REMINDERS: Please check your grade to make sure that I'm not missing something. (No "Great Decisions" scores are in yet.) The Chapter #12 blog entry is posted, as is your second "take home" essay exam.
I asked you to get through the 10 pages that was Chapter #13 from The World Is Flat for today. You'll find that final required blog entry, plus another "Bonus" blog entry posted over the weekend.
While I am sure many of you will finish off the book this weekend, we'll officially ask that you have Chapter 14 read for Monday and Chapter 15 read for Wednesday. (They will be the readings for the last bonus blog.) You've made it this far, so let's finish it off...
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We'll start with the "International Organizations" matching quiz today. 20 groups - 10 points.
Megan, Laurel and Lauren have the floor for "Great Decisions" on Brazil today.
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In addition to being an MPA parent (Carl is a sophomore), Monday's guest speaker C. Ford Runge is Professor of Applied Economics and Law at the University of Minnesota. He did his undergraduate work at the University of North Carolina, and he was a Rhodes Scholar at Oxford. His areas of focus in research and teaching include food, trade policy and natural resources policy.
Mr. Runge is currently working on a manuscript for The American Interest on the Doha round of trade negotiations and the role of agricultural subsidies. Below are two short articles from The Economist that would provide you with helpful background. Please read these before Monday's class.
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"Slouching towards disaster"
The Economist
July 6, 2006
The Doha trade round is dying of apathy. Only George Bush can save it
The world's trade ministers gathered in Geneva last week for what was billed as a final attempt to salvage the Doha round of global trade talks. That those efforts got nowhere is depressing. The really bad news is that no one seemed to care.
Kemal Nath, India's trade minister, turned up 90 minutes late for the first big meeting, because he had thought it more important to watch Germany beat Argentina in the World Cup. Rather than haggle through the night, as trade negotiators are wont to do, the ministers took it easy and went home early. The negotiators promised to keep talking—but did not bother to set a date for further discussion. All this failed to excite the financial press. It is bad enough when trade talks break up in acrimony; how much worse that the Geneva gathering petered out amid complacency and apathy.
Time for a penalty shoot-out?
Today's malaise has two possible explanations. Either the authors of any deal—America, the European Union and the big emerging economies—have concluded that it does not matter if Doha fails; or they see no need to reach an agreement quickly. Just as earlier global trade negotiations, such as the Tokyo and Uruguay rounds, dragged on for years, so today's negotiators might believe that the Doha talks can simply be put on hold; something will emerge eventually.
Both lines of argument are flawed. The stakes go far beyond the narrow gains in this round for trade in farm goods, lower industrial tariffs and more open markets for services (though those are not to be sniffed at). If the Doha talks go nowhere, the future of the multilateral trade system itself will be at risk. The efforts of trade officials are already shifting from the multilateralism that Doha represents to regionalism. There are now more than 250 bilateral and regional trade deals, double the number of a decade ago, and many more are being negotiated. If the Doha round collapses, regionalism, despite its unarguable economic inferiority, will replace multilateralism as the organising principle of global trade. The World Trade Organisation will rapidly wither as a negotiating forum for new rules; it may eventually lose its legitimacy as an arbiter of trade disputes, whereby the old rules are upheld.
A deadline in Washington, DC
What about the idea that there is no real time pressure? This ignores American politics. George Bush's trade-promotion authority (TPA) expires in June 2007; after then, any deal will have to go through Congress where it will be picked apart by special interests. That deadline means a trade deal must be concluded this year—which in turn demands a political breakthrough now. The possibility of extending TPA is slim. November's mid-term elections will probably increase the number of Democrats in Congress, shifting the balance of the legislature towards protectionism. Even Democrats who support freer trade will be loth to hand Mr Bush a political victory.
The world economy has been extraordinarily buoyant during the years that the Doha negotiators have been haggling. That cannot last. Slower growth and higher unemployment will surely make it harder to get a trade deal done.
Although today's complacency is unforgivable, overcoming it will not be easy. Conscious that they will lose if Doha fails, some big trade powers, notably Brazil, at last appear ready to compromise. But many still see the cost of failure as being lower than the short-term political price of success. India, in particular, is more worried about upsetting subsistence farmers than it is excited by the prize of freer trade in the services that now matter so to its economy. America, too, seems increasingly uncertain that the likely outcome of a Doha deal is worth the pain of facing down farmers. The latest Geneva talks got nowhere in large part because America refused to make bigger cuts in its farm subsidies (see article).
America does not bear all, or even most, of the blame for Doha's deadlock. But at this eleventh hour, Mr Bush may be the only person capable of breaking it. A dramatic display of political courage by the world's biggest economy and the traditional leader of the multilateral trading system could still jolt the round from apathy to action. Mr Bush should offer deeper cuts in farm subsidies than he has been willing to discuss so far, shaming the Europeans and others to greater openness. A clear, public commitment by Mr Bush at the G8 summit in St Petersburg next weekend offers the best, and probably last, opportunity to save the Doha round. If he cares about global trade, Mr Bush should grasp it.
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A tangle of troubles
The Economist
July 20, 2006
America's cotton-farmers are worried about both drought and Doha
“That's what the drought does for us,” says Barry Evans, a family farmer near the west Texas town of Kress. He is peering out of his pickup at thin, scraggly green cotton plants, a foot or so high in between rows of dry stalks. It barely rained last winter and, by June, Kress had received less than two-thirds of the rain that fell a year earlier. Now blistering heat is drying out the plants even more. Across the Texas plains, cotton experts estimate that 1m acres—perhaps 15% of the state's crop—have already been lost.
If weather were the only problem facing cotton farmers, things might not be so bad. They are used to nature's whims: Kress lies in the heart of the 1930s Dust Bowl, and even today dirt storms (and sometimes tornadoes) roll through in the spring. Fortunately cotton requires much less water than, say, maize. Many farmers tap the Ogallala Aquifer for at least part of their crop, but Texas also has substantial areas of “dry-land cotton” (about one-third of Mr Evans's crop, for example) that remain outside the irrigators' reach.
Free trade is even more of a threat. The cotton industry exists in America only because of subsidies, and it stands to lose much if the World Trade Organisation's Doha negotiating round succeeds. Cutting trade-distorting farm subsidies is a top priority in the trade round and negotiators have already promised that subsidies for cotton will be cut “more ambitiously” than others.
Nothing will happen immediately, since the talks are at a standstill. American negotiators have offered to cut the limits for the most trade-skewing subsidies by 60% in return for greater access to international markets. The European Union and big developing countries want bigger cuts in America's subsidies but are loth, as always, to dismantle their own barriers.
The absurdity of America's cotton subsidies is well known. Uncle Sam spends over $4 billion a year propping up cotton farmers, with the bulk of the money going to those whose operations are much larger than Mr Evans's. Cotton receives far more government cash per acre than other crops—in 2001, four or five times that of maize or wheat, according to a recent paper by the National Centre for Policy Analysis, a conservative think-tank. The losers are not just American taxpayers but some of the world's poorest farmers, as America's subsidised production pushes down world prices. Cotton prices have halved since the mid-1990s as America's subsidies have doubled.
The end of this gravy train is long overdue. Some change is inevitable even without a Doha deal, as the WTO has already declared some American cotton subsidies illegal. The uncertainly is casting a pall over the Cotton Belt—especially Texas, where more than a third of America's 20m bales are grown. Mr Evans, looking gloomily ahead, fears his livelihood may be about to be “traded away”.
Don Ethridge, director of the Cotton Economics Research Institute at Texas Tech University, reckons that if America cuts its cotton subsidy by 60%, income for cotton farmers would fall by 26% over six years—or 19% if America won great access to international markets. “We're scared to death,” says Mr Evans. Though not scared enough, it seems, to think beyond today's subsidies. Some dream that cottonseed oil, already used for cooking, could one day power America's cars. But “I sure am not going to bet my long-term future on biofuels,” says Mr Evans. “We just don't know enough yet.”