Wednesday, December 07, 2005

Hiatus

The University of Iowa College of Law has commenced its winter break. Consequently, there likely will be no postings on UICIFD's News & Developments feature until sometime in January.

Friday, December 02, 2005

The WTO's Sixth Ministerial Conference to be held in Hong Kong in December

On Tuesday, December 13, the World Trade Organization will hold its sixth Ministerial Conference in Hong Kong, to further negotiations of issues left for the Doha Round.

Some hot-button issues that await agreement between member states include the reduction of industrial tariffs, intellectual property patents and agriculture tariffs.

The recurring theme that developed countries should assist the least developed countries through trade is still relevant at the talks. Concessions on one issue can be used as leverage for negotiations in another. For example, EU trade commissioner Mendelson has said that there will be no further EU reduction of farm tariffs, while some developing countries such as Brazil and India would not cut industrial tariffs or open the service industry unless the EU makes further cut on farm tariffs. The developing countries claim that tariffs imposed by the EU has depressed prices for agricultural products worldwide. The current negotiation is often characterized as a deadlock.

More specifically, agreements on agriculture should be made on three pillars, namely domestic support, export subsidies (and other aspects of the export regime) and market access. A preliminary plan envisages five tiers in the tariff reduction formula, fixed percentage reductions for tariffs within each tier with higher cuts in higher tiers, maximum final tariffs (“caps”), flexibility through a limited number of designated “sensitive products”, milder treatment for developing countries. This scheme aims at providing flexibility so to encourage agreements.

On a more optimistic note, the WTO has extended the deadline for the world's poorest countries to comply with intellectual property rules on patents, trademarks and copyrights. However, one crucial issue remained to be discussed is whether the least developed countries can have better access to cheap generic medicine, as part of the development package. The deadline is said to be extended from Janurary of next year to year 2013.

Sources:
Financial Times, WTO Chief Urges Actions Ahead of Talks
Financial Times, WTO Extends Intellectual Property Exemption Deadline for Poorest Countries
The Taiwan Times, Prospects Cloudy for WTO Meeting in Hong Kong
The World Trade Organization, Farm Talks Chairperson Reports to Trade Negotiations Committee

Thursday, December 01, 2005

New EU Sugar Regime

European Union's Agreement to Revamp the Sugar Subsidy Programme BBC, 11/28/05
Region Loses in EU Sugar Cuts BBC, 11/24/05

The European Union (EU) reached an agreement on November 24 in Brussels that cut the price of sugar by 36 percent over a four year period. Under the old EU system, sugar production was supported by generous EU subsidies and import tariffs, all of which will be phased out over a four-year period starting in 2006 .

The EU said this move would strengthen its position in upcoming World Trade talks in Hong Kong. Last month, the World Trade Organization ruled that EU sugar subsidies were illegal as they make it impossible for producers in other countries to compete. EU sugar prices are more than three times higher than the global market rate. Brussels also pays out export subsidies to get millions of tons of sugar a year off its market.

Critics say that the EU's reformed sugar regime looks out for sugar beet farmers in Europe more than sugar producers in developing nations. Guyanese President Bharrat Jagdeo said the agreement amounts to a "betrayal" and demonstrates that Europe cannot be trusted.
The EU has offered the 19 sugar producers in the African, Caribbean and Pacific (ACP) trade group $47million to help cushion the impact of reform, but the ACP dismissed this amount as "paltry".

Caribbean sugar producers say they could lose over $150 million annually under the new regime. Since then an EU agriculture spokesman said the bloc was proposing a further $223 million dollars in aid annually for Caribbean producers, but that deal depends on whether the EU governments can agree on a new budget deal.

Caricom (Caribbean community) leaders, who are now meeting in Malta at the Commonwealth Summit, said they will take their case to the WTO ministerial trade meeting in Hong Kong in December.

Oil Shapes Up as Issue for Mexico's Elections

By: John Lyons
November 30, 2005; Page A16
The Wall Street Journal

Current debate over Mexico’s oil economy will likely take center stage at the presidential elections next year. Felipe Calderon, the candidate for the ruling National Action party, suggested that the constitution be amended to allow private companies to explore for oil, while a leftist candidate wants to keep energy production in the hands of the state. Mr. Calderon predicts that Mexico, one of the world’s largest producers of oil, will run out of natural reserves in a little over a decade. He further suggests that lifting of this constitutional ban on private exploration will serve as a means to replenish oil reserves and lower the cost of refined fuels.

"If someone else can come here, build a refinery bigger than the ones we have and at a lower cost, then let them do it," Mr. Calderon told the American Chamber of Commerce in Mexico City. Several members of the populist party are taking the opportunity to highly criticize Calderon, who is the first serious presidential candidate to consider lifting the constitutional ban on private exploration in the oil industry.

Petroleos Mexicanos, the state-owned agency which provides about a third of government revenue, “lacks the management expertise, technology and finances to replenish its oil reserves, much of which are believed to be in the hard-to-reach deep waters of the Gulf of Mexico.”

Questions:
1) What are the potential benefits and downfalls of lifting this constitutional ban on oil exploration?
2) With elections approaching, will this issue potentially “make or break” Calderon’s presidential campaign?





Venezuela Clinches Spain Defense Deal

By: Andy Webb-Vidal in Caracas
November 29 2005
The Financial Times

Venezuela and Spain signed a deal on November 28, 2005 to buy twelve transport aircrafts and eight coastal patrol ships to support maritime defense. The United States was opposed to this deal because this increase in the defense equipment of Venezuela will increase Venezuela’s military power and political influence in the region.

Both the governments of Venezuela and Spain maintain that the contract is for defense reasons only. Chavez says that the vessels and the aircraft will be used to combat the drug trade, which is largely influenced by Colombia, which borders Venezuela and is the largest producer of cocaine in the world.

The united States is also concerned that Venezuela is purchasing 100,000 assault riffles from Russia. While the U.S. and Spain are still on fairly good terms, Spanish defense minister, Jose Bono, stated, “What country with a business opportunity would give it away to another country?”

Questions:
1) Will this contract for military supplies between Spain and Venezuela further hurt the relationship between the U.S. and Spain (which was severely affect by Spain’s removal of peace-keeping troops from Iraq in April 2004)?
2) How would this increase in military supplies affect Venezuela’s political influence in the region?

Argentine Inflation Raises Pressure on Kirchner

By: Michael Casey
November 28, 2005
Dow Jones Newswires

As a result of a recent rise in inflation rates in Argentina, several businesses are charging President Kirchner with engaging in anti-business policy. The Argentinean government won praise for a three-year upswing following their major economic crisis in 2002; however, in recent months, inflation hit record highs, reaching 12% (the second highest in Latin America, following Venezuela).

Outside investment companies suggest that Argentina tighten their monetary policies in order to lower inflation and raise exchange rates. Instead, Argentina launched several economic strategies which harmed several sectors of the business community and labor market. In an effort to curb inflation, there was an increase in export taxes, change in wage-price policy, and threats made to business cartels that result in economic inefficiency and harm the market.

Last week, economy minister, Roberto Lavagna, accused delegates of a construction-industry conference of collusive business practices. This accusation furthered the tension between Mr. Lavagna (who is generally more respected in the business community than Mr. Kirchner) and planning minister, Julio de Vido.

There are rumors that Mr. Lavagna is likely to distance himself from these monetary policies, and perhaps resign from his post as economy minister. This caused fear among economists and currency traders, who began frantically selling their pesos last week.

Questions:
1) Will Mr. Lavagna, remain in his post as economy minister? If not, what effect will that have on the value of the peso? What effect will that have on the Argentine economy in general?
2) If Mr. Lavagna were removed from office, what effect would that have on the upcoming financial negotiations between Argentina and the IMF (International Monetary Fund)?

Brazil Braces for Gloomy Growth Figures

By: Jonathan Wheatley in São Paulo
November 29 2005
The Financial Times

Results of Brazil’s third quarter GDP show that there is not only a decline in growth, but also that the economic figures are worse than the second quarter. This result comes following eight quarters of consecutive growth, and is particularly devastating because of current scandals surrounding vote buying and illegal campaign financing.

This set-back might result in the relaxation of current financial policies in Brazil. Although these strict policies are what helped secure Brazil’s economic stability over the past three years, other ministers, besides the minister of finance, are eager to relax these public spending policies. Specifically, there is an ongoing dispute between the minister of finance and the minister responsible for coordinating and executing governmental policy.

The largest impacts on the Brazilian economy come from the Central Bank’s high lending rates to control inflation and the increasing strength of the Real, which went from R$3.50 to the dollar, to about R$2.20 in recent times. Additionally, there has been an increase in exports, especially to China. Exports are expected to produce a R$43 billion record trade surplus this year.

Ironically, the increase in the strength of the Real has led to a delay in manufacturing in Brazil. Due to the strength of the Real, it is now more expensive to build manufacturing plants and such in Brazil, than in other countries, such as China. Similarly, foreign companies aren’t as interested in investing in Brazil anymore because of the increase in costs to them.

Questions:
1) The relatively strong performance of the economy over the past two years has helped maintain popular support for President Lula, despite the public unease over the corruption scandal. How will this decrease in economic stability fare for the president?
2) Is it likely that we have another President Collor on our hands?
3) The Real Question is: As presidential elections approach, what effect will this have on Lula’s chance at re-election?