Trade Group to Cut Farm Subsidies for Rich Nations
(Note: "Think Global, Act Local." - Hazel Henderson, United Nations globalist, 1976. Look where such has brought us: to the place where all the the Constitutional Republic of the United States of America, is being offered at the altar of those seeking to tear it to shreds ... so they can make more money and have more power. America was not always wealthy, and if the global change agents -- Zoellick among others -- have their way, she will be dragged down by such schemes as "free trade agreements." Such is happening this very moment in time.)
August 1, 2004
By Elizabeth Becker
The New York Times
New York, New York
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Geneva, Switzerland - The World Trade Organization agreed Saturday that it would eventually eliminate billions of dollars of farm subsidies for rich nations in a new framework for revising global trade rules aimed at helping the world's poorest people.
The framework agreement approved Saturday night amounts to the halfway point in this round of talks.
Officials hope for a successful conclusion in 2006, about the time that Congress will be renewing the farm program, which will have to include the changes finally agreed to by the global trade body.
Foreign Minister Celso Amorim of Brazil, who has become a spokesman for the developing world on those issues, said the accord reached here was a milestone for farmers who could never compete against the rich world's subsidized crops and who were going out of business by the millions.
"This is the beginning of the end of subsidies," Mr. Amorim said. "It is a rare combination of social justice and trade coming together.''
After its very public failure to reach an accord in Cancun, Mexico, last year, the trade body and its members said they were determined to revive this round of talks, despite skeptics who questioned the rich nations' sincerity. But rich and poor countries alike have been questioning the world's trading system and blaming globalization for many ills, from outsourcing jobs to lowering standards of living. So the talks here have been seen as essential to proving that trade can be fair.
Any deal would have required serious changes in agriculture by many nations.
The World Bank, International Monetary Fund and the United Nations have said that the $300 billion in annual subsidies and supports given to farmers in the world's wealthiest nations are some of the worst injustices in the global economy.
Robert B. Zoellick, the United States trade representative [USTR], and Pascal Lamy, the top trade minister for the European Union, promised at the beginning of the year to revive this round of trade talks, known as the Doha round.
Those men, the world's two most powerful trade ministers, traveled the globe to seek compromises with other countries, especially those in the new alliance of 20 developing nations that includes Brazil, China, India and South Africa and represents more than half the world's population.
In his remarks, Mr. Zoellick thanked
"President Bush confounded conventional wisdom by empowering me and my administration colleagues to make trade success a priority, even in an election year, because he believes open markets build stronger economies and help create jobs in the United States and opportunity around the world," he said.
Supachai Panitchpakdi, the director general of the World Trade Organization, also praised the agreement after the long evening session. His tenure will be judged on the success of this round, which could add $3 trillion to the world economy.
In an e-mailed message, Democrats immediately belittled the framework, saying it was too little and too late for the American economy. "After almost four years, it appears that the result is to simply identify for our trading partners the barriers they have had in place throughout the years of this administration to U.S. exported manufactured goods," said Representative Sander Levin, Democrat of Michigan and ranking minority member of the Ways and Means Trade subcommittee. "In the face of 2.5 million jobs lost, we can and must do better for hard-working Americans."
In leading up to the steps on Saturday, the first wealthy countries to blink were the Europeans.
Earlier this year, Mr. Lamy offered to eliminate the European Union's $3 billion in farm export subsidies. That put the spotlight on the United States.
"We took a risk and it worked," Mr. Lamy said. "It was worth it for us and for the developing countries."
In the talks here, the United States agreed with other wealthy nations to a 20 percent cut in some of its farm subsidies, which was seen, in part, as an effort to match the European pledge.
In the United States, the cuts could include some of the $19 billion given annually to farmers who raise cotton, rice, corn, wheat and soybeans.
But during the all-night talks that lasted into Saturday morning, several developing countries questioned whether there would be an overall reduction in American subsidies or simply shifting subsidies from one category to another.
"The cuts are important but there's a fair bit of people promising not to do something that they're not doing anyway,'' said Jim Sutton, a New Zealand delegate.
The United States also resolved an emotional issue left over from the Cancun talks by reaching an agreement with four impoverished West African nations -- Benin, Burkina Faso, Chad and Mali.
They had pleaded for relief from subsidized American cotton that they said had driven down world prices and destroyed the livelihoods and the lives of thousands of their farmers.
Under the framework, the United States agreed to speed up its reduction of subsidies for cotton, which were recently declared illegal by a World Trade Organization tribunal.
The agreement also calls for help in finding more development aid for those African countries.
In return, the countries without subsidies agreed to make changes as well. The highest agricultural tariffs will be cut more deeply than the lowest ones, and countries with state trading enterprises -- like Canada with its wheat board -- accepted new restrictions on how they sell their commodities. Those changes should translate into more open markets for American agricultural goods, a goal that Mr. Zoellick had said was critical to achieving a balanced trade round.
Many difficult questions were left unanswered until the next gathering of negotiators. A group of wealthy nations including Japan, Norway and Switzerland agreed that their biggest tariffs should be cut the most. But they persuaded the 147 members of the trade organization to postpone making decisions about how much the tariffs would be reduced, with a special eye toward tariffs they impose to protect what they call sensitive products. Those include rice for Japan and dairy products for Norway and Switzerland. "We maybe have mixed feelings, but we said yes," said Masato Kitera, a Japanese delegate at the talks. "We will negotiate the level of tariffs later."
Many of the ideas behind the agricultural compromise came from a small group - including the United States, the European Union, Australia and Brazil - that was created by Mr. Zoellick and Mr. Lamy to craft a consensus in separate discussions before and during this week's trade talks. Two of its members - Brazil and India - were invited to join the United States, the European Union and Australia in separate talks before and during this session to reach a consensus on agriculture.
Kamal Nath, India's commerce minister, a member of the group, said the accord was a long-awaited acknowledgement that wealthy nations' farm subsidies were unfair. "It has finally dawned on everyone that our farmers can't compete against subsidized crops," he said. He also said the accord was a tribute to Mr. Lamy and Mr. Zoellick.
The deal could be the final legacy on the global trade arena for the two men. Mr. Lamy's commission is over in October, and Mr. Zoellick's position probably depends on whether President Bush is re-elected.
Additional researched, recommended reading:
Dead Capital - Undeveloped assets or assets held without clear ownership or title. Assets held in defective forms (houses without title deeds and unregistered enterprises without access to formal finance). Informal/illegal property. http://www.gdnet.org/pdf/CP%20(Sameh%20Wahba).pdf
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The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else: A discussion with Hernando de Soto
July 17, 2002
David de Ferranti, Vice President of the Bank's Latin America and Caribbean region, provided some introductory remarks. De Ferranti said internationally renowned economist Hernando de Soto not only writes, but carries out his ideas by testing his theories on the ground. He called de Soto more than just a thinker, but a doer as well.
Peter Hakim, President of the Inter-American Dialogue, a cosponsor of the event, said de Soto's strength was that he made his ideas accessible, attractive and appealing. He called de Soto's ideas profound, yet explained to the public in simple and elegant terms.
Hernando De Soto [Peruvian economist] started by noting there is no shortage of entrepreneurs in the world. The question was why have entrepreneurs flourished in the West but not elsewhere, where only one out of six billion have benefited. He suggested the underlying reason is that people in the West trust each other. He noted economists Adam Smith and Karl Marx suggested greater division of labor led to specialization which led to increased productivity. Division of labor led to more interdependence among people. In surveys on the issue of trust, people in Western countries had a high level of trust of people in their countries. However, levels of trust were quite low in developing countries. The basis of trust, de Soto said, are the standard forms and legal documents which provided opportunities to uniformly identify people, wealth, and ownership. De Soto quoted Adam Smith who wrote the value of wealth must be fixed before it is realized. De Soto believes Smith referred to fixed wealth as something which was metaphysical rather than physical. De Soto quoted Bertrand Russell who said there is knowledge by acquaintance. In addition, de Soto suggested there is knowledge by description, such as a passport, a driver's licence or another legal document. Philosophers often say truth lies outside the object themselves, outside description.
Economists also operate in a such a world. It is a world about description, where documents tell the economists things about other things. Documents allow one to do things otherwise not possible. For example, there are buildings in both Mexico and the U.S. where people work and live. De Soto said, however, he has counted 100 more things that the U.S. buildings do that the Mexico buildings don't. U.S. buildings are being mortgaged, act as collateral, are places where things are delivered, etc. These sorts of uses are often not available to people in the developing world. De Soto and colleagues for the Institute for Liberty and Democracy (ILD) don't ask the most common development question, which is how many people in the world live for under $2 per day. Rather they ask how much of the world is covered by law, and how many people can represent their assets or themselves, or participate in a market economy.
Capital that can be used for things such as obtaining credit or guaranteeing an investment were called live capital by Adam Smith. Much of de Soto's work revolves around understanding and identifying what he calls dead capital, which is capital outside the law. He used his experiences in Egypt as an example of the extent to which dead capital exists in an economy. Different legal jurisdictions allow people to own assets that are outside the law of other jurisdictions. In Egypt, building on agricultural lands is illegal, yet de Soto estimated 4.7 million homes are built on such land. Public housing has been extended illegally. He estimates 92% of all buildings are outside the law, and 90% Egyptian businesses and people operated and live outside the legal system. 78% of Mexicans fall into the same category, he added. He acknowledge their activities represent enterprise, but not a real market economy operating within the rule of law. De Soto estimates Egypt's poor own $245 billion in dead capital, which is 55 times of all Foreign Direct Investment in Egypt since Napoleon's time or 50 times more than all the bilateral aid include World Bank loans. The wealth, in fact, lies with the poor. Similar statistics can be found in Mexico.
Capital, de Soto said, is the value things have when they can enter the market and be measured. He used the example of the privatization of the Peruvian telephone system. Market agents could not adequately measure the value of the phone service, but when titling for the phone company was adequately done to measure up to Western standards, the value of the company grew 37 times. This was simply done by improving the representation of the form.
He noted that many things related to value are invisible things.
History showed that documentation of ownership in Western culture was created to protect ownership.
In fact, it also launched something not originally envisioned: the start of capital markets.
De Soto suggested much of the developing world has yet to learn this.
The developing world needs to better understand that law, in addition to providing order, allows people to transport value and trust one another in expanded markets with interdependent specialists in fruitful cooperation.
Creating titling systems of property law is another critical area to fostering capital markets. De Soto used the example of the transition from feudal Japan to a modern society. Laws developed following the Second World War in post-war Japan destroyed the feudal system and created wealth opportunities to the public. The new property laws, giving the public new opportunities to participate, created the foundation upon which Japan became one of the world's leading economic powers. In Haiti, the poorest country in the Western Hemisphere, de Soto and ILD colleagues are now working on property law issues. He said he has found much of the population living in shacks, but the shacks are in fact titled. Not by the government, but privately. This is done because the Haitian poor understand the importance of having some sort of representation of value as the government tries to create a workable market economy. They are trying to create the basis of a market economy revolution. The social part of the revolution is already underway, de Soto said, but the legal reforms have yet to catch up.
De Soto calls his book, Mystery of Capitalism, and the ILD's work about creating shortcuts on these processes for developing countries. He said it took 300 years for it to happen in the West, but the Japanese short-cut the learning curve, so it can be done elsewhere. He acknowledges as well, [that] much of the information on understanding these social and legal interactions was derived by lessons learned and knowledge disseminated by the Bank itself.
The floor was then opened to questions from the audience.
Hernando de Soto: http://www.pbs.org/wgbh/commandingheights/ shared/minitextlo/int_hernandodesoto.html
Institute for Liberty and Democracy http://www.ild.org.pe/
"The Mystery of Capital" Annual Morgenthau Lecture at Carnegie Council on Ethics and International Affairs