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Backgrounder on Trade

 

April 2006


The Church’s social doctrine has time and again called attention to aberrations in the system of international trade, which often, owing to protectionist policies, discriminated against products coming from poorer countries and hinders the growth of industrial activity and the transfer of technology to these countries.

--Compendium of the Social Doctrine of the Church, 364


Background

Global trade talks and negotiations involving the 149 member countries of the World Trade Organization (WTO) are conducted under the auspices of the WTO. The current series of trade negotiations are called the Doha Development Agenda (DDA) and they are due to conclude by the end of 2006. The DDA emphasizes a commitment by countries to link trade policy with development needs. These “multilateral” talks collapsed in Cancún in September 2003. They were put back on track in July 2004 and progressed further at the Hong Kong meeting in December 2005. Despite some small concessions to the poorest countries, major issues around agriculture and industrial goods and services remain unresolved.

In October 2005, the United States issued its proposals for the Hong Kong meeting. The proposals included a plan to reduce US farm supports and give increased access to the US market on the condition that similar concessions were made by other major trading countries, especially the European Union (EU). The subsequent offer made by the EU was ambitious compared to Europe’s previous position on reform of its agricultural sector but was considered insufficient as a basis for substantive discussions during the Hong Kong meeting.

Before the meeting, Bishop Skylstad, USCCB President, wrote to President Bush urging him to break the impasse in negotiations and “go the extra mile” on behalf of the poor. (See www.usccb.org/sdwp/international/BushLetteronDoha.pdf.) In early December, Cardinal McCarrick met with President Bush to discuss the up-coming meeting and the importance of giving priority to the needs of the poor in trade negotiations. The Cardinal’s statement following the meeting can be found at www.usccb.org/comm/archives/2005/05-273.shtml.

Hong Kong Ministerial Meeting, December 2005

Six thousand delegates, 3,000 journalists and 2,000 NGO representatives met in Hong Kong to participate in the Sixth Ministerial Meeting of the World Trade Organization. Expectations for a major breakthrough in Hong Kong were low with much focus on a small package of development-oriented measures. The meeting achieved its low expectations. Perhaps the most tangible achievements were the following:

  • An agreement to eliminate agriculture export subsidies, which tend to be the most damaging subsidies to the ability of poor countries to sell their goods, by 2013. (The EU provides 90% of such subsidies.)
  • Rich countries agreed to give 40-plus least developed countries 100% access to their markets for all products by 2008. Poor countries would not have to pay any duty on their exports and there would be no limit on the amount they could export. The US agreed to only 97% of such products, which will allow it to maintain trade barriers for certain products important to poor countries (e.g. sugar and textiles, two exports that tend to be the most beneficial to poor countries).
  • The WTO has set an April 2006 deadline for agreement on specific numbers and formulas for reducing agricultural subsidies and tariffs with a final agreement expected by the end of 2006. The ambitious deadline is largely driven by the expiration of the US President’s “fast-track” authority in June 2007. This authority limits Congressional action on trade agreements to a simple for or against vote.

Bi-lateral trade agreements

In addition to global trade talks, the US has continued its efforts to negotiate bilateral trade agreements. The U.S. Congress passed the US-Central American Free Trade Agreement (CAFTA) in July 2005 and singly each country has implemented this agreement. Negotiations between the U.S. and countries of the Andean region, Colombia, Peru and Ecuador on the U.S.-Andean Trade Promotion Act continue. Peru was the first to conclude an agreement made public in January 2006. It awaits Congressional ratification. It is likely that Colombia and Ecuador will join the agreement in due course.

For the first time a “side letter” acknowledging the importance of traditional knowledge in the area of biodiversity accompanies a trade agreement. The US and Peru agreed, in effect, to compensate those indigenous groups that have traditionally preserved such knowledge and techniques. This “side letter” marks a new step in ensuring trade respects the rights of indigenous people. USCCB sent a letter to Ambassador Portman, the US Trade Representative, highlighting concerns regarding the agreement. (See www.usccb.org/sdwp/international/tradeind.shtml.)

In other developments, negotiations appear stalled in the proposed agreement between the US and the Southern African Customs Union (SACU) that includes the countries of Botswana, Lesotho, Namibia, South Africa and Swaziland. The United States hopes to achieve progress in a regional trade agreement with the 34 countries of the Western hemisphere (excluding Cuba) called the Free Trade Area of the Americas (FTAA). Negotiations on the FTAA are stalled awaiting progress on agriculture and intellectual property rights at the WTO.

Budget Reconciliation and Payment Limitation Legislation

As part of the final budget resolution for 2006, the House and Senate Agriculture committees must make adjustments to the 2002 Farm Bill that will result in $3 billion in savings from FY06 to FY10. The Conference has long supported common-sense adjustments in the farm-subsidy program to protect America’s family farmers while creating a more just marketplace for poor farmers in developing countries. Sen. Grassley (R-IA) introduced a bill called the Rural America Preservation Act (RAPA) which would place a real limit on the amount of direct federal funding any single entity can receive and would close loopholes that currently allow the largest farms to receive massive government payments. On April 1, 2005, Bishops DiMarzio and Ricard, Chairman of the Domestic and International Policy Committees, wrote to Senator Grassley endorsing S. 385. USCCB support for both RAPA and for the adjustments to domestic farm supports in the Budget Reconciliation process is aimed at assisting poor farmers in developing countries to be more competitive in selling their goods on international markets. Reducing domestic and export subsidies of developed countries is considered an essential step in the up-coming trade negotiations at the WTO.

Measures to reduce trade-distorting domestic supports were unsuccessful in the budget reconciliation process. Instead, the House passed measures to cut significantly funding for conservation programs that have been supported by USCCB. This failure demonstrates the difficulty of securing measures in US farm policy that will translate the commitment to fair trade rules for poor farmers at home and abroad into concrete actions. As the Congress prepares to work on a new Farm Bill in 2007, the global context in which US agricultural trade takes place will require close attention from all those concerned with fair trade and the plight of the poor.

Haitian Trade Preferences

See section in Haiti Backgrounder entitled “Trade and Haiti’s Economic Development.”


USCCB/CRS Position:

For over a decade, the U.S. Conference of Catholic Bishops has addressed aspects of international trade. Rather than take a position for or against complex trade agreements, the Conference has proposed a set of ethical criteria that should guide trade negotiations. In July 2004 these criteria were applied to the US-CAFTA agreement in the Bishops’ Joint Declaration and in November 2005 they were applied to the US-Andean Trade Promotion Act.

In November 2003, the US Catholic Bishops issued the statement For I Was Hungry and You Gave Me Food: Catholic Reflections on Food, Farmers and Farmworkers. It can be found at this website: www.usccb.org/bishops/agricultural.shtml. This statement articulates the Conference’s specific policy on trade, particularly as it applies to agriculture.

Domestic Farm Policy

  • The United States should target and cap limited government subsidies to small and moderate-sized farms, especially minority-owned farms. Rather than simply rewarding production through these subsidies that can lead to surpluses and artificially low world prices, government resources should reward environmentally sound and sustainable farming practices.

International Trade Policy—Subsidies, Tariffs and Quotas and Differential Treatment

The subsidies, tariffs and quotas of richer countries that severely constrict poorer countries in their ability to sustain their own agriculture should be reduced.

  • Developing countries should be given some flexibility (technically referred to as “special and differential treatment”) in using appropriate subsidies, tariffs, quotas and other support measures to make sure they have sufficient food supplies, enhance rural incomes and promote rural development.
Having a Voice

  • Trade documents should be made available during the process of negotiation for review and public comment.
  • Major elements of civil society, including groups representing the poor, business, labor and religious communities, should have greater access to participation in the process.
  • Richer countries should provide technical assistance to help poorer countries be able to participate more fully in trade negotiations.
  • Labor and Environment •Trade agreements should treat labor and environmental concerns as integral to trade agreements and not as peripheral matters.
  • Trade agreements should lead to economic and social improvements at home and abroad, particularly for poor and vulnerable workers and their families; this can be accomplished by adopting internationally agreed upon labor standards.
  • Trade agreements should foster the right to organize and bargain collectively.
  • Trade agreements should encourage and not undermine the ability of poor countries to promote environmental protection and sustainable agricultural practices.
  • Migration
  • The impact of trade on migration should be concretely addressed when trade measures are considered.
For further information: Rev. Andrew Small, OMI, United States Conference of Catholic Bishops, at (202) 541-3153.

The poverty of billions of men and women is “the one issue that most challenges our human and Christian consciences.”
--Pope John Paul II, World Day of Peace Message, 2000
 





 



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