize it is the only such agreement. The WTO’s predecessor, the General Agreement on Tariffs and Trade, banned export subsidies decades ago because they are among the most trade-distorting measures. But there was an exception for agriculture at long last removed in Nairobi. Dig into the details and we find that the European Union agreed to eliminate export subsidies that it no longer uses, and the United States accepted “disciplines” on its food aid and agricultural export credit programs that allow it to keep doing what it’s doing. India and China secured commitments to continue negotiation on their demands to further loosen disciplines on their trade-distorting support for farmers.
Agreements aiming to improve market access for poor cotton exporters and other least-developed countries “encourage” members to “consider” taking steps in the right direction. In other words, they are likely to have little or no impact on actual behavior. The most commercially significant decision was the expansion of the Information Technology Agreement (ITA). Under this “critical mass agreement,” a subset of two dozen developed and developing WTO members, accounting for 90 percent of the trade, will eliminate tariffs on more than $1 trillion in information technology products. The tariff cuts are on a “most-favored nation” basis, meaning that consumers in all WTO member countries will benefit. The ministerial decisions are here.
The question of what to do about the Doha Round of multilateral trade negotiations proved unresolvable, however. India, China, and other developing countries insisted to the end that the hopelessly deadlocked Doha Development Agenda must remain the basis for negotiations going forward. US Trade Representative Michael Froman was equally adamant that it could not. The ministerial declaration affirms the commitment of all members to “advance negotiations on the remaining Doha issues” and to “maintain development” at the center of the organization’s work, but it also effectively buries the long-suffering Doha Round.
The question now is what comes next and whether the WTO will continue to have a role in setting the rules of trade. The Financial Times’ Shawn Donnan identified the core of the dilemma in a piece over the weekend:
The tension is akin to that in UN-sponsored climate talks. This month’s climate agreement in Paris was reliant in many ways on developing countries such as China recognising that the world had changed since the Kyoto protocol of 1997, which bound advanced economies but not emerging ones.
But at the WTO, that is something developing nations have failed to do.
In Paris, three key players—the United States, China, and India—realized that climate change was a great enough threat that things needed to change even where it meant confronting difficult political circumstances at home. While it didn’t happen in Nairobi, the key players will need to summon similar courage to safeguard the future of the multilateral trade system.
With the Office of the US Trade Representative (USTR) reported to be considering a downgrade of India, trade ties between the two countries are even rockier than usual. Worse, the decision could be announced soon after a newly elected Indian government takes office in May, potentially starting a new relationship on a very sour note. Arvind Subramanian, a senior fellow at CGD and the Peterson Institute, recently warned about these risks in a piece in India’s Business Standard.
After five years, capped by five days of intense, around-the-clock negotiation, trade ministers from the 12 Tran-Pacific Partnership (TPP) countries announced they had reached a deal in Atlanta Sunday night. From information available so far, it looks like there were improvements in some areas of interest for developing countries. But I still have concerns in the three areas I wrote about in July. I’ll need to see the details before I can assess the outcomes there. And my biggest concern about the TPP, TTIP, and other regional agreements remains how they affect the World Trade Organization (WTO). Most developing countries are outside these big trade deals and will have no way to protect themselves in trade if the multilateral system fades into irrelevance.
On the deal itself, here are my initial impressions, based on the summary circulated by the US Trade Representative’s office.
Potentially Positive Steps
The investment chapter appears to expand the space for countries to use capital controls if necessary to manage economic crises; the summary also says that it includes “strong safeguards” to prevent abusive or frivolous claims under the investor-state dispute settlement mechanism and mentions the “possible award of attorneys’ fees.” That could help poorer, smaller countries with limited resources to fight back against challenges from large multinationals with large legal teams and deep pockets.
The exceptions to the agreement allow parties to deny access to the investor state dispute settlement mechanism for claims relating to tobacco control measures. This would shield policies such as Australia’s plain packaging law for cigarettes, which was challenged by Philip Morris as a violation of an investment agreement between Australia and Hong Kong.
The parties agreed to eliminate some agricultural subsidies, albeit only those that promote exports rather than the more ubiquitous subsidies that support domestic production. That is a symbolic step, since none of the parties directly subsidize exports, but it is the first time US negotiators have been willing to address agricultural subsidies at all in a regional trade agreement. (The summary also indicates the TPP partners agreed to work together at the World Trade Organization to develop disciplines on export competition more broadly.)
There is potentially far more important language on subsidies in the environmental chapter, where the summary says the parties will “prohibit some of the most harmful fisheries subsidies … and make best efforts to refrain from introducing new subsidies that contribute to overfishing.” That could have significant impact in the region, given that Japan is a party, and will hopefully spur the discussion on fishery subsidies at the WTO. The summary also says that the parties will promote sustainable forest management, though it doesn’t say how, and that they will combat wildlife trafficking. The environmental chapter seems to go far beyond what has been in previous US trade agreements.
Rhetoric or Reality?
For what I believe is the first time in a US preferential trade agreement, there is a separate development chapter. The summary says there will be a development committee but only specifies that the committee will “meet regularly to promote voluntary cooperative work” in the areas identified (economic growth, women and growth, and science, technology, and innovation). There is also a chapter on cooperation and capacity building, with yet another committee to review areas where these activities could be helpful, “subject to the availability of resources.” Maybe I’m being too cynical, but it sounds like jobs for bureaucrats and lots of talk with little action.
Australia, Chile, and Peru seem to have hung tough on just five years of market exclusivity for new biologic drugs, but there is not much information on what the reported 5+3 compromise really means. We also don’t know the specifics of any other WTO+ rules on intellectual property, or how much and what kind of flexibility developing-country partners will have to implement them.
The summary reports the parties agreed to “eliminate tariffs on textiles and apparel.” But, as expected, there is a restrictive rule of origin that limits the use of fabric and other inputs from outside the region, thereby raising production costs for Vietnam and other exporters. Depending on the details, the rule could make compliance so expensive that exporters are unable to take advantage of the reduction in import tariffs.
To the degree that Vietnam and other apparel exporters do get improved access, it could be at the expense of Bangladesh, Cambodia, and Nepal unless the United States moves to provide duty-free, quota-free market access for all least developed countries, as the other high-income parties to the TPP have done.
Finally, how will the deal impact the multilateral system? Will a successful TPP negotiation spur countries on the outside to increase their efforts to bring things back to the WTO? Or will it encourage US negotiators to turn away from the WTO and focus on the Transatlantic Trade and Investment Partnership? We should get an indication of that when WTO ministers meet in Nairobi in December and, unfortuately, I’m not optimistic.
The US Dietary Guidelines Advisory Committee is catching flack for recommending that Americans consider the environmental consequences of eating so many burgers. Pointing to climate change and other environmental effects of meat production, the panel suggested Americans contemplate the broader implications when choosing what to eat. Suffice it to say, the meat industry and its supporters in Congress are not happy.
But seriously folks, Americans eat a lot of meat:
Source: UN Food and Agricultural Organization.
And, as the panel pointed out, the negative consequences aren’t limited to those who choose to be carnivores and they aren’t contained within US borders.
In addition to the local water and air pollution generated by large feeding operations with thousands of animals crammed into small spaces, meat production contributes to global public bads. Climate change is a big one, but there are also growing concerns about the role of livestock production in accelerating the emergence of antibiotic resistance. Most farm animals in the United States receive antibiotics at some point in their life, often mixed in their food or water to promote growth or prevent, not treat, disease (look for my new paper on this next month).
And it is developing countries that will pay much of the cost. Research suggests that low-income countries will be hit hardest by climate change. Spreading resistance to older, cheaper antibiotics also imposes disproportionate costs on low-income countries and particularly poor children in them, who suffer and die more often from infectious diseases.
Let me confess that I like the occasional burger as much as anyone. The panel isn’t suggesting that everyone go vegetarian. But most of us (at least in the United States) could afford to eat a little less meat. If considering the impact on others—today and in the future—helps motivate us, what’s the problem?
At the beginning of the new millennium, a key development concern was the impact of agricultural policies in high-income countries on poor farmers in the rest of the world. Over the ensuing decade, the focus swung from the role of price-suppressing farm subsidies to the role biofuel policies play in driving food prices up. While development advocates are right to criticize the trade-distorting costs and environmental risks of current biofuel policies, agricultural subsidies and trade barriers in rich countries remain in place and the distorting impact of those policies will rise again when prices decline.
Regional trade agreements such as the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership could leave some poor countries behind. Here are three policy changes to help Congress and President Obama avoid doing so.
This model declaration could be issued by the United States, the United Kingdom, and other governments to implement preemptive contract sanctions in Syria.
The documentation of grave violations of international human rights laws and norms by Syrian government forces is extensive and compelling and we take note of UN Secretary-General Ban Ki-moon’s statement to the General Assembly on June 7:
[It is] evident that President [Bashar] Assad and his Government have lost all legitimacy. The recent slaughter in El-Houla brought this fact into horrifying focus.
The Government of the Syrian Arab Republic is already subject to a wide range of economic sanctions imposed by our governments, but some international trade and financial flows continue and provide material support for the Assad regime’s violations of international law. In light of all this, it is the position of the undersigned governments that any new contracts with this government that support the ongoing violations, such as those relating to arms or oil, are illegitimate.
The United Nations is on the record documenting and repeatedly condemning the appalling human rights violations by the Syrian government. An Independent Commission of Inquiry appointed by the UN Human Rights Council issued its initial report in November 2011, finding that:
The substantial body of evidence gathered by the commission indicates that these gross violations of human rights have been committed by Syrian military and security forces since the beginning of the protests in March 2011. The commission is gravely concerned that crimes against humanity have been committed in different locations in the Syrian Arab Republic during the period under review.
The report noted that “customary international law provides that a State is responsible for all acts committed by members of its military and security forces” and concluded that the Syrian Arab Republic “has failed its obligations under international human rights law.” The commission called on the Government of the Syrian Arab Republic “to put an immediate end to the ongoing gross human rights violations, to initiate independent and impartial investigations of these violations and to bring perpetrators to justice.”
The commission noted that, while responsibility had not yet been proven, “[t]hese acts may amount to crimes against humanity and other international crimes, and may be indicative of a pattern of widespread or systematic attacks against civilian populations that have been perpetrated with impunity.”
Given this flagrant disregard for the rights and interest of its citizens, President Assad’s continued intransigence in complying with UN resolutions or cooperating with its designated representatives, and given that external resources to the Assad regime are being used to support the violent suppression of those rights, we, the undersigned, hereby declare that our governments will not consider contracts [relating to arms or oil] with the current Government of Syria after this date as binding on future Syrian governments.
As such, we will:
Discourage our legal systems from being used to enforce claims against future Syrian governments for non-payment of debts contracted after [fill in date].
Not retaliate against future Syrian governments that refuse to honor other contracts signed by the existing Syrian government after [fill in date].
Take the position in any future debt relief negotiations with a new Syrian government that debt contracted after [fill in date] is illegitimate and instruct our representatives in multinational institutions to behave in accordance with these principles.
Support the decision of a new government that arises in Syria to refuse to honor contracts entered into after the date of this declaration and take the position, through our representatives at multilateral institutions such as the World Bank and the IMF, that this is a legitimate action of the new government
Scarce resources. Climate change. Population growth. Rising food prices. Feeding the world’s hungry will require a giant leap in agricultural innovation. In a new working paper, senior fellow Kimberly Elliott explores how advance market commitments could pull the private sector into producing for the world’s poor.
This brief summarizes the findings of the CGD Global Trade Preference Reform Working Group and its recommendations to make preference programs better promote prosperity and stability in the world's poorest countries.