Negotiating Trade Liberalization at the WTO: Domestic Politics and Bargaining Dynamics (International Political Economy)

International Political Economy Series General Editor: Timothy M. Shaw, Professor and Director, Institute of International Relations, The University of the West Indies, Trinidad & Tobago Titles include: Lucian M. Ashworth and David Long (editors) NEW PERSPECTIVES ON INTERNATIONAL FUNCTIONALISM Eugénia da Conceição-Heldt NEGOTIATING TRADE LIBERALIZATION AT THE WTO Domestic Politics and Bargaining Dynamics Robert W. Cox (editor) THE NEW REALISM Perspectives on Multilateralism and World Order Frederick Deyo (editor) GLOBAL CAPITAL, LOCAL LABOUR Stephen Gill (editor) GLOBALIZATION, DEMOCRATIZATION AND MULTILATERALISM Björn Hettne, András Inotai and Osvaldo Sunkel (editors) GLOBALISM AND THE NEW REGIONALISM Christopher C. Meyerson DOMESTIC POLITICS AND INTERNATIONAL RELATIONS IN US–JAPAN TRADE POLICYMAKING The GATT Uruguay Round Agriculture Negotiations Isidro Morales POST-NAFTA NORTH AMERICA Manuela Moschella GOVERNING RISK The IMF and Global Financial Crises Volker Rittberger and Martin Nettesheim (editors) AUTHORITY IN THE GLOBAL POLITICAL ECONOMY Justin Robertson (editor) POWER AND POLITICS AFTER FINANCIAL CRISES Rethinking Foreign Opportunism in Emerging Markets Michael G. Schechter (editor) FUTURE MULTILATERALISM The Political and Social Framework

Ben Thirkell-White THE IMF AND THE POLITICS OF FINANCIAL GLOBALIZATION From the Asian Crisis to a New International Financial Architecture? Thomas G. Weiss (editor) BEYOND UN SUBCONTRACTING Task Sharing with Regional Security Arrangements and Service-Providing NGOs Robert Wolfe FARM WARS The Political Economy of Agriculture and the International Trade Regime

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Negotiating Trade Liberalization at the WTO Domestic Politics and Bargaining Dynamics Eugénia da Conceição-Heldt

© Eugénia da Conceição-Heldt 2011 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978–0–230–27356–6

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Contents List of Tables

xi

List of Figures

xii

Preface and Acknowledgements

xiii

List of Abbreviations

xv

Introduction

1

Overview of the argument Case studies Methodology: selection of the units of analysis Domestic institutions Economic importance of the EU, US, Brazil, and Australia in the WTO Actors’ positions on agricultural trade liberalization Sources Chapters’ overview

3 4 6 6 8 10 11 12

Part I Setting the Stage 1

2

Framework for Analysis of Negotiations

17

Two-level games literature and trade policy: an overview International-level explanations Domestic-level explanations: society- and state-centred approaches Domestic institutions Executive–legislative relations Number of veto players Link between parties and interest groups Domestic constraints and international negotiations Integrative and distributive bargaining International level: the time dimension of negotiations Time dimension and concession rates Time pressure: elapsed time and concession rates Best alternative to a negotiated agreement Repetitive games and tough bargaining strategies Conclusion

17 18

Multilateral Agricultural Trade Regime

36

Introduction

36 v

19 22 24 25 27 28 28 29 29 30 33 34 34

vi

Contents

Evolution of international trade cooperation Uruguay round negotiations 1986–94 Inclusion of agriculture in the negotiating agenda First negotiating phase: 1986–8 Second negotiating phase: 1989–90 Final negotiating phase: 1991–3 Agreement on agriculture of the Uruguay round Market access Export subsidies Domestic support and the system of boxes Impact of the agreement on agriculture on domestic support Conclusion

36 38 38 39 40 41 42 42 43 44 45 46

Part II Domestic Institutions 3

4

US Trade Politics

51

Introduction Power delegation in US trade politics Reciprocal Trade Agreements Act of 1934 and beyond Failure to ratify the International Trade Organization charter Trade Expansion Act and Trade Adjustment Assistance of 1962 Enactment of fast track negotiating authority in 1974 Strengthening congressional oversight in the 1980s Current provisions of fast track negotiating authority Ex ante congressional oversight procedures Ex post control mechanisms Link between parties and campaign contributions of interest groups Campaign contributions of farm organizations Campaign contributions of commodity producer groups US agricultural subsidies and international trade US veto players 1999–2006 Conclusion

51 53 54 54

EU Trade Politics

73

Introduction Institutional structure of the EU political system Evolution of EU trade politics Delegation of power and control mechanisms Ex ante control mechanisms: the negotiating mandate Control mechanisms at locum: the 133 Committee Ex post control: voluntary and involuntary defection Actors’ positions on agricultural trade liberalization Member states

73 75 78 79 80 81 82 83 83

55 57 58 59 60 62 62 64 65 67 70 70

Contents

5

6

vii

European Commission Farmer and business groups Domestic-level institutions in France Structure of the executive Link between parties and farmer groups The Common Agricultural Policy and international trade Conclusion

85 86 87 87 88 90 92

Brazilian Trade Politics

94

Introduction Brazilian trade politics National economic development model 1930–45 Trade politics under democratic governments 1946–64 Protectionist industrialization model 1964–85 Adoption of a more liberal trade policy after 1985 Decision-making process in trade policy High party fragmentation Link between parties and interest groups Veto players in Brazil 1999–2006 The Brazilian agricultural sector Conclusion

94 95 95 95 96 97 98 99 102 103 106 106

Australian Trade Politics

109

Introduction Australian trade politics Australia’s trade dependence on Great Britain until 1956 Trade policy of Liberal-Country governments 1956–72 First tariff reductions of the Labor government 1972–5 Increasing protection under Liberal-National governments 1975–83 Multilateralism under Labor governments 1983–96 Bilateralism under Liberal-National governments 1996–2007 A ‘Westminster-inspired’ democracy Decision-making process in trade policy Link between parties and interest groups Veto players in Australia 1999–2006 The Australian agricultural sector Conclusion

109 110 110 110 111 112 113 114 115 116 117 118 120 120

Part III Negotiating Trade Liberalization 7

Seattle Ministerial Conference 1999

125

International-level negotiations Identification of issues and the initial negotiating positions of the actors

125 125

viii

8

9

Contents

Deep divisions and no time pressure to make concessions Domestic institutions United States Failure to renew fast track negotiating authority under a divided government Position of interest groups European Union 1999 CAP reform and WTO negotiations European Commission’s negotiating mandate Council–Commission relationship Position of interest groups Brazil Informal consultations in trade policy Parliamentary discussion on the Brazilian negotiating position Position of interest groups Australia Anti-globalization campaign of the One Nation Party Position of interest groups Conclusion

125 128 128

Doha Ministerial Conference 2001

139

International-level negotiations A first assessment of actors’ negotiating positions Doha ministerial conference 9–14 November 2001 Doha ministerial declaration on agriculture Time framework for the Doha round Domestic institutions United States Congressional negotiations on new trade and farm bills Major provisions of the 2002 Trade Promotion Authority bill Positions of major interest groups on the new trade bill European Union Council–Commission relationship Brazil Parliamentary discussion on trade liberalization Australia Establishment of the WTO Advisory Group Conclusion

139 139 141 142 143 143 143 143 146 147 147 147 148 148 148 148 149

Cancun Ministerial Conference 2003

152

International-level negotiations Presentation of detailed negotiating proposals The Harbinson text: trying to find a middle ground EU–US joint proposal and the emergence of the G-20

152 152 153 155

128 129 130 130 131 131 132 133 133 133 134 135 135 135 136

Contents

Cancun ministerial meeting 10–14 September 2003 Domestic institutions United States The 2002 farm bill: increasing domestic support Implications of the 2002 farm bill for WTO negotiations Congressional reaction to the G-20 coalition Position of major agricultural groups with respect to the G-20 demands European Union Modification of the Commission’s negotiating mandate The 2003 CAP reform: decoupling direct payments from production Reaction of major agricultural groups to the CAP reform Implications of the CAP reform for WTO negotiations Brazil A new heterogeneous governing coalition Lula da Silva’s trade policy Workers’ Party position on trade liberalization Parliamentary discussion on the Brazilian negotiating position Divisions within the governing coalition on the G-20 Australia Shift towards bilateral trade agreements Free trade agreement with the US Farmers’ organizations position on the free trade agreement Conclusion 10 Hong Kong Ministerial Conference 2005 International-level negotiations US and EU initiatives to move negotiations forward The July 2004 framework for agriculture Informal meetings and impasse in negotiations Presentation of new detailed negotiating proposals Hong Kong ministerial conference 13–18 December 2005 Settlement of new deadlines Domestic institutions United States Signature of the Central America Free Trade Agreement Congressional discussions on the US negotiating position Positions of farmer groups on the US negotiating position European Union Member states’ reaction to the Lamy-Fischler initiative Nomination of a new European Commission Conflictual Council-Commission relationship

ix

157 159 159 159 159 160 160 160 160 161 163 163 164 164 165 165 166 167 167 167 168 170 170 173 173 173 174 176 176 180 182 182 182 182 183 184 186 186 186 187

x

Contents

Brazil Enlargement of the governing coalition Economic policy and corruption scandals Australia Reaction of farmer groups to the Hong Kong meeting Conclusion 11 Geneva Informal Meeting 2006 International-level negotiations New deadlines and the shadow of transatlantic trade disputes Six weeks of intensive negotiations without any breakthrough The Falconer draft text on hundreds of outstanding issues Rejection of the ‘20-20-20’ formula and breakdown of negotiations Reaction of major players to the temporary suspension of negotiations Major players’ best alternatives to a negotiated agreement Domestic institutions United States Congressional and farm groups’ opposition to further concessions European Union Divisions within the Council on further concessions Moving towards bilateral and regional trade agreements Brazil Pressure from interest groups Australia Reaction from interest groups and the Labor Party Addendum: attempts to revive the Doha round after July 2006 Conclusion Conclusion WTO negotiations so far Summary of results Time pressure and best alternatives to a negotiated agreement Executive–legislative relationship Number of veto players Link between parties and interest groups Limitations of the study and avenues for further research

188 188 189 190 190 191 194 194 194 196 198 199 200 201 202 202 202 203 203 204 204 204 205 205 206 207 209 209 213 213 215 224 225 229

Notes

231

References

238

Index

263

List of Tables I.1

WTO ministerial meetings 1999–2006

5

I.2

Domestic institutions

7

I.3

Coalition groups in the WTO and their position on agricultural issues

9

3.1

US Congress: seats by party in the House of Representatives and Senate 1993–2007

71

5.1

Presidents and governing coalitions in the Brazilian Congress 1996–2006

101

5.2

Brazil: seats by party in the Chamber of Deputies 1996–2007

105

5.3

Brazil: seats by party in the Senate 1996–2007

105

6.1

Australia: seats by party in the House of Representatives 1996–2007

119

6.2

Australia: seats by party in the Senate 1996–2007

119

9.1

Summary of negotiating positions in the agricultural negotiations

154

10.1 The July 2004 framework on agriculture

175

10.2 Summary of the negotiating positions at the Hong Kong meeting

177

C.1

Summary of results

216

C.2

Types of institutional power in international trade negotiations

219

xi

List of Figures 3.1 3.2 4.1

Campaign contributions from the labour sector to Democrat and Republican representatives 1990–2006

63

Campaign contributions from the agribusiness sector to Democrat and Republican representatives 1990–2006

65

CAP direct payments 2006 in € million

84

xii

Preface and Acknowledgements Negotiations on agricultural trade liberalization are complex and have been one of the most controversial issues dealt with in the Doha round. This study explains how negotiation outcomes at the WTO are influenced by two factors: domestic political institutions and time pressure (or lack thereof) at the international level. The investigation applies an internationalcomparative perspective to the study of multilateral negotiations by bringing together Comparative Politics, International Relations, and Negotiation Analysis literature. This study also aims to enable the reader to better understand agricultural trade negotiations by explaining complex jargon as well as clarifying the interaction between domestic and international politics. If in some modest way it allows the reader to better understand the complexities of the interactions between these two levels in this contentious area, then it will have achieved its purpose. Writing this study was sometimes akin to putting the different pieces of a puzzle together. Moving back and forward between the domestic and the international levels took longer and was trickier than I had anticipated at the beginning of this research. A longer version of this manuscript was submitted to, and accepted by the Department of Social and Political Sciences of the Humboldt University of Berlin as a post-doctoral ‘Habilitationsschrift’ (habilitation thesis) in 2009. I am much indebted to Stefano Bartolini, Riccardo Crescenzi, Andreas Dür, Manfred Elsig, Klaus Goetz, Adrienne Héritier, Ellen M. Immergut, Bart Kerremans, Michael Kreile, Sophie Meunier, Daniel Naurin, and Ann Rasmussen for their insightful comments on preliminary versions as well as excerpts from this study, which were presented in many conferences, papers, and seminars. Thanks go especially to all the participants of the 2007–8 Jean Monnet fellows’ seminar of the Robert Schuman Centre at the European University Institute, to the participants of the 2008 ECPR Joint Sessions in Rennes, the 2009 ECPR Joint Sessions in Lisbon, the 2010 ISA Annual Convention in New Orleans, and the 2010 SGIR 7th Pan-European International Relations Conference in Stockholm. The anonymous reviewers of the manuscript presented me with an extensive set of suggestions for improving the presentation of the argument, and for this I am also grateful. Thanks are also due to Mark William Jones and Helen Morris for their careful English-language editing support that greatly improved the text. I would like to thank Gisela Hirschmann, Matthias Orlowski, Janine Pietsch, Michael Püschner, and Niklas Schrader for their research assistance.

xiii

xiv

Preface and Acknowledgements

Finally, I am grateful to the Department of Social and Political Sciences of the Humboldt University Berlin for allowing me to take a one-year sabbatical at the Robert Schuman Center for Advanced Studies at the European University Institute. A Jean Monnet fellowship enabled me to write most of this study in the unique environment of the San Domenico Convent during the 2007–8 academic year. Eugénia da Conceição-Heldt

List of Abbreviations ACCI

Australian Chamber of Commerce and Industry

ACGC

Australian Cane Growers Council

ACMA

Associated Chambers of Manufactures in Australia

ACP

African, Caribbean and Pacific Countries

ACTPN

Advisory Committee for Trade Policy and Negotiations

ACTU

Australian Council of Trade Unions

AEB

Association of Brazilian Exporters (Associação de Exportadores Brasileiros)

AFBF

American Farm Bureau Federation

AFL-CIO

American Federation of Labor and Congress of Industrial Organizations

ALP

Australian Labor Party

AMS

Aggregate Measure of Support

AoA

Agreement on Agriculture

APEC

Asia-Pacific Economic Cooperation

ARENA

National Renewal Alliance (Aliança Renovadora Nacional)

ASA

American Soybean Association

ASEAN

Association of Southeast Asian Nations

BATNA

Best Alternative to a Negotiated Agreement

BCA

Business Council of Australia

CAFTA

Central-America Free Trade Agreement

CAI

Confederation of Australian Industry

CAP

Common Agricultural Policy

CAT

Autonomous Central of Workers (Central Autônoma dos Trabalhadores)

CEB

Brazilian Business Coalition (Coalizão Empresarial Brasileira)

CGT

General Confederation of Workers (Confederação Geral dos Trabalhadores)

CNA

National Agriculture Confederation (Confederação Nacional da Agricultura)

xv

xvi

List of Abbreviations

CNI

National Industry Confederation (Confederação Nacional da Indústria)

COG

Congressional Oversight Group

COGECA

General Confederation of Agricultural Cooperatives (Comité Général de la Coopération Agricole)

COPA

Committee of Professional Agricultural Organizations (Comité des Organisations Professionnelles Agricoles)

COREPER

Committee of Permanent Representatives

CP

Farmers’ Confederation (Confédération Paysanne)

CPE

European Farmers’ Coordination (Coordination Paysanne Européenne)

CUT

Confederation of Workers (Confederação Única dos Trabalhadores)

DFAT

Department of Foreign Affairs and Trade

DG

Directorate-General

DR-CAFTA

Dominican Republic-Central America Free Trade Agreement

EC

European Community

ECJ

European Court of Justice

EEC

European Economic Community

EEP

Export Enhancement Program

EP

European Parliament

EU

European Union

FAIR

Federal Agriculture Improvement and Reform

FIESP

Industry Federation of the State of São Paulo (Federação das Indústrias do Estado de São Paulo)

FIPs

Five Interested Parties

FN

National Front (Front National)

FNSEA

National Federation of Farmers’ Unions (Fédération Nationale des Syndicats d’Exploitants Agricoles)

FS

Labor Force (Força Sindical)

FTA

Free Trade Agreement

FTAA

Free Trade Area of the Americas

GATT

General Agreement on Tariffs and Trade

GMOs

Genetically Modified Organisms

ICTSD

International Centre for Trade and Sustainable Development

List of Abbreviations

ITO

International Trade Organization

JSCOT

Joint Standing Committee on Treaties

LDCs

Least Developed Countries

LPA

Liberal Party of Australia

MFN

Most-Favoured Nation

MODEF

National Confederation of Family Farmers’ Unions (Mouvement de Défense des Exploitants Familiaux)

NAFTA

North American Free Trade Agreement

NAMA

Non-Agricultural Market Access

NAWG

National Association of Wheat Growers

NCA

National Cattlemen’s Association

NCC

National Cotton Council

NCGA

National Corn Growers’ Association

NFF

National Farmers’ Federation

NFU

National Farmers Union

NGOs

Non-Governmental Organizations

xvii

NMPF

National Milk Producers Federation

NTBs

Non-Tariff Barriers

OECD

Organization for Economic Cooperation and Development

PACs

Political Action Committees

PCdoB

Brazilian Communist Party (Partido Comunista do Brasil)

PDT

Democratic Labor Party (Partido Democrático Trabalhista)

PFL

Liberal Front Party (Partido da Frente Liberal)

PMDB

Brazilian Social Democratic Movement (Partido do Movimento Democrático Brasileiro)

PP

Progressive Party (Partido Progressista)

PPS

Popular Socialist Party (Partido Popular Socialista)

PR

Republican Party (Partido da República)

PSB

Brazilian Socialist Party (Partido Socialista Brasileiro)

PSD

Social Democratic Party (Partido Social Democrático)

PSDB

Party of the Brazilian Social Democracy (Partido da Social Democracia Brasileira)

PT

Workers’ Party (Partido dos Trabalhadores)

PTAs

Preferential Trade Agreements

xviii

List of Abbreviations

PTB

Brazilian Labour Party (Partido Trabalhista Brasileiro)

PV

Green Party (Partido Verde)

RPR

Rally for the Republic (Rassemblement pour la République)

RTAA

Reciprocal Trade Agreements Act

SCA

Special Committee on Agriculture

SDC

Social Labour Democracy (Social Democracia Sindical)

SDT

Special and Differential Treatment

SPS

Single Payment Scheme

SSM

Special Safeguard Mechanism

STEs

State Trading Enterprises

TAA

Trade Adjustment Assistance

TEU

Treaty of the European Union

TPA

Trade Promotion Authority

TPAC

Trade Policy Advisory Council

TRIPs

Trade-Related Aspects of Intellectual Property Rights

UDF

Union for French Democracy (Union pour la Démocratie Française)

UGT

General Union of Workers (União Geral dos Trabalhadores)

UMP

Union for a Popular Movement (Union pour un Mouvement Populaire)

UNCTAD

United Nations Conference on Trade and Development

UNO

United Nations Organization

US

United States

USTR

United States Trade Representative

WTO

World Trade Organization

ZOPA

Zone of Possible Agreement

Introduction

Negotiations on trade liberalization have been protracted, and several World Trade Organization (WTO) ministerial meetings since 1999 have ended in deadlock while in others states reached only partial agreements. The 1999 Seattle ministerial meeting closed in disarray because states disagreed on the agenda for negotiations. By contrast, at the 2001 Doha ministerial meeting, WTO members launched a new round of multilateral trade negotiations. The 2003 Cancun ministerial conference was also deadlocked following disagreement among major players on agricultural issues. Finally, the 2005 Hong Kong meeting was a partial success, as WTO members agreed on the elimination of all forms of agricultural export subsidies by the end of 2013. However, negotiations on controversial issues such as market access and domestic support remained deadlocked. In July 2006, negotiations were temporarily suspended, resumed in April 2007 but then broke down again at the end of July 2008. The causes of an impasse in trade negotiations in which an agreement would leave bargaining parties in a better position than in the absence of agreement remains one of the enduring puzzles in the analysis of bargaining. In line with the two-level games approach (Putnam, 1988), this study explains how negotiation outcomes at the WTO are influenced by two factors: domestic institutions and time pressure (or lack thereof) at the international level. The argument put forward by the two-level games approach, suggesting that domestic and international relations are closely intertwined, is no longer controversial. The central research question now facing scholars of international bargaining is how and under what conditions domestic politics determine bargaining outcomes at the international level. Leading explanations from the two-level games literature usually focus on the role of domestic institutions (Ehrlich, 2007, 2009; Mansfield, Milner, and Pevehouse, 2007; Milner, 1997; Milner and Rosendorff, 1997; Müller and Risse-Kappen, 1990; Rogowski, 1999; Zimmermann, 2007), interest groups (Bailey, Goldstein, and Weingast, 1997; Destler and Odell, 1987; Dür, 2007, 2008, 2010; Evans, Jacobson, and Putnam, 1993; Frieden, 1988; Goldstein, 1998; Grossman and 1

2 Negotiating Trade Liberalization at the WTO

Helpman, 2002; McGillivray, 2004; Zangl, 1999), or negotiators’ bargaining strategies (Clark, Duchesne, and Meunier, 2000; Conceição-Heldt, 2006a; Fearon, 1998a; O’Neill, 1991; Odell, 2009) to explain trade cooperation. Studies of two-level games constitute a useful tool for thinking about interaction between the domestic and the international level, but four central problems remain: first, there is still a rigid division between Comparative Politics and International Relations; second, only a small number of studies have attempted to integrate both levels into the study of international negotiations (see also Frieden and Martin, 2002); third, most of these studies treat states as unitary actors, i.e. they assume that there are no internal divisions within a state; finally, only a few scholars have pursued cross-national and cross-time qualitative analysis of trade negotiations (for an exception, see Odell, 2009). The present rigid division between Comparative Politics and International Relations is both difficult to justify and obstructs the development of new research approaches. In order to close this gap, scholars have suggested making greater use of studies that apply an international-comparative perspective (Gourevitch, 2005; Mosley, 2005). Bringing together Comparative Politics and International Relations literature will enable scholars to create a common research area and a framework for future research. So far, there has been very little systematic empirical work on within-country variation on trade policy (Milner, 2002). Therefore, the present study explores this area and develops the research initiated by Gourevitch (1978, 1986) and Putnam (1988), continued by Milner (1997, 1998), Martin (2000), Russett (2003), Pahre (2006), Mansfield, Milner, and Pevehouse (2007), Ehrlich (2007), and Odell (2009) on the intersection of the sub-disciplines of International Relations, Comparative Politics, and Negotiation Analysis. Hitherto, Milner (1997) is one of the few scholars who has compared the effects of divided government, interest groups, and the distribution of information within a country upon trade policy. The four units of analysis (Australia, Brazil, the European Union [EU], and the United States [US]) were selected in a way that provides variation in the central independent variable (domestic institutions). This contrasts with the methodological approach taken in Milner’s study, which was vehemently criticized by Robert Pahre (2005) because she combined a formal model with informal theorizing by selecting the case studies on the basis of the dependent variable (cooperation).1 The most recent studies by Mansfield, Milner, and Pevehouse (2007) and Ehrlich (2007) provide a useful starting point for international comparative research. The approach taken by these authors explicitly integrated veto players into their quantitative study on preferential trade agreements (PTAs). Unlike the approach of Mansfield, Milner, and Pevehouse (2007), the focus of this book is on multilateral trade negotiations. In line with the approach taken by Ehrlich (2007), this study incorporates institutional differences within countries and looks at how they affect a country’s

Introduction

3

trade policy. Unlike Ehrlich, I contend that focusing solely on the institutional access points results in a distorted image of trade negotiations because it ignores the international level. Any effort to explain why it is so difficult to agree on agricultural trade liberalization requires not only a careful analysis of the internal decisionmaking process, but also of the bargaining process at the international level. Trade negotiations evolve over time and consist of different stages and concession dynamics. I will distinguish between five distinct negotiating phases that correspond to different ministerial meetings.2 Stage one of the negotiation process deals with the identification of the issues at stake and with the initial positioning of major players. During stage two, actors agree on the negotiating agenda. Stage three focuses on the presentation of detailed negotiating positions. These first three negotiating stages may be categorized as the early phase of negotiations, in which actors are expected to concede less. In stages four and five, negotiators come under time pressure as the deadline to conclude negotiations approaches. Actors realize that at least one of them has to make major concessions. This concession may lead to reciprocal concessions from other bargaining parties. These stages make up the late part of negotiations and are characterized by greater time pressure as deadlines for settling the final details of the agreement are worked out.

Overview of the argument This study argues that domestic institutions and the time dimension of negotiations affect trade policy cooperation. Domestic institutions refer here to the power-sharing mechanisms between the executive and the legislature, the number of veto players within a political system, and the link between parties and interest groups. By contrast, the time dimension of negotiations means that time has an impact on the extent to which actors impose demands and make concessions at the international level. At the national level, domestic institutions are expected to have an impact upon international negotiations in three important ways. First, if the decision-making power is shared between the executive and the legislature, provided that their preferences diverge, cooperation is expected to be more difficult to achieve than in political systems with executive dominance in trade policy. Second, the larger the number of institutional and partisan veto players, the fewer concessions the executive is likely to make at the international level. Finally, if the party in government has strong links to specific interest groups, the executive is expected to take the interests of these groups into account during international trade negotiations. Using a bargaining-centred approach, at the international level the focus is on the time dimension of negotiations, which is expected to intervene in three important ways. First, negotiations are assessed as a process unfolding over time, so that in the early stage of negotiations actors are expected to

4 Negotiating Trade Liberalization at the WTO

concede less. Given the limited time pressure, concessions are perceived as a sign of weakness by the other bargaining parties. Second, one has to find out whether actors have a better bilateral or regional alternative than securing a multilateral trade agreement, because if they do, they will concede less. Third, in repetitive bargaining games actors concede less and will adopt a tougher bargaining strategy than in one-shot games. This is because they know that they will be tied into agreements for a longer time. A set of theoretical propositions guides the empirical analysis. I have divided these propositions into six general hypotheses that capture the essential elements of the analytical framework and are addressed by the case studies, namely five WTO ministerial meetings. The executive–legislature hypothesis falls within the field of International Politics and was slightly adapted from Milner (1997), Martin (2000), and Pahre (2006). In turn, Tsebelis’ (1995) veto players hypothesis has been taken from Comparative Politics. The hypothesis on the link between the party in government and interest groups comes from International Political Economy, and was adapted from Alesina (1987) and Grossman and Helpman (2002). The three hypotheses on the time dimension of negotiations go back to Negotiation Analysis. The hypothesis on time pressure was originally introduced by Pruitt and Latané Drews (1969). The hypothesis on the best alternative to a negotiated agreement was adapted from Lax and Sebenius (1999). Finally, the hypothesis on the linkage between iterated bargaining and tough bargaining strategies was adapted from Fearon (1998b) and Conceição-Heldt (2006a). This study will test these hypotheses by focusing on agricultural negotiations that took place at the WTO between 1999 and 2006. Thereby, two aspects will be explored: first, under what conditions do any of these hypotheses have a significant bearing upon negotiation outcomes (i.e., when are they crucial and when not)? And second, in what ways do they interact with each other and how have they played out in the case of agricultural negotiations? If time pressure is high, does it mean that the power division between the executive and the legislative is not as significant an explanatory variable as when there is plenty of time for actors to negotiate? And what if a party in government has strong links with a particular interest group but there are many veto players and time pressure is high? Will more concessions be forthcoming because of the latter or less because of the close ties between a party and an interest group? Is the number of veto players the key issue, or is it rather a question of how many interest groups there are whose interests are on opposite ends of the spectrum? These questions relate to how the two independent variables (domestic institutions and the time dimension) interact with each other and how they shape bargaining outcomes.

Case studies There have been five ministerial meetings since the beginning of the present trade round: Seattle 1999, Doha 2001, Cancun 2003, Hong Kong

Introduction

5

2005, and Geneva 2006. Each of these meetings will be treated as a case study. Following the creation of the WTO in 1995, in Seattle states attempted to initiate a new round of multilateral trade negotiations in November 1999. However, this first ministerial meeting terminated in disarray because WTO members were unable to agree on the negotiating agenda. Two years later, at the Doha ministerial meeting, WTO members officially launched a new round of multilateral trade negotiations (referred to as the Doha Round). The Doha ministerial declaration provided the broad framework for the upcoming negotiations and set a timetable for the conclusion of this new trade round. By March 2003, WTO members should have agreed on specific formulae for further agricultural trade liberalization, and the Doha ministerial declaration envisaged the submission of detailed negotiating proposals at the Cancun ministerial conference in September 2003 (see Table I.1). By January 2005, negotiations were to have concluded. However, the Cancun ministerial meeting ended in disarray following disagreements among major players on agricultural issues. In the July 2004 framework, WTO members agreed on a new timetable for the completion of negotiations by the end of 2005. The Hong Kong meeting was a partial success, since WTO members agreed on the elimination of all forms of agricultural export subsidies by the end of 2013 and set new deadlines to facilitate the completion of negotiations by the end of 2006. Nevertheless, negotiations on controversial issues, such as market access and domestic support, remained deadlocked and were postponed until 2006. But from March to July 2006, the positions of major players − including the EU, the US, Brazil, and Australia − remained largely unchanged. Given the lack of movement, the WTO director-general Pascal Lamy decided to temporarily suspend negotiations. Even though negotiations were resumed at the end of April 2007, delegations did not come any closer to reaching agreement, and negotiations broke down again at the end of July 2008. Since then, several attempts to revive the Doha Round have failed because these four major players have not moved from their negotiating positions. Table I.1

WTO ministerial meetings 1999–2006

Ministerial meetings

Outcomes

Seattle 1999 Doha 2001

• WTO members failed to agree on the negotiating agenda • Agreement on the negotiating agenda (Doha ministerial declaration) • Timetable for negotiations with several deadlines • No agreement on formulae and percentage reductions • Agreement on the elimination of export subsidies by 2013 • Negotiations on market access and domestic support were postponed to 2006 • Temporary breakdown of negotiations

Cancun 2003 Hong Kong 2005

Geneva 2006 Source: Own table.

6 Negotiating Trade Liberalization at the WTO

Methodology: selection of the units of analysis This study fits well into the ‘analytic narrative’ (Bates et al., 1998) tradition of combining analytical tools used in economics and political science with the narrative form, which is more frequently employed in history. Following Bates et al. (1998), the approach used here is not only narrative, in the sense that it pays close attention to the specific context of negotiations, but it is also analytical since it applies a theoretical framework to the analysis of WTO negotiations. Broadly speaking, I will adopt a rational choice perspective that shares four principles. First, all social phenomena have to be explained in terms of the actions of the individuals involved, who try to maximize their preferences within a set of institutional constraints. Actors’ choices are strategic, that is, when trying to maximize their preferences, actors need to take the actions of others into account (Lake and Powell, 1999). Second, the actors involved in a certain decision-making process along with their preferences are explicitly identified. Third, institutions and other contextual features that determine actors’ options are also clearly identified. Finally, hypotheses are generated by a deductive logic, that is, the theoretical approaches tested are causal, falsifiable, and internally consistent (Geddes, 1995). The four units of analysis (the EU, the US, Brazil, and Australia) were selected by taking the following three criteria into account: domestic institutions; the economic importance of these four players within the WTO framework; and their position on agricultural trade liberalization. Domestic institutions Domestic institutions and domestic constraints refer in this study to the power-sharing mechanisms between the executive and the legislature, the number of veto players within a political system, and the link between political parties and interest groups. Even though foreign policy-making is a classical field of executive dominance, political systems vary in the degree of autonomy they give to government representatives at the international level. While Australia and Brazil are examples of two countries with executive dominance, the EU and the US represent two political systems with power-sharing mechanisms in the area of trade policy. The Brazilian and Australian constitutions give the president and the prime minister, respectively, the authority to negotiate trade agreements. However, in the US, competence over trade policy is shared between the president and Congress (see Table I.2). The latter usually supports legislation that affords the president the authority to negotiate trade agreements using expedited procedures, the so-called fast track procedure. This gives the president a negotiating mandate for a fixed time period and allows the president to submit legislation to Congress for approval or rejection, amendments not being allowed. Similarly, in the EU two actors the European

Introduction Table I.2

Domestic institutions

Unit of analysis

Australia EU Brazil US

7

Power-sharing mechanisms

Number of veto players

Link between parties and interest groups

⫺ ⫹ ⫺ ⫹

few many many few

high low low high

Source: Own table. Notes: – inexistent; + existent; few: one to three veto players; many: more than three veto players.

Commission (hereafter simply called the Commission) and the Council of Ministers share power on trade policy (see Table I.2). The Commission represents the EU in trade negotiations utilizing a negotiating mandate determined by the Council of Ministers. When analysing the power-sharing mechanisms between the executive and the legislature, I will distinguish between four different types of institutional power: agenda-setting power; negotiating mandate power; oversight mechanisms; and ratification or veto power. These powers are distributed differently between the negotiating institution (the executive) and the ratifying institution (the legislature). Different power-sharing mechanisms are expected to affect the way negotiators bargain at the international level. This might seem a simple point, but until now studies have failed to recognize the significance of this fact and have subsequently failed to analyse the effects of institutional arrangements on policy outcomes in a comparative perspective. This study is an attempt to fill this gap. The second aspect that is taken into account is the number of veto players in a political system. I expect countries with few players (one to three partisan and institutional veto players) and executive dominance in trade policy to make more concessions at the international level than countries with many veto players. A political system is considered to have many veto players, when there are more than three institutional and partisan veto players. Australia and the US represent two different parliamentary and presidential systems with few veto players. In Australia from 1999 to 2006, there was a partisan veto player and from 1999 to 2005 one institutional veto player (the Senate). In the US from 1999 to 2001, there were three institutional veto players (House of Representatives, Senate, President), and from 2001 to 2003 one institutional veto player (the Senate). By contrast, the EU and Brazil represent two different political systems with many veto players. In the Brazilian presidential system, there are three institutional veto players (Chamber of Deputies, Senate, President), and the number of partisan veto players varied between five in the period from 1999 to 2002 and as many as nine partisan

8 Negotiating Trade Liberalization at the WTO

veto players from 2003 onwards. By contrast, in the EU, at the ratification stage, every single member state can turn into a veto player since trade issues fall under exclusive and mixed competence. Whereas exclusive trade issues fall under qualified majority voting, mixed competence issues are decided upon by unanimity, so that each one of the 27 member states can turn into a veto player. The focus on the formal institutional structure of a political system completely neglects the role played by interest groups and specifically the question of how the link between political parties and interest groups influences bargaining outcomes at the international level. Political parties respond to different constituencies and interest groups. For example, left-leaning parties are more likely to represent labour union demands and centre or centre-right parties would be expected to take the positions of the business sector into account. A link between a party and an interest group is expected to be high when a party was created by a specific interest group or when an interest group makes significant campaign contributions to a political party. Whereas in the US and Australia the link between parties and interest groups is high, in the EU and in Brazil it is low (see Table I.2). Given that in the EU the link between parties and interest groups is low, this study will take a closer look at the French domestic level in order to test the hypotheses as to whether there is a link between interest groups and the party in government. The focus on France can be explained by the fact that this country, as the largest European agricultural producer, with 20 per cent of the EU’s total agricultural production and as the main beneficiary of CAP direct payments, will be the major loser of any change to the status quo. These three indicators will help us to identify the impact of domestic institutions on bargaining outcomes at the international level. Economic importance of the EU, US, Brazil, and Australia in the WTO The second criterion for the selection of these four units of analysis was their economic importance within the WTO. Created in 1995, the WTO now has 153 member countries, which together account for about 90 per cent of world trade volume. World trade export and import volume is dominated by the US and by the EU, which are also the leading exporters and importers of agricultural products. The EU is the biggest trading region in the world and thus a key player in the multilateral trading system. The US accounts for about 25 per cent of the world’s exports of agricultural products and is the world’s largest single country exporter. After the US, EU, and Canada, Brazil is now the world’s fourth largest agricultural exporter (World Trade Organization, 2007b). The Uruguay Round of trade negotiations was dominated by the US, the EU, Japan, Canada, and Australia. Unsurprisingly, most studies analysing this round of multilateral trade negotiations focus mainly on the US and

Introduction

9

the EU (Meunier, 2005). Even though in the present trade round new alliances or coalitions have come about, negotiations have been dominated by the US, EU, Brazil, India, and Australia (the so-called Five Interested Parties (FIPs)). Brazil and Australia are the leaders of the Group of 20 (hereafter simply called G-20) and the Cairns Group respectively. Whereas the G-20 defends the interests of agricultural exporting and importing nations at the WTO, the Cairns Group3 represents the interests of small and medium-sized exporters of agricultural products (see Table I.3). Table I.3

Coalition groups in the WTO and their position on agricultural issues

Group

Position on agricultural issues

Membership

Cairns Group (agricultural exporting nations)

Liberalization of agricultural trade

G-20 (agricultural exporting and importing nations)

Elimination of export subsidies and domestic support and liberalization of market access

G-33 (developing country importers of agricultural products)

Differentiated treatment of developing countries on the basis of food security, and rural development needs, inclusion of special safeguard mechanisms

G-10 (net agricultural importers)

Multifunctionality of agriculture and need for high levels of domestic support and protection Liberalization of trade in the cotton sector Special and differential treatment

Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Philippines, South Africa, Thailand, and Uruguay Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Thailand, Tanzania, Uruguay, Venezuela, and Zimbabwe Antigua and Barbuda, Barbados, Belize, Benin, Botswana, China, Congo, Côte d’Ivoire, Cuba, Dominican Republic, Grenada, Guyana, Haiti, Honduras, India, Indonesia, Jamaica, Kenya, Rep. Korea, Mauritius, Madagascar, Mongolia. Mozambique, Nicaragua, Nigeria, Pakistan, Panama, Peru, Philippines, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Senegal, Sri Lanka, Suriname, Tanzania, Trinidad and Tobago, Turkey, Uganda, Venezuela, Zambia, and Zimbabwe Chinese Taipei, Rep. of Korea, Iceland, Israel, Japan, Liechtenstein, Mauritius, Norway, and Switzerland

C-4 (‘Cotton-Four’) G-90 (LDCs)

Benin, Burkina Faso, Chad, and Mali Coalition of ACP countries and LDCs

Source: Own table based on information from WTO (2007b).

10 Negotiating Trade Liberalization at the WTO

Australia and Brazil are major exporters of agricultural products. Agricultural exports account for 20 per cent of total Australian exports (Australian Department of Foreign Affairs and Trade, 2007c), and the Brazilian agribusiness sector (commodity and processed goods) is one of the most dynamic sectors of the Brazilian economy, accounting for 30 per cent of all Brazilian exports and 35 per cent of all jobs (Jales, 2006). As a result of this concentration, Brazil and Australia would be two major winners of agricultural trade liberalization. When analysing the different ministerial meetings, the study takes a broader view by describing the negotiations at the international level and taking into account the positions of major actors involved. The analysis includes the negotiating position of the G-90, the coalition of the African, Caribbean, and Pacific countries (the so-called ACP countries) as well as the Least Developed Countries (LDCs), the C-4, a new coalition of four cotton exporting countries (Benin, Burkina Faso, Chad, and Mali), and the G-33, a coalition of developing countries that are net importers of agricultural products (see Table I.3). This study does not include India as a unit of analysis since this country is, together with Brazil, one of the founding members of the G-20. The same is true for the domestic institutional structures: the executive has exclusive competence on trade policy and both countries have coalition governments with many partisan veto players. Given that India and Brazil have similar positions on agricultural trade liberalization, only one country from the G-20 was selected for this study. Actors’ positions on agricultural trade liberalization The interests of these four actors on agricultural trade liberalization are relatively stable. Australia and Brazil have a very offensive position. They favour extensive agricultural liberalization and oppose export subsidies and domestic support. The main source of future benefits for Brazil and Australia lies in acquiring access to the EU and US markets that can only be achieved by reducing high agricultural tariffs and quota restraints. Australia, Brazil, and the US are large net exporters of agricultural products. Any reduction of tariff rates in agriculture would offer a boom for producers of the hitherto most protected sectors, such as wheat, dairy, beef, rice, and sugar. Accordingly, both Brazil and Australia pursue an offensive agenda of seeking to improve market access to their agricultural products abroad. The US has a more nuanced approach to agricultural trade liberalization. Although the US demands better market access, at the same time it wants to keep its system of domestic support. With the 2002 farm bill, the US increased subsidies for farmers and reversed the aid payment tied to price but not to production. Since then, the US has taken a more defensive position on agricultural issues. By contrast, the EU has a defensive position, which seeks to protect the agricultural sector from wide trade liberalization. The Common Agricultural

Introduction

11

Policy (CAP) protects EU farmers from international competition through import tariffs, direct payments, and export subsidies. Although there have been several CAP reforms in the past decade, the European agricultural support system has been widely criticized because when European production exceeded internal demand, the surplus was dumped on world market at a lower price than those of non-subsidized exporters. The reduction of domestic support is a very sensitive issue for the US and the EU because opening agricultural markets might reduce subsidies paid to farmers and also lead to a loss of jobs in the agricultural sector.

Sources The data gathered for this study consists mainly of primary and secondary sources. The official administrative documents (proposals, reports, briefing notes, and other internal governmental documents) and policy positions papers of interest groups are available as free downloads from several websites. The empirical data on the official negotiating positions of the four actors is based on information collected from the following primary sources: proposals submitted to the WTO negotiations and official statements during and following the ministerial meetings. The official documents of the different governments can be found in the online database of documents on the WTO website, on the websites of the EU’s directorates general for trade and agriculture, on the websites of the US, Brazilian, and Australian trade and agriculture ministries, as well as on the websites of the leading labour unions, business, and farmers’ organizations. These sources have been complemented with information from the European news agency, Agence Europe, the major US trade policy source, Inside US Trade, the European agricultural news agency, Agra Facts, as well as the Brazilian congressional news agencies, the Agência da Câmara do Brasil and Agência Senado. Finally, Australian primary sources include newspapers, government documents, especially those of the Department of Foreign Affairs and Trade, minutes from the Joint Standing Committee on Foreign Affairs, Defense and Trade, as well as data from the Australian Journal of Politics and History, which provides reports twice a year on issues in Australian foreign policy. In addition the book makes use of information from the International Centre for Trade and Sustainable Development (ICTSD), which provides the most comprehensive insight into multilateral trade negotiations. The materials from these primary sources offer a useful summary of the bargaining process, allowing for a straightforward reconstruction of the different bargaining rounds. This large body of primary sources was chosen in order to provide the analysis with sufficient material to reach really solid conclusions, which seek to explain the link between domestic institutions and time dynamics of international negotiations.

12 Negotiating Trade Liberalization at the WTO

Chapters’ overview This study is divided into three parts. Part I defines the field of research. Chapter 1 briefly reviews the literature on two level-games and trade policy and introduces a framework for the analysis of negotiations. Chapter 2 outlines the Uruguay round negotiations on agriculture and the core features of the present multilateral agricultural trade regime. This will help us to understand what is at stake in the present Doha round. Part II gives a general overview of domestic institutions of the four units of analysis. These four chapters have a similar structure: first, they all start with a summary of the competing perspectives on trade policy; second, all chapters briefly summarize the evolution of trade policy and the decisionmaking processes in the three countries and in the EU; third, the link between political parties and interest groups will be assessed as well as the number of veto players in these political systems. A last section addresses the problem of the impact of the agricultural policies of the EU and the US on domestic support, as well as the importance of the Brazilian and Australian agricultural sectors in terms of the overall trade exports. Chapter 3 provides the background for understanding US trade policy, especially the evolution of power-sharing mechanisms between the US president and Congress, as well as the link between political parties and interest groups through campaign contributions to Republican and Democratic candidates. Chapter 4 delineates the institutional structure of EU trade policy, with a special focus on the delegation of power from member states to the Commission and the control mechanisms available to member states. It also identifies the position of member states, the Commission, farmers, and business groups on agricultural trade liberalization. This chapter includes a section on the domestic-level institutions in France, which focuses on the structure of the executive as well as on the link between parties and farmer groups. Chapter 5 provides the background for understanding Brazilian trade policy, the relationship between governments and interest groups, as well as the importance of the agricultural sector in terms of the overall functioning of the country’s economy. Finally, Chapter 6 provides the background for understanding the decision-making process and important domestic actors (interest groups and political parties) involved in Australian trade politics. Part III presents the five ministerial meetings from Seattle 1999 to Geneva 2006 as a two-level bargaining process. In doing so, it analyses why there has been such a discrepancy between the results of ministerial meetings. Particular attention is paid to why some ministerial meetings failed, terminating without agreement such as those at Seattle, Cancun, and Geneva, whereas others resulted in agreement and may be considered as a success, such as Doha and Hong Kong. Chapter 7 deals with the 1999 Seattle ministerial conference, in which actors positioned themselves but were unable to agree on a negotiating

Introduction

13

agenda. Chapter 8 focuses on the 2001 Doha ministerial meeting that established the agenda and the time framework for a new round of trade negotiations. Chapter 9 outlines the 2003 Cancun ministerial meeting and explains why negotiations broke down. Chapter 10 deals with the 2005 Hong Kong ministerial meeting, in which states committed themselves to complete the Doha Round by July 2006 and also agreed to eliminate all forms of export subsidies by the end of 2013. Chapter 11 explains the crisis and breakdown of the negotiations in the Geneva informal meeting in July 2006. Since negotiations have not yet been concluded, this chapter also outlines the prospects for reaching an agreement in the future. Finally, the conclusion summarizes the major findings of this study and outlines tasks for future research.

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Part I Setting the Stage

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1 Framework for Analysis of Negotiations

Two-level games literature and trade policy: an overview A large body of literature in international relations has attempted to explain the interaction between domestic politics and international politics in trade policy. Even though Kenneth Waltz (1959) was the first to outline a threefold typology of International Relations theories consisting of individual, domestic, and international-level approaches,1 it was only with the publication of Robert Putnam’s (1988) seminal article on ‘Diplomacy and Domestic Politics: the Logic of Two-Level Games’ that the domestic level was definitively brought into the analysis of international politics. Putnam basically describes international negotiations as a two-level game involving a chief negotiator who must deal simultaneously and interactively with his/her counterparts at the international level (Level I) and with his/her constituents at the domestic level (Level II). Agreement at the international level is possible only when the win-sets (the range of agreements at the international level that can be ratified at the domestic level) overlap. Given that any agreement reached at the international level needs to be ratified at the Level II, the domestic-level constraints (preferences, coalitions, and political institutions) have an effect on a negotiator’s initial bargaining position and strategies at the international level (Putnam, 1988). Even though Putnam states that the size of the win-set depends on these three variables, in the next step he lists only several very general propositions. For example, he distinguishes between those constituents facing low or high costs from no-agreement and gives the example of the greater readiness of members of two-wage-earner families to strike than sole breadwinners. The relevance of these examples to international negotiations, however, remains nebulous. Furthermore, political institutions refer merely to the formal rules (simple majority or two-thirds majority) of the ratification process. Putnam illustrates his argumentation with the separation of power between the US Congress and the president. This has two implications for the US negotiating position at the international level: first, it increases the bargaining 17

18 Negotiating Trade Liberalization at the WTO

power of the US government representatives, who can argue that they are constrained by a recalcitrant legislature, but at the same time, it reduces the scope for agreement at the international level. Finally, concerning the strategies of negotiators at Level I, Putnam states that the larger the win-set of a chief negotiator, the easier it should be to conclude an international agreement, but this weakens his/her bargaining position vis-à-vis other negotiators (Putnam, 1988). This very broad approach, as Putnam recognizes, needs wide-ranging studies. Since the publication of Putnam’s seminal article, a very substantial literature, applying or elaborating upon the two-level framework, has attempted to explain how interest groups, domestic institutions, or the bargaining strategies of negotiators determine the range of possible negotiation agreements. These different studies usually focus on the international or on the domestic level. The two-level games literature on trade policy that focuses on the domestic level can be placed into two general categories: society- and state-centred approaches. Both perspectives return to the internal structure of nation-states to explain international relations, but they differ in the way that they conceptualize the domestic determinants of foreign policy. International-level explanations International- or systemic-level explanations hold domestic politics constant and explore variance in the international arena. All of the system approaches from neo-realism to neo-liberal institutionalism depart from the assumption of the state as a unitary actor, which means that states are organized hierarchically. At the domestic level, decision-making authority flows through a vertical hierarchy, from top to bottom, in which governments make all the final decisions. In contrast to this, international politics are anarchic, that is, there is no central authority above the states (Mearsheimer, 1995). Systemic-level approaches focus on the distribution of power across states. At the beginning of the 1990s, there was a controversial discussion between neo-liberal and neo-realist scholars on the relative and absolute gains achieved though international cooperation. Whereas neo-liberal institutionalists assume that states are more concerned with their individual absolute gains (what will be the total gain from cooperation for all states), neo-realists claim that states focus primarily on their relative gains (what one state will gain compared with the others) (Powell, 1991). If we expand this discussion into the area of trade policy, it means that states may refuse mutually profitable trade because of concerns about relative gains (Grieco, 1988). If one state benefits disproportionately from economic advantages compared to another, the lesser beneficiary may fear that the relative winners will turn their economic advantages into military ones. Morrow (1997) uses a model of military allocations and trade to demonstrate that the relative gain argument is inadequate to explain the persistence of protection in trade policy. Concern about relative gains should not impede trade cooperation even

Framework for Analysis of Negotiations

19

between two rival states because states cannot immediately turn the gains from trade into a military advantage. Milner (1997) also shows that cooperation among nations is less affected by relative gains than by the domestic distributional consequences of policy coordination. Most international relations theories have been mainly used to explain security rather than trade issues. The international-level perspective does not tell us much about how and why states pursue specific sorts of goals. In addition, this level is silent on where actors’ negotiating positions come from as it completely ignores the impact of domestic institutions on trade cooperation. Unlike security issues, changes in trade policy inevitably create winners and losers at the domestic level. If the interests of domestic political actors differ strongly, it is hard to keep the unitary actor assumption. Thus, if we relax the assumption that states are unitary actors, we can bring domestic politics back in and thus open the ‘black box’ of preference formation. It might seem quite trivial to argue that domestic politics plays an important part in explaining states’ foreign policy. It may be all the more surprising that it has taken so long to adopt approaches from Comparative Politics and incorporate them into the International Relations literature. The central question is which domestic political variables are relevant when determining a country’s trade policy. According to James Fearon (1998a), there are two ways in which domestic politics became part of the explanation of foreign policy. First, domestic politics can cause states to pursue suboptimal outcomes (e.g., total costs to consumers typically dwarf benefits to workers in the protected policy field) due to an agency problem (consumers are too numerous and their interests are too diverse to be organized into a coherent force). Second, different political institutions, economic structures, or even leadership goals can explain why states choose different foreign policy goals. For Ronald Rogowski (1999) institutions affect a state’s foreign policy in five areas: policy bias of foreign policy, for example, towards protectionist or liberal trade policies; credibility of foreign policy commitments; coherence and stability of foreign policy (alliances over time and across policy domains); mobilization and projection of power; and the strategic environment of power. These five different independent variables are very general and imprecise. In conclusion, it remains unclear as to how they will influence a state’s foreign policy. Domestic-level explanations: society- and state-centred approaches Society-centred approaches claim that a state’s international economic policy is shaped by the ongoing competition for influence among societal interest groups. The basic unit of analysis is not the state, but contending groups or classes within the society with power to influence the government. The government is seen as a ‘cash register that totals and then averages the preferences of political power of societal actors (…) the major function of public officials is to make sure that the game is played fairly’ (Krasner, 1984, p. 227).

20 Negotiating Trade Liberalization at the WTO

The state is viewed as a ‘black box’ that merely processes inputs and outputs. This view is atomistic in that it denies a single, collective national or public interest in favour of the summation of numerous, individual private interests. Gourevitch (1986) and Frieden (1988) have focused on the competition between coalitions of business and labour groups positioned on both sides of the debate over trade. In contrast, Rogowski (1989) has examined how broad class coalitions between owners of land, labour, and capital in a range of historical contexts might shape the direction of trade policy. Midford (1993) has made similar assumptions about the centrality of class cleavages in trade politics when drawing distinctions between skilled and unskilled labour. Hiscox (2002) has focused on trade cleavages in six Western economies since the 1920s by examining the effects of such cleavages on the behaviour of political parties and the lobbying efforts of major industry groups. Hiscox comes to the conclusion that when levels of factor mobility are relatively high broad-class conflict is more likely and when levels of mobility are low narrow industry-based conflict is more likely. Following the grand tradition of Schattschneider (1935), other scholars have highlighted that since gains from freer trade are diffuse (spread throughout society) and costs are concentrated in a well-organized group, interest group pressures are biased towards those who lose from trade liberalization (Bailey, Goldstein, and Weingast, 1997; Evans, Jacobson, and Putnam, 1993; Moravcsik, 1993). Milner (1991) has shown that interest groups also represent free-trade-oriented interests. But if those groups that might lose from trade liberalization mobilize to hinder a policy change, this approach is not able to explain why under such an interest constellation trade liberalization takes place. In other words, the influence of interest groups is a necessary but not a sufficient condition to explain international trade agreements. We also need to take into account the way that power is shared between the executive and the legislature. State-centred approaches focus specifically on how the institutional structure of the state affects trade policy cooperation. Milner analyses how domestic interests, institutions, and information shape cooperation at the international level by differentiating between three sets of actors: an executive, a legislature, and societal interest groups (organized labour and organized capital) (Milner, 1997). The main point made by Milner is that if the preferences of these three actors diverge, and they share control over decision-making about a specific policy issue (e.g., trade), then domestic politics cannot be treated as if it involved a unitary actor. Milner expects that the greater the divergences among their preferences, the more equally information is possessed, and the more institutions disperse power over policy, the more polyarchic is the domestic situation. In the extreme, if each player can veto a policy choice, then one approaches a situation of anarchy. In the meanwhile, several studies have integrated the veto players approach to the analysis of trade agreements. O’Reilly (2005), using a sample of cross-national time-series collection of 23 OECD countries in the period

Framework for Analysis of Negotiations

21

1960–96, found out that large numbers of institutional veto players leads to a smaller percentage of changes in tariffs and non-tariff barriers. Henisz and Mansfield (2006) use statistical tests covering almost 60 countries between 1980 and 2000 to analyse the domestic determinants of commercial openness for democracies and autocracies. Their study supports the thesis that high unemployment leads to protectionist trade policies in stable democracies with few veto players. Also Mansfield, Milner, and Pevehouse’s (2007) quantitative study covering 194 countries from 1950 to 1999 comes to the conclusion that the probability of forming a PTA declines as the number of veto players increases. Rogowski (1999) explains states’ foreign policy with variation on domestic political institutions. His independent variables comprise the franchise, representational mechanisms, and the decision rules. Franchise refers to who exerts influence within a state. The focus is on peak interest groups that may range from property owners to particular regions. Representation is linked to the length of terms of office for politicians and the effects of the electoral system on the trade policy. Finally, decision rules refer to the separation of powers, number of veto points, and the ratification procedures. Milner and Rosendorff (1997) formalized the conditions under which Schelling’s conjecture (a negotiator can point to a hawkish legislature to extract greater concessions at the international level) holds by introducing electoral uncertainty (legislative elections) to their model and contrasted it with a two-level game with complete information. If elections take place between the termination of international negotiations and the ratification process, then it is expected that a new legislature will not accept the negotiated agreement. Moreover, with electoral uncertainty and divided government, the tariff agreement at the international level is expected to be increasingly protectionist. Tarar (2001) also finds that under complete information domestic constraints are a bargaining advantage. The negotiator with the higher domestic constraint is better off. But, if both negotiators face ratification constraints, it is the ‘second-mover’ who has the bargaining advantage. Pahre (2001) in a study on bilateral trade treaties in Europe in the nineteenth century argues that domestic institutional arrangements have an effect on trade agreements. Pahre’s argumentation follows three steps: first, if treaties require legislative ratification, executives will have more difficulties in liberalizing tariffs through international agreements; second, treaties signed in the past will affect a country’s tariff indirectly, since they constrain states’ ability to change their tariffs autonomously; third, domestic institutions by themselves might strengthen either free trade or protectionist approaches over the autonomous tariff at the national level. Other scholars argue that changes in political institutions may help explain changes in trade policy. Milner and Kubota (2005) demonstrate that there is a positive correlation between a change in the political regime towards more democratization and trade liberalization. Also Mansfield,

22 Negotiating Trade Liberalization at the WTO

Milner, and Rosendorff (2002) contend that democratic countries tend to be more likely to cooperate in trade policy by lowering their tariffs than autocratic ones. Verdier (1998) claims that trade policy creates political conflict, so that democracies may be less likely to pursue free trade and more likely to adopt protection against each other, except when intra-industry trade dominates their trade flows. In contrast, Haggard and Kaufmann (1995) are more prudent in contending that the presence of crises and the form of autocracy may influence the ability of a state to adopt economic reforms or trade liberalization than the political system. Most studies look at one actor, mainly the US or EU, or compare the delegation of trade authority from the legislature to the executive. On US trade policy, most research has focused on the impact of divided government (Destler, 1992; Lohmann and O’Halloran, 1994; O’Halloran, 1997), the electoral system (Mansfield and Busch, 1995; Rogowski, 1987), or interest groups (Bailey, Goldstein, and Weingast, 1997; Destler and Odell, 1987; Medick-Krakau, 1995; Milner, 1991).2 There is now a vast literature applying the two-level games approach to EU trade policy (Clark, Duchesne, and Meunier, 2000; Collison, 1999; Damro, 2007; Dür, 2006; Dür and Zimmermann, 2007; Larsén, 2007; Meunier, 2000; Paarlberg, 1997; Patterson, 1997; Woolcock, 2005; Young, 2002). Finally, there are other studies that compare the trade policy-making process in the US and in the EU by focusing specifically on the delegation of trade authority from a principal–agent perspective (Conceição-Heldt, 2010, 2011; De Bièvre and Dür, 2005; Delreux and Kerremans, 2010; Kerremans, 2004a; Meunier, 2000; Nicolaïdis, 2000). As this literature overview shows, the two-level games approach is a very prominent analytical framework used to explain international trade cooperation. However, little research has investigated the importance of institutional variation within political systems. Institutions vary and their variations are relevant for the analysis of the formulation of foreign policy and hence the negotiating positions that actors choose at the international level. Research and theorizing on this topic are still in their infancy. Or, as Milner (2002) states, the debate over the impact of the political system on trade policy has just begun. For this reason we need to move more towards an international comparative perspective.

Domestic institutions Scholars often invoke the concept of domestic institutions without clearly defining it. In International Relations literature, ‘institution’ is a fuzzy concept, often discussed without being defined at all (Keohane, 1989). One of the most important definitions of institutions is provided by Douglass North, who describes them as ‘the rules of the game in a society, or, more formally, (…) [as] the humanly devised constraints that shape human

Framework for Analysis of Negotiations

23

interaction’ (North, 1990, pp. 3–4). He distinguishes further between formal and informal constraints. Whereas the former include political (basic decision structure) and economic rules (defined property rights), the latter refer to ‘socially transmitted information and are a part of the heritage that we call culture’ (North, 1990, p. 47). Margaret Levi (2000) goes one step further and differentiates between two kinds of constraints: the constitution or other rules delimiting the choice of political actors and the aggregated response of societal interests, whose behaviour influences government action. In line with this definition from Levi, the concept of domestic institutions in this study refers to the power-sharing mechanisms between the executive and the legislature, the number of veto players within a political system, and the link between parties and interest groups. Domestic institutions provide arenas and power resources to different actors and their rules (institutional arrangements), establish the way in which those actors can participate and consequently shape the decision-making process. Neo-institutionalist analysis, especially historical institutionalist studies, suggests that policy outcomes are not determined without reference to the institutional context in which decisions take place (Immergut, 1998; Pierson, 2004; Thelen, 2004). This occurs for a number of reasons. First, institutional arrangements allocate resources in a way that gives some actors a disproportionately strong position in the decision-making process (Steinmo, 1993), for example, when direct access to legislators is restricted to certain groups. Second, institutional arrangements also shape the strategies, alliances, and coalition possibilities of political actors (Immergut, 1992a). For example, the 1974 Trade Act encouraged protectionist industries to shift their demands from Congress to the United States Trade Representative (USTR), who was in charge of defining ‘unfair trade’ practices and decided on the eligibility requirements for import relief and trade adjustment assistance. Finally, institutional arrangements can also influence the way in which actors define their interests and shape the level of autonomy enjoyed by state representatives in international trade negotiations. To examine the problem of how the domestic level shapes negotiation outcomes, following Milner (1997) the focus here is on the domestic institutional structure and the interaction between three actors: executive, legislature, and interest groups. In contrast to the study of Helen Milner, who only distinguishes between presidential and parliamentary systems, the focus of this study is on different kinds of parliamentary and presidential systems. When analysing the decision-making process at the national level (or at the European level) greater consideration will be given to the four different types of institutional power concerning international trade negotiations: a) agenda-setting power: who initiates legislative proposals, and who sets the agenda; are specific issue areas reserved for specialized bodies such as states, provinces, or parliamentary committees or is authority centralized

24 Negotiating Trade Liberalization at the WTO

in a single body, for example, the president/prime minister who has the executive supremacy in foreign policy? b) negotiating mandate power: who represents the state in multilateral trade negotiations, who conducts the negotiations at the international level; how does a negotiating mandate come into place? c) oversight mechanisms: are there any oversight mechanisms that exist after the delegation of power has occurred and if yes, how do they work in practice? d) ratification or veto power: what kind of formal decision-making rules (simple majority, two-thirds majority, or unanimity majority voting) exist in the three countries and in the EU? Actors controlling these powers can shape the policy-making process. Problems between the executive and the legislature are expected to arise, especially when the executive has a different political composition from the parliamentary majority. Executive–legislative relations In Comparative Politics, the study of executive–legislative relations has been dominated by Arend Lijphart’s (1984, 1999b) classic study. Lijphart defines two types of different regimes: majoritarian and consensus democracies. In the revised version of his classic book, he further differentiates between two distinct dimensions: the executives–parties and the federal–unitary dimensions. The executives–parties dimension encompasses the following aspects: concentration of power versus executive power-sharing; executive dominance versus executive–legislative balance; two-party versus multi-party system; majoritarian versus proportional electoral systems; pluralist versus corporatist interest group system. In contrast, the federal–unitary dimension refers to centralized versus decentralized government, uni- or bicameralism, flexible versus rigid constitutions, dependent versus independent central banks (Lijphart, 1999b). Central differences of both political systems refer to the way legislative power is shared or concentrated. Whereas in consensus democracies, powersharing is a central device that includes multiple parties and interests in the decision-making process, in majoritarian democracies political power is concentrated with the winning party. As a result, decisions are made by a majority. By contrast, consensus democracies enlarge the parliament’s room for manoeuvre. Because the most common government types are coalitions, these governments are expected to be weaker than in majoritarian democracies that have weak parliaments and a strong executive dominance. Australia is considered to be a classical Westminster democracy and the EU is viewed as a prototype of consensus democracy. In a parliamentary Westminster-type democracy,3 the executive and legislative branches are fused. The executive dominates the policy-making process and the legislature

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plays a reduced role. In the Australian political system, the dominance of the executive branch enables executive agencies, especially the Department of Foreign Affairs and Trade, to play the leading role in formulating trade policy. In contrast, in the EU, the executive function is shared between the Council of Ministers and the Commission. Applying Lijphart’s concept of institutional regimes to presidential systems such as those in the United States is a more difficult task. Even though we know that presidential systems are more prone to extensive bargaining between the two separated and directly elected institutions of president and legislature, if we use the executives–parties dimension of Lipjhart’s concept, the United States’ political system is strongly majoritarian. Four characteristics (the concentration of executive power in a single-party majority cabinet, a two-party system, a majoritarian electoral system, and a pluralist interest group system) are majoritarian, and it is only in the executive–legislative dimension that the power is shared as in a consensus democracy. The US Congress has exclusive competence over trade policy, but since it is the president and not the Congress who represents the US in international negotiations, the president may be granted a negotiating mandate (fast track negotiating authority) from Congress for a fixed period of time. Shugart and Carey (1992) show that strong presidents are expected to be able to impose their will on the legislative branch, while weak presidents will have to negotiate with the legislature. For example, when a president lacks a legislative majority, the legislature is expected to play a stronger role, even if the president has an exclusive power in trade policy. This is especially important in the Brazilian case, since the president needs the political support of several parties in order to gain a governing majority. The following executive–legislature hypothesis will be tested: H1: If the decision-making power is shared between the executive and the legislature, provided that their preferences diverge, cooperation is more difficult to achieve than in political systems with executive dominance in trade policy. Number of veto players The second aspect to be taken into consideration in the institutional structure of a political system, which is closely entangled with majoritarian and consensus democracies is the number of veto players. Even though George Tsebelis (1995) developed his veto players’ approach in contrast to Lijphart’s model, the way that power is shared or concentrated within these two types of democracies determines the number of veto players. While majoritarian democracies have few veto players, consensus democracies usually have many veto players. Tsebelis (1995) defines veto players as individual or collective actors whose agreement is required for policy decisions. He divides them into

26 Negotiating Trade Liberalization at the WTO

two categories: institutional and partisan veto players. While institutional veto players (the president, chambers of parliament) are specified by the constitution, partisan veto players refer to parties in a governing coalition. The potential for political change in a political system depends upon the number of veto players, their lack of congruence (different policy positions), and their internal cohesion. Thus political systems with many veto players are biased towards the status quo. Other authors (Immergut, 1992b; Kaiser, 1998) refer rather to veto points defined as ‘structural incentives providing windows of influence for political actors’ (Kaiser, 1998, p. 213). Or as Ellen M. Immergut (1992b, pp. 27–8) puts it, they function as ‘points of strategic uncertainty where decisions may be overturned’. Veto points in this sense may be not only constitutional structures, but also conventional rules of behaviour, standing orders, or even societal interest groups with decision-making power. In Immergut’s veto points approach, the importance of interest groups depends on whether they are essential to the executive. For example, if the government is dependent on the approval of a parliamentary committee, certain interest groups might be able to veto policy change (Immergut, 1992b).4 Cox and McCubbins (2001) also point out that the effective number of vetoes in a political system is determined by the interaction between the institutional separation of powers and the separation of purpose, which according to them depends upon the electoral system and the diversity of preferences within a society. In this study, the focus is on veto players in the classical sense as defined by Tsebelis. The more institutional and partisan veto players there are in a political system, the more difficult it should be to change the status quo and to make concessions in international negotiations. The following veto players’ hypothesis will be tested: H2: The larger the number of institutional and partisan veto players, the fewer concessions the executive is likely to make at the international level. This hypothesis is linked to the effects of the number of veto players on international negotiations. If the logic holds, we should expect states with fewer veto players (majoritarian democracies) and with executive dominance to be relatively unconstrained during international negotiations and to concede more than countries with many veto players (consensus democracies) or with power-sharing mechanisms on trade policy. In order for a legislature to have veto power this institutional actor must need to ratify a policy choice made by the executive or the executive must need to obtain a negotiating mandate from the legislature. If the executive controls the legislative agenda, it can act unilaterally in the international arena without taking into account the legislature’s position on trade policy. In contrast, if the executive needs implicit legislative

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support, that is to say if the legislature has veto power over trade policy issues, government representatives are more constrained at the international level. Link between parties and interest groups The problem with the veto players’ approach is that owing to its focus on formal veto players, it completely neglects the role of interest groups. The position of interest groups on trade liberalization, however, may be of central importance for explaining negotiations outcomes. Countries negotiate trade agreements with the aim of reducing trade barriers to increase the volume of international trade. Countries do not pursue free trade as an end in itself, but rather to achieve larger gains from trade for their export-oriented industries. Thus, governments’ negotiating positions at the international level reflect the competing claims of the import- and export-oriented sector within a country. Any change in trade policy has distributive effects, with some interest groups losing and others winning as a result of changes in the status quo. For this reason, trade policy is a highly politicized issue. As broadly asserted in the literature, distributional arguments maintain that political pressures coming from interest groups are key determinants of foreign economic policy and international cooperation (Gourevitch, 1986; Grossman and Helpman, 2002; Hiscox, 2002; Milner, 1997; Moravcsik, 1997; Rogowski, 1989). Political leaders do care about the effects of trade agreements on their domestic constituencies because they do not want their party to lose financial support or seats at the next election. Political parties compete for seats in a legislative body and respond to different constituencies. Special interest groups are collections of voters who share a common interest in specific policy issues. These groups can support one or several political parties (Grossman and Helpman, 2002). Each party represents the interests of a particular social group (Alesina, 1987). For example, a left-wing party is more likely to represent labour, while a right-wing party is more likely to represent the interests of business groups. In line with this research, I contend that interest groups in their role as pressure groups affect trade negotiations by lobbying governments in order to have their positions taken into account. Trade policy preferences of domestic interest groups (farm, business sector, trade unions, or non-governmental organizations (NGOs)) are absorbed by specific political parties. This results in the following hypothesis on the link between political parties and interest groups: H3: If the party in government has a strong link to specific interest groups, the executive is expected to pursue a trade policy favouring these groups when negotiating at the international level. National government representatives have their own bases of political support (electoral constituencies or interest groups). In order to be able to

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explain a nation’s trade policy, one has to specify which parties respond to the demands of specific interest groups. First of all, one has to specify which major central business and agricultural interest groups exist at the domestic level and their position on trade liberalization. Hitherto, it is generally asserted in the literature that agricultural interest groups oppose trade liberalization. However, reality is much more complex, with import- and export-oriented agricultural interest groups having different positions on trade liberalization. This is why a distinction between agricultural interest groups supporting or opposing trade liberalization and their links to specific political parties might help to explain why a government takes a certain negotiating position at the international level.

Domestic constraints and international negotiations Internal divisions or domestic constraints do not necessarily have negative consequences for the outcome of international negotiations. The divisions can be quite useful for extracting concessions from other parties at the international level. Contrary to received wisdom, negotiators with a narrow win-set can gain bargaining advantage by indicating a desire to accept a proposal while also pointing out that it is unlikely that such a proposal would be ratified back home (Schelling, 1960). In the context of EU negotiations, Conceição-Heldt (2006b) illustrates how during the negotiations on the Europeanization of the fisheries policy, Denmark credibly played the card of internal weakness and was thus able to bargain with the other EU countries from a position of strength by arguing that domestic pressures (from the fisheries interest groups and from the Danish parliament) prevented it from agreeing to any disadvantageous compromise solution unless Denmark could receive side-payments in exchange. Putnam (1988) notes that the larger the perceived win-set of a negotiator, the more he can be ‘pushed around’ by other negotiators at the international level. The relative size of the respective domestic level win-sets will affect the distribution of the joint gains from the international bargain. Any successful agreement at the international level must fall within the overlapping win-sets of the domestic arena in order to avoid an involuntary defection.5 Even though the win-set is the central independent variable in Putnam’s study, his framework does not tell us much about the bargaining situation between nations.

Integrative and distributive bargaining The question of whether domestic institutions are helpful to explain the success or failure of negotiations might depend on the nature of the bargaining situation between states. Negotiation theory makes a useful distinction between integrative (‘win-win games’) and distributive bargaining situations (‘win-lose’ or zero-sum games).6 Whereas integrative bargaining implies

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an increase in the joint gains available to all negotiating parties and thus the generation of more value, classical distributive bargaining situations are concerned with more competitive behaviours, intended to affect the division of a single good (Conceição-Heldt, 2006b; Raiffa, Richardson, and Metcalfe, 2002). Or as Raiffa, Richardson and Metcalfe (2002, p. 97) put it: ‘Integrative bargaining is making the pie bigger. Distributive negotiation is about getting a bigger piece for oneself.’ In a multilateral trading system, integrative bargaining situations are by far the most common. Negotiations are a process directed towards finding agreements acceptable to all parties involved. In contrast to distributive bargaining, which may call for bluffs and threats, integrative bargaining requires a high level of trust and openness (Hoekman and Kostecki, 2001). Most bargaining situations, however, involve both integrative and distributive elements. This mix of both bargaining situations also has an effect on predicting how domestic actors are going to react to a change in the status quo. On agricultural trade liberalization, distributional consequences are a central issue, given that a government will not accept an international agreement that is disadvantageous to its country and more specifically to its farmers without some side-payments in exchange. Nations begin trade negotiations because they expect to derive some benefit from them. Bargaining parties only agree to negotiate on market liberalization because they expect that the access to new markets will outweigh the costs linked to, for example, domestic support. Christina Davis (2004), for example, shows that the success or failure of international economic negotiations depends on institutionalized cross-sector linkages. When there is strong opposition at the national level from powerful agricultural interest groups, linking agricultural with industrial issues allows negotiators to counteract domestic obstacles to liberalization by broadening the negotiation stakes.

International level: the time dimension of negotiations Time dimension and concession rates In the classical meaning elaborated by John Nash (1950) and Thomas Schelling (1960), in a bargaining situation there are multiple possible outcomes. The bargaining parties, however, have different preferences regarding the possible outcomes. A second central characteristic of bargaining situations is that they are dynamic.7 Whether or not the parties involved reach an agreement will only become clear over time. During this process, there are sequences of offers and counteroffers during which one of the bargaining parties expects that the others will make concessions in order to reach an acceptable compromise agreement. Time not only influences the extent of demands and concessions, but time pressure might also lead to a situation ripe for settlement. Ripeness

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refers to a particular time when negotiating parties realize that they need to move from their initial positions towards an agreement, since neither side is able to achieve its aims, or resolve the problem unilaterally. Choosing the right time to concede is crucial for a negotiator because if it is too early, the concession will be rejected, as the other negotiating parties will try to obtain more concessions. If it is too late, the concession will not even be considered because the other parties will no longer be willing to come to an agreement (Dupont and Faure, 1991). In the literature on negotiations there are many studies focusing on ‘ripeness’ as a central concept of negotiations (Zartman, 1989). Indeed, there are some studies focusing specifically on time pressure (Carnevale, O’Connor, and McCusker, 1993; Cross, 1996; Pruitt and Latané Drews, 1969; Watkins, 1998). However, these studies have not yet been applied to a specific empirical bargaining situation. Other authors focus on issue linkage and legal framing (Davis, 2003, 2004; Hoekman, 1989), political leadership (Young, 1991), epistemic communities (Haas, 1992, 2000), bargaining strategies (O’Neill, 1991) or bargaining situations (Conceição-Heldt, 2006a, b; Raiffa, Richardson, and Metcalfe, 2002; Walton and McKersie, 1965) to explain bargaining outcomes. Existing models of negotiations tend to be static, to reduce the set of negotiators to two, and they do not account for why negotiators decide to agree or not at particular points in time.8 These simplifications are problematic because negotiations in the WTO involve many players and evolve over time. The central issue is how to operationalize the variable time pressure. On the basis of existing studies (Cross, 1965; Pruitt and Latané Drews, 1969; Smith, Pruitt, and Carnevale, 1982; Watkins, 1998; Yukl, 1974), I will show how time pressure and elapsed time shape actors’ bargaining behaviour. I will contend that there is a correlation between time pressure and negotiators’ concession rates. Under acute time pressure, we should expect a softer approach to negotiation, which involves a lower level of demand and larger concessions. In contrast, under mild time pressure, there are high initial demands and few concessions. The problem with extreme opening bids is that if all actors start negotiations with an extreme demand, it will be rather difficult to find a zone of possible agreement. Time pressure: elapsed time and concession rates One of the most important works on the role of time, as well as on the conceptualization of the process of making concessions, is that of John Cross (1965). In his theory of the bargaining process, negotiators start their calculations with: first, a specification of their own preference ordering for the outcomes in the payoff possibility set; second, a schedule of costs that arises from the time that elapses before a specific contract is agreed upon; and finally, a precise estimate of the other side’s concession rate over time. Given this information, bargaining parties calculate the optimal level for

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their own initial demand on the assumption that the other involved parties will make all of the concessions. A study by Dean Pruitt and Julie Latané Drews (1969) is especially interesting because they conducted their experiment in a laboratory setting in order to investigate the effect of time pressure, elapsed time, and the other negotiator’s concession rate. They based their hypotheses on the perennial dilemma faced by negotiators between taking a ‘tougher’ and a ‘softer’ approach. Tough bargaining behaviour can be defined as the extent to which a bargaining party begins a negotiation round with an extreme demand and only concedes slowly (Smith, Pruitt, and Carnevale, 1982). Whether or not bargaining parties in multilateral trade negotiations make use of tough strategies also depends on whether they have a good best alternative to a negotiated agreement in case of a breakdown in negotiations. Whereas a tougher approach implies setting more ambitious goals, making more extreme demands, bluffing and making fewer concessions, a softer approach suggests the opposite. Two different logics lie behind this claim. First, once one assumes that an agreement will be reached, the use of moderately tough behaviour seems instrumental in order to get more for oneself out of the agreement. The more one party demands and the more slowly one of the bargaining parties concedes, the less likely a negotiator is to overshoot the opponent’s minimal reservation point, a term that refers to the minimal deal that the other bargaining parties would accept. The identification of a zone of possible agreement (ZOPA), which in negotiation theory is called the bargaining range, is a crucial issue in bargaining situations. According to James Sebenius (1991), the ZOPA is the point where for each actor a set of possible agreements is superior to the non-cooperative alternatives of an agreement. It includes all of the possible bargains that both sides prefer to the status quo. Furthermore, using a moderately tough approach may lead the other bargaining parties to lower their goals and, thus, to reduce the level of their demands. In contrast, failure to be moderately tough may be seen by the other bargaining parties as a sign of ‘weakness’, leading them to raise their demands (Stevens, 1963). In other words, those bargaining parties that are willing to wait longer and that are less eager to reach an agreement will be more successful (Raiffa, Richardson and Metcalfe, 2002). Furthermore, moderately soft behaviour might lead to a successful end of the negotiations, since agreement can only be reached if at least one of the bargaining parties is willing to make concessions (Pruitt and Latané Drews, 1969). The time dimension is of central importance in a negotiation because of the sequential nature of the process. The time dimension intervenes in several ways in a bargaining process. The elapse of time might lead to a decline in demands over time. Pruitt and Latané Drews (1969) point out that time pressure has positive effects on the likelihood that an agreement will be achieved. Time pressure is defined here as when negotiators are operating close to a deadline, which could conceivably be when the negotiation might end with

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an agreement.9 Time pressure is expected to occur whenever a deadline is close and thus bargaining parties know that the amount of time available to negotiate is limited. The following hypothesis on time pressure will be tested: H4: Actors that are under greater time pressure will produce a softer approach to negotiations, involving a lower level of demands and larger concessions. When there is significant time pressure a softer approach may be safer, given that the other bargaining parties (having the same knowledge of the time pressure) are less likely to perceive this as a sign of weakness or, according to Stevens (1963), if they do, they have less time to exploit this situation. This hypothesis postulates an interaction between time pressure and a negotiator’s concession rate: under acute time pressure, we should expect that the relationship between toughness and the other negotiator’s concession rate will be less marked and may even be reversed, so that an even softer approach will be taken the greater the other’s concession rate. Stevens (1963) distinguishes between an ‘early’ and a ‘late’ stage of negotiation. Whereas in the early stage there is only a mild time pressure, the late stage of negotiation is characterized by acute time pressure owing to the deadline effect. It is more significant that in the early bargaining stage a concession is often considered as a sign of weakness, elicits tough behaviour in return, and makes one vulnerable to exploitation. By contrast, in the late stage, when negotiators are anxious to reach agreement, the concession of one negotiator might lead to a return concession from the other bargaining parties, who hope that reciprocal concessions might lead to a successful end of the negotiations. In this way, a tough reaction to concessions from the other bargaining party that is found during the early (mild time pressure) stages of negotiation may be overturned in the late (acute time pressure) stage. Moreover, if a deadline is set, greater time pressure is expected to accentuate the perceived importance of reaching agreement and, hence, should lead to a softer approach. In trade negotiations, there is a deadline effect, if agreement is reached very close to the end of negotiations, that is, just before the deadline. Setting a deadline is a way to exert pressure by stating openly the possibility of breaking up or ending negotiations. One also has to be somewhat sceptical about deadlines, since these might be arbitrary. This is linked with the question of whether a particular deadline is really binding and also whether delaying an agreement is costly. The costliness of delay may arise from two factors: first, delaying an agreement means spending more time in negotiations without the benefits an agreement would bring; second, with the passage of time there is also the risk that one bargaining party will break off negotiations entirely and look for other trading partners (Fearon, 1998b).

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The costs that time imposes on negotiators can have three different forms: future agreements may be discounted to the present; the value of the agreement may change over time; and there may be a fixed cost for the parties of the bargaining process, which recurs in each time period. All three of these different forms have the effect that the further the distance in time until an agreement, the less its present value is expected to be (Cross, 1969). Best alternative to a negotiated agreement Delaying agreement at the international level might lead countries to negotiate regional and bilateral trade agreements simultaneously. Both challenges might result in an erosion of support for multilateralism. If negotiations end in stalemate, the status quo ante may be superseded by something much worse for one side (Lax and Sebenius, 1999). Negotiators may experience time pressure because their best alternative to a negotiated agreement (BATNA) will get worse as time passes, or their counterparts’ best alternative will improve. The following BATNA-hypothesis will be tested: H5: If actors have a good BATNA, they are under no time pressure to concede and will make use of tough bargaining strategies by not moving from their initial demands. This hypothesis implies that the worse the alternative to a negotiated agreement, the lower the resistance point or the reservation value. As Odell (2000) underlines, the ZOPA is defined not by the parties’ opening positions or highest demands, but by the worst deal each will be willing to accept. If a bargaining party has bilateral or regional trade agreements in prospect with other major trading nations, then the pressure to agree on a multilateral trade agreement is lower and this actor will concede less in international trade negotiations. According to Lax and Sebenius (1999), the dependence on the other party increases as agreements give greater benefits relative to the value of independent alternatives. The BATNA-hypothesis helps us to explain the concession rate of bargaining parties and whether they are under time pressure to concede. If an actor does not have a good BATNA, it has weak bargaining power and should be more willing to concede.10 This also means that the better the BATNA of an actor, the less dependent it will be on a multilateral trade agreement. In addition, bargaining parties can take actions away from the negotiating table to influence counterparts’ perceptions of their BATNAs (Lax and Sebenius, 1986). The intent of such actions is to influence counterparts’ perceptions of time-related costs. At the bargaining table, some of the negotiators involved may delay, engineer impasse, and seek to convince counterparts that they are in no haste to reach an agreement. Away from the table, they may work to strengthen their own BATNA and weaken the BATNA of their counterparts (Watkins, 1998). This strategy, however, is linked to the risk that

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if all negotiators are successful in convincing each other that delay is costless, then there is no incentive to try to find a compromise solution with which all can agree. Likewise, negotiators may end up trapped in a ‘you-concede-first’ position that contributes to impasse.11 Repetitive games and tough bargaining strategies When states expect to cooperate for an infinite amount of time they are more interested in future payoffs. The expected long-term benefits of obtaining a better deal are very large. In such a situation the potential benefits of delaying an agreement increase. In contrast, when states value future payoffs as almost the same as current ones, accepting an agreement today or tomorrow does not make a significant difference. But if the benefits of holding out rise and the costs are falling as the shadow of the future lengthens, the status quo can only be maintained if bargaining parties engage in tougher bargaining strategies, resulting in more delay before accepting a compromise solution (Fearon, 1998b). This leads us to the following hypothesis on tough bargaining strategies in repetitive games: H6: If actors expect today’s agreement to be relevant for future bargaining interactions, they will choose tougher bargaining strategies than in one-shot games. A tough or competitive approach includes high initial demands and few concessions in the course of the negotiation process. But the bargaining strategy of not conceding in order to avoid weakening one’s bargaining position can also be perilous. On the one hand, if negotiators do not move from their initial demands, they may forgo timely opportunities to reach agreement and cause the other bargaining parties to become extremely tough and resistant. On the other hand, if one is too conciliatory by conceding too much or conceding too readily this can also weaken one’s bargaining position. In this case, one creates the impression of being too anxious to reach agreement.

Conclusion The main argument of this study is that the reluctance of national government representatives in international negotiations aimed at lowering tariff barriers in agriculture can be explained by examining domestic institutions and the role of time at the international level. I will examine in detail the role of domestic institutions (executive–legislature relations, the number of veto players, as well as the link between parties and specific interest groups) and the role of time (elapsed time and concession rates, BATNAs, as well as repetitive games and tough bargaining strategies) at the international level throughout the WTO negotiations.

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The following three hypotheses will be tested to find out whether domestic institutions facilitate or constrain multilateral trade agreements. First, the executive–legislative hypothesis states that if the decision-making power is shared between the legislature and the executive, and if their preferences diverge, cooperation is more difficult to achieve than in political systems with executive dominance in trade policy. This first hypothesis is closely linked to the veto players’ hypothesis, which says that a large number of institutional and partisan veto players will lead to fewer concessions from the executive at the international level. Moreover, the position of interest groups is of central importance when explaining a country’s position on trade issues, given that countries pursue free trade to achieve larger gains for their export-oriented sector. The interest groups–parties hypothesis suggests that if the party in government has a strong link to specific interest groups, the executive is expected to pursue a trade policy favouring these interest groups when negotiating at the international level. At the international level, time is expected to influence the extent to which an actor imposes demands and makes concessions. Time pressure is defined as the closeness to a deadline that could be a time when the negotiation ends in an agreement. The hypothesis on time pressure suggests that actors who are under greater time pressure will have a softer approach to negotiations. This involves a lower level of demands and the willingness to make larger concessions. This hypothesis postulates an interaction between time pressure and a negotiator’s concession rate. It also means that under acute time pressure, we should expect that the relationship between toughness and the other negotiator’s concession rate will be less marked and may even be reversed, such that an even softer approach will be taken the greater the other’s concession rate. Whether negotiators experience time pressure depends also on whether they have better alternatives to multilateral trade agreements. If this is the case, I expect them to make use of tough bargaining strategies, by not moving from their initial demands and making few concessions. In addition, if actors expect today’s agreement to be relevant for future bargaining interactions, they will choose tougher bargaining strategies in repetitive than in one-shot games.

2 Multilateral Agricultural Trade Regime

Introduction Trade between nations is as old as nations themselves, but until the twentieth century it was conducted without interference from international institutions. During the period after the end of the Second World War there was an expansion of international organizations in many different areas, but the plan to establish an International Trade Organization (ITO) failed because the US did not ratify the charter of this trade organization in 1946. A by-product of this failure was the establishment of a temporary contract, the General Agreement on Tariffs and Trade (GATT). Only on 1 January 1995 was the WTO established as an international trade organization.1 In eight successive rounds of multilateral trade liberalization from 1947 to 1994, substantial trade liberalization for industrial products was achieved and important trade rules established. It was only with the Uruguay Round agreement of April 1994 that agriculture was also integrated into the multilateral trading system through the Agreement on Agriculture (hereafter referred to as AoA). The original aim of the agreement was the liberalization of agricultural trade within ten years through modification of the rules on market access, domestic support, and export subsidies.

Evolution of international trade cooperation The year 1946 marks the beginning of negotiations on the creation of an ITO, which alongside the establishment of the International Monetary Fund and the World Bank, was meant to form a triumvirate of international economic organizations designed to manage the world economy (the Bretton Woods system)2 with the aim of avoiding the errors of the 1930s (Wilkinson, 2005). Although the ITO was an American idea, it never came into being because the US president did not submit the ITO charter to the Senate for formal ratification. Hence, a second-best solution, the GATT, which had been 36

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established as an interim set of commitments until the adoption of the ITO, was signed on 30 October 1947, with 23 countries committed to lowering their tariff rates on manufactured goods. The GATT entered into force on 1 January 1948. The provisional character of GATT was reflected by the fact that the signatory countries were simply called ‘signatory parties’ in order to assuage any concern that an international organization had been established (World Trade Organization, 2007a). The main objective of the GATT and now the WTO3 is to liberalize trade and promote fair trade among member countries. More specifically, trade liberalization refers to attempts to reduce the level of protection against foreign goods and services. This can involve various complex types of actions, such as the elimination of quantitative restrictions (quotas) or the reduction of tariffs. The GATT prohibits the use of quantitative import barriers and most domestic or export subsidies for manufactured products. There are, however, exceptions to this rule. These exceptions include agriculture, the balance of payments, economic development, and national security. In this way, the GATT signatory countries were allowed to place import restrictions on agricultural goods when surpluses existed in these countries. In addition, if there is a serious decline in the monetary reserves of a country that threatens its balance of payments, then a country can restrict its imports. Furthermore, the GATT accepts the special position of developing countries by allowing them, upon prior request, to use non-discriminatory import quotas to help the development of infant industries. Finally, GATT signatory countries were allowed to use trade controls for the purpose of national security (Root, 1994). The WTO regulates international trade relations on the basis of the following general principles: the rule of non-discrimination, that is to say concessions to one country must be given to all other WTO members (the reciprocity principle); the rule of the most favoured nation, which means that imported goods from the member countries should be treated no less favourably than domestically produced goods; and prohibitions of quantitative restrictions, which implies that protection for domestic industry should be assured through the use of tariffs, rather than non-tariff barriers (NTBs).4 At present, WTO activities fall into four areas: reductions in tariffs and NTBs; elimination of quantitative restrictions; settlement of trade disputes; and trade policy reviews. Each of these activities is intended to reduce protection and promote free trade. Since the inception of the GATT there have been eight multilateral trade negotiations to negotiate a progressive liberalization of trade on manufactured goods: the Geneva round (1947–8), the Annecy round (1949), the Torquay round (1950–1), the Geneva round (1955), the Dillon round (1960–2), the Kennedy round (1963–7), the Tokyo round (1973–9), and the Uruguay round (1986–94).5 Even though the GATT was signed in 1947 by 23 countries that committed to lowering 45,000 tariff rates, the different trade rounds were

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dominated by the US and the European Community (EC).6 Bergsten (1998) even describes the history of the post-war multilateral trading system in terms of the power relationship between these two actors. He also claims that the key motivation for the US to launch the different trade rounds was the creation of the European Economic Community (EEC) in 1957, the first enlargement of the EC in 1973 and the single European market.

Uruguay round negotiations 1986–94 Inclusion of agriculture in the negotiating agenda The Uruguay round negotiations took place during a period of global recession with high unemployment, high inflation, and a debt crisis in developing countries. This situation led not only to a general decline in world trade, but also to an increase in the number of agricultural trade disputes brought before the GATT Council (Schott, 1994). Over time, agricultural trade policies had evolved in ways that differed from those applied to trade in manufactured goods, with a multitude of domestic and export subsidies and NTBs emerging, including variable levies, minimum import prices, voluntary export restraints, and quantitative import quotas. Domestic agriculture policies increasingly became a source of international friction mainly because production subsidies increased production and generated surpluses on world markets (Food and Agriculture Organization, 2005). In 1986, the US initiated a new round of trade talks with the aim of improving the access of US firms and producers to foreign markets and to reduce agricultural subsidies. Owing to the decline of world prices of agricultural products, US agricultural exports decreased and domestic support costs increased abruptly. Especially, the EC support price for wheat, which was more than the double of the market price, posed a major challenge to US wheat producers wishing to augment their exports (Preeg, 1995). As a reaction to these wheat export subsidies, the US Congress established a countervailing subsidy programme, the Export Enhancement Program, which became operational in 1985. This, in turn, led to an increase in trade disputes. The EC responded by expanding its export subsidies, which became the main outlet for surplus production. This resulted in an enormous increase in the EC’s budget (Josling, 1998). The lack of effective international agricultural trade rules led to a suboptimal situation for all actors involved, since each government was tempted to subsidize its exports to create a competitive advantage in third-country markets (Bagwell and Staiger, 2002). Agriculture came onto the agenda of the Uruguay round because the US and the EC agreed that the benefits of cooperation on agricultural trade might be higher than keeping the present system of domestic farm support, which had become too expensive.

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The escalation of agricultural subsidization by the US and the EC led to disruptions in the international trade regime. This had especially negative consequences for agricultural exporting nations, such as Australia, Argentina, Brazil, or Canada, which found themselves in the middle of the expanding EC–US subsidy programmes and lost market shares. These countries asked for an extensive liberalization of the agricultural sector, similar to the liberal trade regime for manufactured goods (Preeg, 1995). Three major agricultural issues dominated the Uruguay round negotiations: the reduction of domestic subsidies; greater market access for agricultural products through the reduction of NTBs; and the reduction of export subsidies. From the standpoint of developing countries and agricultural exporting nations the reduction of export subsidies was essential. Export subsidies are direct payments intended to make agricultural exports competitive with lower-priced commodities produced by other countries. Thus, export subsidies have a direct impact on the export earnings of other countries (Stewart, 1993). The Uruguay round negotiations can be divided into three distinct negotiating phases: 1986–8, 1989–90, and 1991–3. The next three sections deal in more detail with these three phases by focusing on the negotiating position of the major players involved in agricultural issues. First negotiating phase: 1986–8 At the beginning of the negotiations in 1986, negotiating parties had first of all to agree on which issues should be included in the negotiating agenda. The interests of the participating countries differed greatly, especially between the EC, the US, and the countries represented in the newly formed Cairns group. This group of countries asked for a significant liberalization of agricultural trade. Since the US is highly competitive as a producer of cereals and meat, it asked for trade liberalization in these sectors. At the same time, the US wanted to keep protection of imports of dairy products, sugar, peanuts, and cotton. By contrast, the EC, Switzerland, Norway, Japan, and South Korea had a more defensive position. This group of countries only wanted to accept limited and gradual reductions in agricultural subsidies (World Trade Organization, 2007a). But also African net food importing countries, especially those dependent on cereals imports and other basic agricultural products, feared that an international agreement to reduce export subsidies would result in unaffordable world prices for them (Croome, 1995). In July 1987, the US presented a detailed negotiating proposal calling for the complete elimination of all agricultural subsidies over a ten-year period. Only subsidies not linked to production (‘decoupled’ payments), together with genuine food aid and domestic nutrition and poverty programmes, should be allowed (Koo and Kennedy, 2005). The US also asked for a radical

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reform of the CAP with cuts of 70 per cent in subsidies, while the EC offered a 30 per cent reduction (Kaplan, 1996). The EC put forward a less radical proposal that foresaw the introduction of one-year emergency measures to reduce import barriers and to stabilize markets for cereals, sugar, and dairy products. This initial emergency action would be followed up by phased longer-term measures to reduce the support for agriculture. The EC asked for compensation for the effects of reduced production support in the form of the provision of support to farm incomes. Such income support would be ‘decoupled’ from production. The EC underlined that it would accept concessions in agriculture only if these were linked to other central issues of the Uruguay round (Croome, 1995). Second negotiating phase: 1989–90 The second negotiating phase took place between April 1989 and November 1990. The negotiations were pursued when participating countries agreed to a ‘mid-term’ package that included a progressive reduction in tradedistorting subsidies, improvement of import access, the curbing of export subsidies, and the freezing of support prices (Josling, 1998). This negotiating phase was characterized by a redefinition of the bargaining positions of the main players. In July 1989, in an informal meeting, the delegations agreed on a three-phase scenario for the remaining negotiations. In the first phase (until the end of 1989), governments were expected to table their positions at the working group level, and to outline the possible elements of a compromise proposal. In the second negotiating phase (until August 1990), negotiators should build bridges between the different proposals and reach broad agreement in every negotiating group. The final negotiating phase (from September to December 1990) should refine the agreements and prepare the necessary legal instruments for final adoption (Preeg, 1995). By December 1989, most countries had tabled their negotiating proposals. The US still asked for a complete phasing out of export subsidies over ten years, the conversion of NTBs to tariffs, and the categorization of domestic support programmes according to their trade-distorting effects. The proposal on ‘tariffication’ meant that NTBs on a given product would be converted into a tariff equivalent, which would then be bound and reduced over time (Stewart, 1993). Whereas the Cairns Group broadly supported this proposal, the EC accepted the proposal on ‘tariffication’, but opposed the reduction of export subsidies (Josling, 1998). In June 1990, the chairperson of the negotiating group on agriculture, Aart de Zeeuw, prepared a draft agreement reconciling the different negotiating positions. By and large, he proposed to progressively reduce domestic support and export subsidies, while decreasing import barriers and introducing the principle of tariffication (Preeg, 1995). Domestic support subsidies were to be allowed if they did not surpass an overall ceiling and were not

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linked to production. Examples of subsidies that were permitted include environmental and rural programmes, regional development, and income safety-net programmes. All other internal support-market price supports, such as direct payments to producers, would be progressively reduced in terms of the aggregate measure of support given to each commodity in 1988 (Croome, 1995). The US and the Cairns Group broadly supported De Zeeuw’s compromise proposal, while the EC considered it to be biased towards the positions of the US and the Cairns Group (Schott, 1994). Despite further attempts to bridge the gap among negotiating parties, the GATT ministerial meeting in Brussels in December 1990 broke up in disarray. Final negotiating phase: 1991–3 From January 1991 onwards, the EC was negotiating a CAP reform intended to shift price support payments to direct income payments. During this period, the Uruguay round negotiations were simply suspended. In December 1991, Arthur Dunkel, the chair of the working group on agriculture, prepared a further draft agreement. The ‘Dunkel draft’ suggested a reduction in export subsidies by 36 per cent in budget outlays and by 24 per cent in the quantity of subsidized exports over six years from 1993 to 1999. Domestic support levels should be reduced by 20 per cent from their 1986 levels over the period 1993–9. Concerning market access, there should be a full tariffication and import tariffs should be reduced on average by 36 per cent and individually by at least 15 per cent (Croome, 1995). The Dunkel text was closer to negotiating proposals put forward by the US and by the Cairns Group. Therefore, the EC refused to accept this compromise package (Josling, 1998). In June 1992, the EC member states agreed on the MacSharry CAP reform. The main change to the CAP’s price support mechanisms took place in the cereals sector, where intervention prices were reduced by 30 per cent, and by 15 per cent in the beef sector (Daugbjerg and Swinbank, 2007). At the same time, direct income payments were introduced to all farmers to compensate for price cuts on support payments. In order to be eligible for compensatory payments, farmers had to set aside 15 per cent of their arable land (Rieger, 1998). This CAP reform facilitated the continuation of the negotiations. In particular, the lower cereal prices would allow the EC to agree to subsidy reductions, as long as the compensation payments were excluded. One month later, discussions started again, with most of these meetings taking place at the bilateral level between the EC and the US, reducing the role of other countries to bystanders. In November 1992, after the election of the new US president, Bill Clinton, the European agriculture commissioner Ray MacSharry and external affairs commissioner Frans Andriessen agreed with their counterparts in the Blair House residence in Washington to a compromise package on agriculture, the so-called Blair House agreement (Meunier, 2005). This agreement watered

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down the Dunkel draft in three key areas. First, the EC had accepted a cutback in the volume of export subsidy reductions of 21 per cent. Second, domestic subsidies paid to farmers as part of the MacSharry reform and the US deficiency payments were exempted from reduction commitments. The 20 per cent reduction on trade-distorting support was to be aggregated across the agricultural sector as a whole rather than in specific commodities (Capling, 2001). Third, a ‘peace clause’ was created to provide immunity against complaints to subsidies that were in the course of reduction (Meunier, 2005). France, however, opposed the Blair House agreement, claiming that the European Commission had exceeded its negotiating mandate by approving measures incompatible with the CAP. In December 1993, a new EU–US agricultural agreement was concluded, changing several important elements of the original Blair House agreement. In the Blair House Accord II, the US made considerable concessions to the EC. First, the 21 per cent reduction on export subsidies was spread equably over the six-year implementation period, and the base period from which to measure the reduction was moved from 1986–90 to 1991–2 to allow for a higher level of subsidized exports in the cereals sector. The ‘peace clause’ was extended from six to eight years. Second, market access rules would take place according to the type of product (meat, dairy products, etc.) instead of the more restrictive product-by-product access (Meunier, 2005). Third, this new agreement created a blue box that removed certain types of European subsidies from the amber box (Capling, 2001). While amber box subsidies are linked to production and affect trade directly, blue box subsidies are direct payments made to farmers to reduce production. In return, the US received significant market access concessions for its agricultural exports to the EC, including fruit and meat products (Preeg, 1995). The Blair House agreement between the two major trading powers enabled the resumption of negotiations, so that the final Uruguay round agreement was signed at a ministerial level meeting in Marrakech on 15 April 1994.

Agreement on agriculture of the Uruguay round The agreement on agriculture of the Uruguay round (hereafter AoA) came into effect on 1 January 1995. The AoA has three different pillars: market access, export subsidies, and domestic support subsidies. These different categories are interrelated and mutually reinforcing. This multilateral agricultural trade regime defines the rules for domestic support subsidies and in this way restricts the right of WTO members to grant agricultural subsidies that have trade-distorting effects. Market access Under the AoA, all member countries were required to eliminate quantitative restrictions (import quotas) and NTBs, which were to be replaced with

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custom tariffs. Whereas developed countries had to convert their NTBs into equivalent custom tariffs, developing countries were given the option of simply replacing their NTBs and unbound tariffs with bound tariffs, known as ‘ceiling bindings’. Countries agreed to substitute quantitative restrictions and NTBs through tariff rate quotas because it is easier to negotiate the subsequent reductions in tariffs. Tariff rate quotas grant the entry of a specified quantity of a product at a reduced tariff rate and set higher rates for quantities that exceed the quota (Matsushita, Schoenbaum, and Mavroidis, 2003). Participating countries agreed to reduce their tariff rates by 36 per cent for developed countries over six years (1995–2000) and by 24 per cent for developing countries over ten years (1995–2004).7 They also agreed on minimum tariff reductions of 15 per cent for developed countries and 10 per cent for developing countries; LDCs were exempted from these tariff reductions, but committed to not raising them either (World Trade Organization, 1994).8 Export subsidies Export subsidies have a direct impact on terms of trade because they counter partially or fully the tariff levied on a product by the importing nation. Export subsidies are paid to firms with specific reference to the export of a product. By contrast, domestic or production subsidies are granted to a firm or to a farmer regardless of exports. Hence this type of subsidy has a less direct impact on international trade. The impact may be very slight if the percentage of products exported by that firm is small. Even where imports are relatively high in proportion to the total production, the economic impact is reduced since the subsidy is spread over the entire amount produced. As a result, domestic or production subsidies are of less concern than export subsidies (Matsushita, Schoenbaum, and Mavroidis, 2003). Although the GATT prohibited the use of export subsidies in most sectors, this rule did not apply to agricultural products. The prohibition of export subsidies in the manufacturing sector was justified with ‘dumping’ concerns (with selling goods at a lower price than the cost of production in the home country). Under the AoA, export subsidies are allowed, but they are now subject to reductions and have to be notified to the WTO.9 Developed countries were to reduce their export subsidies by 36 per cent in value (financial outlay) and by 21 per cent in volume (subsidized quantities) over five years, while developing countries were to reduce their total volume of subsidized exports 24 per cent by value and 14 per cent by volume over ten years (Matsushita, Schoenbaum, and Mavroidis, 2003). These reductions were product-specific, and countries that did not use export subsidies during the period 1986–90 were prohibited from introducing them. This included the reduction of direct subsidies, sale of agricultural products at a lower than market price, or subsidized export marketing costs (World Trade Organization, 1994).

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Domestic support and the system of boxes Under the AoA, domestic support measures are differentiated according to their degree of trade distortion. A ‘traffic light’ analogy was adopted to describe the various forms of domestic agricultural support and the extent to which this support was to be reduced. These types of domestic support are familiarly referred to as a system of ‘boxes’. The red box includes all policies that are not allowed. This box is, however, not currently applied to domestic policies. Domestic policies generally fit into the amber box, the blue box, and the green box categories. Green box subsidies are ‘decoupled’ direct payments not linked to production levels. They include domestic food aid, decoupled income support, income insurance and safety-net programmes, set-aside programmes, regional and structural adjustment assistance, environmental protection, and measures that support early retirement for farmers (Matsushita, Schoenbaum, and Mavroidis, 2003). These payments are considered to have no impact or a minimal effect on trade and are not subject to reduction commitments because they are not related to current price or output. By contrast, amber box subsidies affect trade directly and include market price support (linked to production) or direct payments. For example, producer subsidies (price supports or per unit payments) that can encourage overproduction fall under this category. WTO members agreed on reducing amber box support by 20 per cent over a five-year period for developed countries and 14 per cent over a ten-year period for developing countries; LDCs were exempted from this commitment (Matsushita, Schoenbaum, and Mavroidis, 2003). However, minimal amber box support (de minimis) is allowed and not subject to reduction (Landau, 2001). This includes productspecific domestic support not exceeding 5 per cent of a country’s total value of production of an agricultural product for developed countries and 10 per cent for developing countries (Grossman, 2003). Subsidies in this box are calculated under the aggregate measure of support (AMS), which consists of market price support and government payments. Finally, blue box subsidies are linked to production factors, but not to price and volume of output. Blue box subsidies include direct payments that compensate producers for income loss when production is reduced (Grossman, 2003). Although blue box subsidies are considered to be potentially tradedistorting because they include supply restrictions, they are regarded as less likely to have negative effects on other countries than amber box measures (Landau, 2001). The creation of the blue box was a way of allowing the US to cover its deficiency payments to grain producers and for the EU to keep its compensation payments to farmers introduced under the 1992 MacSharry reform, in exchange for the price cuts implemented (Tangermann, 2001). The signatory countries agreed on a ‘Due Restraint Provision’ – the so-called ‘peace clause’ – that included the imposition of countervailing

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duties. This clause specified that domestic support measures that fully conform to the green box provisions could not be challenged under the WTO agreements (World Trade Organization, 1994). Since the expiration of the ‘peace clause’ at the end of 2003, all trade-distorting farm subsidies can be challenged under the ‘Agreement on Subsidies and Countervailing Duties’. Furthermore, domestic support and export subsidies in line with GATT commitments are subject to countervailing duties only if it can be demonstrated that they harm other countries. This includes blue box payments under production-limiting programmes (Koo and Kennedy, 2005). Finally, the AoA also included a ‘special agricultural safeguard’. This mechanism allowed a temporary tariff increase to deal with price falls or import surges for some products (Josling, 2005). After the completion of the Uruguay round negotiations, WTO members widely agreed that trade reform was an ongoing process and laid down that negotiations on agricultural trade liberalization would begin one year before the end of the six-year implementation period (in 2000) (World Trade Organization, 1994). This is why a new round of trade negotiations was launched in 1999.

Impact of the agreement on agriculture on domestic support Although the AoA created a distinction between trade-distorting and nontrade-distorting subsidies, since then domestic support subsidies have been increased rather than reduced. For example, the EU and the US have increased their use of green or blue box area payments, and Switzerland, Norway, Japan, and South Korea have made widespread use of amber box support (Landau, 2001). Stiglitz and Charlton (2005) note that the AoA achieved very little in terms of agricultural trade liberalization. Even though countries agreed on reductions in tariff rates, the tariffication process was initially used by countries to set very high initial tariffs, in such a way that after the agreed reform, the new binding tariffs were even higher than the prevailing tariff rates that had been in place for the reference period (1986–8), in which market prices for most agricultural commodities were very low. This explains why the overall level of farm support in countries of the Organization for Economic Cooperation and Development (OECD) remained almost unchanged. Whereas in 1988 farm subsidies made up 51 per cent of all OECD farm production, in 2005 government support to farmers in OECD countries made up a total of €225 billion, a figure that represented 29 per cent of total farm revenues (OECD, 2006). Domestic support subsidies of industrialized countries have a direct effect on farm incomes in developing countries since they suppress world prices and thus displace the agricultural exports of the latter (Stiglitz and Charlton, 2005).

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High protection for agricultural commodities continues to be the major distorting feature of international trade. The EU, the US, and Japan are still the largest providers of domestic support mainly through market price support and production payments. Together, they account for 90 per cent of total domestic support in OECD countries. Whereas the EU has reduced its production subsidies by decoupling support from production in the 2003 CAP reform, the US increased the levels of support provided in preceding years through ad hoc payments contained in the 2002 farm bill. In addition, agricultural tariffs of OECD countries on market access are still extremely high, above 100 per cent – almost 70 per cent in Norway and Iceland, 40 per cent for Japan, over 30 per cent for the EU and about 12 per cent in the US. For example, the EU has very high average tariffs for cereals (156 per cent), sugar (297 per cent), rice (361 per cent), and for veal and beef (125 per cent). By contrast, the US only has high tariff rate quotas for sugar (197 per cent) (Nicolas, 2000). The minimal reduction commitments of the AoA did not affect price levels and trade flows. Only export subsidies have declined significantly. In this way, the AoA did not place any real constraints on the agricultural support of the US or the EU.

Conclusion As a result of the signature of the AoA, for the first time, agricultural commodities were included in the multilateral trading system. WTO members’ commitments under the agreement can be divided into three broad categories: market access, export subsidies, and domestic support. On market access, quantitative import restrictions were to be replaced by tariffs that are bound and subject to reduction. Agriculture export and domestic production subsidies and all other trade-distorting measures now form a single category and are subject to reduction or elimination over time. On domestic support, subsidies were differentiated according to their degree of trade distortion through a system of boxes: amber, blue, and green boxes. The amber box refers to measures that are trade-distorting and were to be reduced by 20 per cent over five years (developed countries) and 14 per cent over ten years (developing countries). Amber box subsidies include market price support (linked to production) and direct payments (e.g., loan deficiency payments in the US or the EU intervention price). By contrast, blue box payments are regarded as less trade-distorting as they deal with direct payments to farmers for programmes to limit production. Green box support is allowed and includes measures that are assumed to have no effect on production. Finally, countries agreed on a ‘peace clause’ that specified that measures conform to the green box provisions could not be challenged under the WTO agreement.

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Although countries agreed on tariff rate reduction for agricultural products, they set very high initial tariffs so that after the implementation of the AoA, the new binding tariffs were even higher than the tariffs that had been in place for the reference period 1986–8. Market prices for most agricultural commodities were very low during this period and agricultural subsidies very high. The AoA has been ineffective in reducing subsidies because the new rules left too many loopholes and the reduction commitments were too generous, giving countries much scope for the continuation of high levels of protection and support.

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Part II Domestic Institutions

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3 US Trade Politics

Introduction The literature on US trade policy-making is characterized by a dichotomy between explanations centred on the influence played by interest groups versus those that focus on divided government. Scholars disagree about whether US trade liberalization has been obstructed when different parties hold majority control of Congress and the presidency (divided government) and as to whether Congress abdicated from its constitutional powers by delegating trade authority to the president. Some scholars argue that since the Second World War divided government has slowed down trade liberalization (Epstein and O’Halloran, 1996; Lohmann and O’Halloran, 1994), or that this has even impeded international trade agreements (Milner and Rosendorff, 1997). By contrast, other scholars have drawn the opposite conclusion, arguing that divided government has no effect on trade policy. For example, Mayhew (1991) remarks that major trade legislation has been passed under both united and divided governments. These studies differ both in the focus of their analysis and in their methodology: some use spatial models or statistical analysis (Bailey, Goldstein, and Weingast, 1997; Hiscox, 1999, 2002; Karol, 2000; Lohman and O’Halloran, 1994; Sherman, 2002), while others provide more detailed case studies of particular institutional arrangements that give rise to free trade or protectionism (Destler, 1992, 2005; Hody, 1996; Medick-Krakau, 1995; O’Halloran, 1997; Pfeil, 2000). Even though these studies come out with diametrically opposed explanations as to why Congress has delegated authority to the president, they can be divided into three competing views: presidential dominance thesis; congressional dominance thesis; and the nested game thesis. First, proponents of the presidential dominance thesis consider that Congress, by transferring authority for setting tariffs to the president, has automatically abdicated from its control over trade policy (Bauer, Pool, and Dexter, 1972; Destler, 1992, 2005; Goldstein, 1988; Haggard, 1988; 51

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Nelson, 1986). Destler (1992, 2005) argues that Congress members are unable to resist the protectionist pressures of special interest groups and thus choose to bind their hands by delegating trade policy to the president, who is less susceptible to protectionist pressures since he represents a broad national constituency. Bauer, Pool, and Dexter (1972) and Nelson (1986) speak in this context of a ‘deflection thesis’, meaning that interest group lobbying was so strong that by transferring authority to the president Congress simply wanted to divert protectionist pressures from itself. Haggard (1988) contends that in approving the 1934 Reciprocal Trade Agreements Act (RTAA), Congress created a strong executive able to pursue liberal trade policies. Goldstein (1988) also considers that the delegation of power from Congress to the president was a constraint upon the direct participation of Congress in the decision-making process. This group of scholars fails, however, to assess the extent of power delegation to the executive branch. Second, the proponents of the congressional dominance thesis assert that the delegation of authority to the president does not mean that Congress has lost control of the executive branch, rather the situation is quite the contrary (Lohmann and O’Halloran, 1994; O’Halloran, 1994). The congressional dominance thesis in its extreme form suggests that even if Congress delegates power to the president, the latter’s discretionary powers are limited by procedural constraints. In this way, the resulting trade policies are similar to those that would be implemented by Congress if its members passed trade legislation without recourse to delegation. This view is consistent with the observation that the legislature has repeatedly restrained the president’s discretionary power by requiring presidential trade proposals to meet numerous consultation requirements before congressional approval. For O’Halloran (1994), the central issue is not which actor dominates the decision-making process, but how Congress structures the delegation of power in order to control trade policy without reverting to legislative logrolls. She shows that the same delegation regime can have different effects on the executive– legislative relationship, depending on the location of the status quo relative to the players’ preferences: sometimes the president seems to dominate the decision-making process, whereas in other cases Congress is partially able to constrain the president’s authority. Lohmann and O’Halloran (1994) show that under divided government and partisan conflict, it is better for the majority party in Congress to constrain the president’s use of delegated authority. As a result, the president has to take protectionist pressures from Congress into account. This may lead to higher levels of protectionist trade policy. In times of divided government, Congress has strengthened institutional constraints on the president’s trade authority and under unified government institutional constraints have been loosened. The nested game perspective analyses the interaction of electoral, partisan, and institutional variables (Gibson, 2000). For example, Karol (2000) focuses on the interaction of institutional and party constituency-based preferences.

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He demonstrates that the trade policies of some presidents (Harry Truman, Ronald Reagan, and George Bush Senior) won support primarily from their co-partisans and were impeded by divided government. In contrast, the trade policies of Dwight Eisenhower, Richard Nixon, and Bill Clinton were backed by members of Congress from the other party. Presidents coming from the protectionist (Democratic) party gain from divided government and those from the liberal (Republican) party are harmed by it. Divided government is not the main issue, but rather the interaction between protectionist forces in Congress and a liberal president. Schnietz (2000) considers that partisan politics better explains liberal policy outcomes: Democrats supported the RTAA because they expected it to provide durability to their preferred low tariff policy. Finally, Shoch (2001) shows that since 1980 Democrats have supported fair-trade and protectionist trade policies and Republicans have backed free trade. This degree of partisan differentiation has depended upon the following aspects: the degree of capital and labour division on trade issues; the salience of trade bill proposals to key swing constituencies; the ideological composition of the two congressional party factions; the willingness of the president and the congressional parties to compromise; unified versus divided government. However, these studies fail to analyse the impact of a specific institutional arrangement, the fast track procedure, on the US negotiating position at the multilateral level. I will argue throughout this study that the fast track arrangement or the trade promotion authority allows Congress to exercise considerable influence over the conduct of negotiations. First, Congress can threaten to withhold negotiating authority unless the president accepts the conditions imposed by the legislature. Congress can also attempt to influence the negotiations while they are under way by threatening to reject any agreement that does not include aspects favourable to the views of Congress. Finally, Congress has a veto power (up or down vote) over the trade agreement negotiated by the USTR.

Power delegation in US trade politics The US constitution gives the power on trade policy issues to Congress, but the president has the power to conduct foreign affairs, to negotiate, and to conclude treaties with foreign countries. At the ratification stage, the treaties negotiated by the president have to be approved by a simple majority in both houses of Congress. Power delegation in trade policy is the result of many decades of rebalancing the competences of the legislative and executive branches on trade policy. The enactment of the Reciprocal Trade Agreements Act of 1934 marked a turning point in the history of the delegation of authority, since it was the first law formally authorizing the president to negotiate reciprocal tariff reductions with other nations within a limited time period.

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Reciprocal Trade Agreements Act of 1934 and beyond In 1932 Democrats won the congressional elections and passed the Reciprocal Trade Agreements Act (RTAA) in 1934. This trade act authorized the Democrat president Franklin D. Roosevelt to negotiate reciprocal trade agreements with other countries. The RTAA has been assessed as being ‘simply [an] institutional reform with revolutionary consequences’ (Hiscox, 1999, p. 669) because it changed US trade policy-making. From an institutional perspective, the RTAA gave the president the power to enter into trade agreements with other countries and to reduce any US tariff by up to 50 per cent in a reciprocal basis, without further recourse to Congress. Although the administration had originally asked Congress for a negotiating authority unbounded in time, Congress restricted the president’s power to negotiate any reduction of tariffs with foreign countries to three years (Destler, 2005). Congress also agreed that issues relating to trade agreements would be adopted on the basis of a simple majority instead of a supermajority (Bailey, Goldstein, and Weingast, 1997). Setting a time limit was a central issue for Congress because it ensured that the president would have to return to Congress to obtain a new negotiating mandate. Furthermore, Congress also set up oversight procedures to protect the interests of producers and manufacturers. Before entering into negotiations and signing a commercial agreement, the president was required to inform Congress through public hearings and consultation with executive departments. Before the conclusion of bilateral agreements, interest groups could present their views to the president’s mandate (Bauer, Goldstein, and Weingast, 1972). This was a way of ensuring that abuses of trade negotiating authority by the administration would be assuaged (Beckett, 1941). Moreover, delegation of power was closely linked to specific procedures to protect domestic industry, like the peril point that laid down that concessions made at the international level did not result in damage to domestic industries, or the escape clause ensuring that domestic industries could seek assistance from import competition (Hody, 1996). With the signature of the RTAA, for the first time, the principles of reciprocity, non-discrimination, and unconditional most-favoured nation (MFN) were united as fundamental elements of US trade policy. Failure to ratify the International Trade Organization charter After the Second World War, under the leadership of the US, a new era in international relations began with the establishment of several international organizations. At the national level, this period was characterized by a tension between trade liberalization and trade protectionism through the compensation given to industries affected by foreign imports. In October 1947, the Democrat president Harry S. Truman signed the protocol for conducting multilateral trade negotiations in the framework of an ITO.

US Trade Politics

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Congress, however, considered that the president’s negotiating authority was only valid for bilateral agreements (O’Halloran, 1994). Even though the ITO charter was discussed in the House Committee on Foreign Affairs, it was never voted on by the entire House. In 1950, President Truman decided not to submit the ITO charter to congressional ratification. Since the ITO could not survive without the participation of the US, the other signatories of the ITO decided not to ratify it either (Kaplan, 1996). There are different explanations for the failure of the ratification of the ITO charter. Pastor (1980) contends that a majority in the US Congress considered that the charter was overloaded with too many issues only indirectly related to trade. By contrast, Medick-Krakau (1995) underlines that the failure arose from the opposition of central business groups, such as the American Chamber of Commerce and the American Business Community. Finally, Odell and Eichengreen (1998) point out that the ratification failed because US negotiators (agents) lost touch with their principals (US Congress), a classical case of agency slack. In 1951, the RTAA was renewed for only two years and linked to several conditions. The president was required to submit any trade agreement to the US Tariff Commission with a complete list of all commodities on which the US was considering granting concessions (Hody, 1996). At the same time, Congress prohibited the president from making concessions on imports that could damage domestic industries (O’Halloran, 1994, p. 89). This escape clause permitted the modification or even withdrawal of negotiated concessions, if it was linked to serious injury to a domestic industry from increased imports (Hody, 1996). By contrast, the peril point required the Tariff Commission to estimate the point beyond which tariffs could not be reduced without ‘peril’ to specific domestic industries (Destler, 2005). A new Trade Act in 1958 extended the president’s authority to negotiate trade agreements until 1962, which included an authorization for reducing duties by a total of 20 per cent (Bauer, Pool, and Dexter, 1972). At the same time, this act changed the escape clause procedures in two important ways. First, it stipulated the imposition of higher duties allowing for duty increases of up to 50 per cent above the rates of the RTAA. Second, it gave Congress the authority to overturn the president’s decisions, if he refused to follow the recommendations of the Tariff Commission (Leddy and Norwood, 1962). Trade Expansion Act and Trade Adjustment Assistance of 1962 In the post-war period, the US provided massive aid to facilitate the economic recovery of Western Europe and Japan. Since the return to self-sufficiency of these countries also depended on their ability to export products to the US market, the US granted them market access but accepted de facto a discrimination against itself by maintaining its own import and exchange controls. Until 1960, the US economy was competitive in all major industrial sectors,

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with total imports making up only about 3 per cent of GDP. In this context of economic prosperity, these concessions were relatively painless for the US (Destler, 2005). In 1962, the Democrat-dominated Congress passed the Trade Expansion Act, which empowered President John F. Kennedy to negotiate bilateral and multilateral trade agreements and to engage in broad tariff reductions on industrial products with the EC (Dobson, 1976; O’Halloran, 1994). For the first time, Trade Adjustment Assistance (TAA) was established to financially assist domestic industries that had to adjust to foreign imports. The TAA provision gave technical assistance to firms through loans, loan guarantees or tax cuts, and to workers in the form of unemployment compensation or relocation allowances (Destler, 2005). This new Trade Act further shifted the authority from Congress to the president. First, the House Ways and Means Committee transferred the basic competences for negotiating trade agreements from the State Department to a new executive agency, the Special Representative for Trade Negotiations, who was responsible directly to the president, but had to report directly and regularly to Congress (O’Halloran, 1994). When defining the US negotiating position for trade agreements, the special representative should gather information and consult with representatives of interest groups (industry, agriculture, and labour) as well as government agencies (Kaplan, 1996). Second, Congress also increased the pre-negotiation advisory system by requiring members of the House Ways and Means and the Senate Finance Committees to be included in the US trade delegation to multilateral trade negotiations (O’Halloran, 1994). Third, Congress could override a presidential decision against the use of the escape clause by a majority vote in both houses, instead of two-thirds (Bauer, Pool, and Dexter, 1972). In the summer 1971, there was an increased vulnerability of the dollar in foreign exchange markets. As a result, Richard Nixon took several measures to reduce the international value of the dollar, which included a temporary 10 per cent ‘additional tax’ on imports. The overall aim of these measures was to ensure that US products would not be at disadvantage because of unfair exchange rates. For the first time in the post-war period, the US balance of trade was negative, with more imports than exports (Destler, 2005). The economic recession came with a strong increase in the rate of manufactured imports relative to domestic production. This led diverse interest groups to ask for state intervention (Chorev, 2005). Farmers and labour unions were especially discontent with the Kennedy round provisions, which reduced average duties for all industrial products by 35 per cent but excluded the farm sector. The American Farm Bureau Federation (AFBF) requested market access to the European and Japanese markets. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) complained that imports caused high unemployment and asked for new trade assistance mechanisms. Unions considered that the TAA programme of the 1962

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Trade Expansion Act was not really helpful to American workers because its requirements were so difficult to fulfil that not a single worker or firm had hitherto received it (Kaplan, 1996). Congress reacted by issuing bills setting import quotas for several products (footwear, dairy products, mink, and steel products) and the president was charged with the task of negotiating limits on textile imports (Chorev, 2005). Enactment of fast track negotiating authority in 1974 At the beginning of the 1970s, the US trade balance began to improve and the Republican-dominated Congress passed the Trade Reform Act in December 1974, which allowed Nixon to launch and negotiate the Tokyo round. This new Trade Act included, among other measures tariffs, NTBs, escape clause, TAA, retaliation, and countervailing duties (Section 301), as well as new rules on the delegation of trade authority (Kaplan, 1996). The escape clause provision foresaw a restriction on imports, if the Trade Commission considered that a certain industry sector had suffered serious injury. The president had the power to reject the Trade Commission’s recommendation only on the grounds that it was against the national economic interest. The TAA programme allowed workers to apply for unemployment benefits, vocational training, and relocation aid, if the Tariff Commission considered that they had lost their jobs as a result of increased imports (Chorev, 2005). Moreover, Section 301 of the 1974 Trade Act assigned basic responsibilities for retaliation against unfair trade practices to the president, who could also impose more quickly special duties on imports that were subsidized by the exporting government (Kaplan, 1996). These provisions were a means for the administration and Congress to address domestic protectionist demands, while at the same time further gradually reducing trade tariff barriers. Between 1962 and 1974 the average tariff rates in the US declined to 10.5 per cent, and between 1974 and 1984 to 5 per cent (Goldstein, 1993). Of greater significance for the relationship between Congress and the president was the establishment of a new institutional arrangement, the fast track procedure, which gave the president the trade authority to negotiate bilateral and international trade agreements. Under this new rule trade agreements are submitted to Congress for approval or rejection (up or down vote) and floor amendments are not allowed. However, this delegation of power went together with the strengthening of oversight mechanisms. The fast track procedure did not give the president a blank cheque to negotiate trade agreements because Congress required the president to consult frequently with the House Ways and Means Committee and the Senate Finance Committee, special advisers designated by the Congress, and domestic producers (O’Halloran, 1994). In addition, Congress substituted the Special Representative for Trade Negotiations with a new office, the Office of the Special Representative for Trade Negotiations,

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under the leadership of the USTR, whose role included keeping Congress informed of the state of the negotiations that were under way (Dobson, 1976). Finally, Congress also circumscribed the power of the president with a congressional veto: either through a congressional affirmative determination or a congressional option to reverse fast track. This allowed Congress to ensure that future executive policies reflected the priorities authorized by Congress and that US domestic interests were taken into account in multilateral trade negotiations (Bauer, Pool, and Dexter, 1972). In this way, Congress delegated authority, but increased its oversight mechanisms in order to be fully informed on the trade agreements that were under negotiation. Strengthening congressional oversight in the 1980s The first substantial modification of the fast track procedure occurred in the Trade and Tariff Act of 1984. Even though this new trade bill gave the president the authority to negotiate bilateral free trade agreements, it simultaneously integrated ‘committee gate-keeping’ rules into the fast track procedures. Under this new provision, before initiating bilateral or multilateral trade negotiations, the president was required to provide written notice of the state of the negotiations and to consult with the House Ways and Means and the Senate Finance Committees for a period of 60 legislative days before giving the statutorily required 90-day notice of this intention to sign an agreement. If both committees agreed with the signature of such a trade agreement within the 60 days period, then any subsequently negotiated agreement would be implemented under the fast track procedure. In contrast, if one of the Committees opposed negotiations in advance or after the conclusion of negotiations, the president could submit it for consideration only under normal legislative procedures (O’Halloran, 1994). This alteration to the original fast track procedure increased the influence of congressional input over the negotiation of trade agreements. The enactment of the Omnibus Trade and Competitiveness Act in 1988 extended the president’s negotiating authority for a further three years and changed the eligibility requirements for TAA to make it easier for workers and firms to receive import relief (O’Halloran, 1994). This new bill once more enhanced congressional power. First, consultation between the president and the relevant committee now had to include the nature and objectives of an agreement. Second, it established a ‘reverse fast track’ provision that allowed gatekeeper committees to terminate fast track authority at any time if they opposed a trade agreement or if they considered that the president had failed or refused to consult with Congress (US House of Representatives, 1988). Finally, Congress transferred the provisions on ‘unfair trade’ practice from the president to the USTR, which would have the power to initiate investigations on ‘unfair trade’ practices (Super 301 provision), to impose sanctions, and to grant import relief and TAA for domestic groups (Special

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301 provision). The president would only retain control over the timing and method of retaliation (Kaplan, 1996). During the presidency of George Bush Senior (1989–93), Congress extended fast track negotiating authority in 1991 and 1993 for the North American Free Trade Agreement (NAFTA) and the Uruguay round negotiations (Destler, 2005). When the president’s fast track authority to negotiate trade agreements expired in early 1994, it was not renewed during the two terms of Democrat president Bill Clinton (1993–2000). It was only in 2002 under the new president George W. Bush Junior (2001–8) that a new trade promotion authority bill was enacted.1

Current provisions of fast track negotiating authority Fast track negotiating authority allows the president to negotiate bilateral and multilateral trade agreements, which are automatically exempted from committee review in Congress, encounter restricted debate on the floor of each house and are not subject to amendments. This procedure is called ‘fast track’ because it contains mandatory deadlines for the debate and the vote (within 90 days from submission). This avoids the agreement being held in a committee without being submitted for vote in plenary and prohibits amendments that would require the renegotiation of the international agreement (Destler, 2005). Fast track has some advantages over normal legislative process. It gives maximum credibility to the other trading partners: once the president enters a trade agreement, the uncertainty whether or not it will be ratified is significantly reduced. In contrast to a treaty that requires a two-thirds majority in the Senate to be ratified, under fast track a trade agreement needs only a majority in both houses of Congress to be approved. The fast track legislative procedure ensures a streamlined legislative process. The implementing trade bill is introduced in both houses of Congress, sent to the relevant committees, including at a minimum the House Ways and Means and Senate Finance Committees, and is automatically approved after 45 legislative days if the bill has not been reported out of the committees. In this way, Congress has to either accept or reject the trade agreement in its entirety. Moreover, there are time constraints on floor consideration and no amendments are permitted. First, floor debate is limited to 20 hours in each chamber, and this time is equally divided between supporters and opponents of the bill. Second, after the bill has been reported or discharged, each chamber of Congress has to vote on final passage of the bill within 15 days. It ensures that no conference committee will take place since both chambers have to vote on the same bill (Brainard and Shapiro, 2001). At the same time, Congress has several police-patrol and fire-alarm oversight mechanisms to extensively control the executive branch. The police-patrol oversight allows Congress to survey the activities of the

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executive branch with the aim of detecting possible violations. The firealarm oversight gives Congress and organized interest groups direct access to information, allows them to scrutinize the US administration and to mandate agencies to examine conflict situations between Congress and the US administration (McCubbins and Schwartz, 1984). Fast track procedures fulfil two central functions. First, this institutional arrangement formally gives Congress a threefold veto over executive actions: Congress can deny the president fast track authority; if the president has failed to keep legislators adequately informed, fast track can be withdrawn; and Congress has to approve or reject the whole agreement through an up-or-down vote. Second, fast track provides Congress with information on trade negotiations that are under way, especially through USTR reporting. Members of Congress can actively monitor the executive’s behaviour by participating directly in international negotiations (O’Halloran, 1994). The oversight provisions on fast track laws can be divided into two categories: ex ante control through congressional oversight procedures and the possibility of reversing fast track through an ex post veto power. Ex ante congressional oversight procedures Ex ante oversight procedures enumerate general industry- or issue-specific trade negotiating objectives that Congress expects the USTR to pursue at the international level. Oversight procedures allow Congress to control and, if necessary, to sanction the USTR in light of the information provided. The requirements for consultation go through different phases. As a first step, before entering into negotiations, the president must provide the International Trade Commission with a list of articles that are going to be negotiated. Then, this commission has 90 days to inform the president about the likely impacts on labour, consumers, and industries that are directly affected by a trade agreement. In the next step, the USTR consults regularly with the departments concerned (agriculture, commerce, defence, interior, labour, state, and treasury), as well as with congressional committees affected by trade agreements. These include the House Ways and Means Committee, the Senate Finance Committee, Appropriations, Agriculture, Banking, International Relations, Commerce, Judiciary and Environment and Public Works (only from the Senate), and the Leadership Offices of the House and of the Senate (Office of the United States Trade Representative, 2008a). At this consultation stage, private sector advisory committees play a central role. These committees provide the president with information and advice with respect to US negotiating objectives and bargaining positions before and during the negotiations on trade agreements (Office of the United States Trade Representative, 2005). The trade policy advisory committee system is made up of 26 advisory committees, with a total membership of about 700 advisors. The system is organized into three tiers: the president’s Advisory Committee for Trade Policy and Negotiations (ACTPN); four policy advisory committees; and

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22 technical and sectoral advisory committees. The president appoints up to 45 ACTPN members for two-year terms upon recommendation from the USTR. The ACPTN assembles key economic interests affected by trade (service industries, retailers, small business), representatives of state and local governments, agriculture, labour, consumer interests, universities, and think tanks (Office of the United States Trade Representative, 2005). The policy advisory committees are made up of the Intergovernmental Policy Advisory Committee, Trade and Environment Policy Advisory Committee, Labor Advisory Committee, and the Agricultural Policy Advisory Committee. The members of these policy advisory committees are appointed by the USTR. The Intergovernmental Policy Advisory Committee is composed of 48 members that represent the American states. There are members directly representing some states in the House of Representatives, associations that stand for the US states (e.g., the Council of State Governments or the National Governors Association), or for different counties, such as the National Association of Counties. The Trade and Environment Policy Advisory Committee represents key organizations dealing with the environmental aspects of trade as well as some broader issues. This committee has 27 members who represent diverse NGOs and include Transparency International, as well as the Peterson Institute for International Economics. The Labor Advisory Committee consists of representatives of different labour unions, such as AFL-CIO and United Steelworkers of America. Finally, the Agricultural Policy Advisory Committee is composed of a broad spectrum of farmers and agribusiness interest groups. They include the major commodity producer organizations, such as the Dairy Farmers of America, the National Pork Producers Council, the American Soybean Association, the National Cotton Council of America, the American Seed Trade Association, the National Corn Growers Association, and the Florida Fruit & Vegetable Association (Office of the United States Trade Representative, 2008b). While these four different policy advisory committees provide information based upon the perspective of their specific area, the 22 industry and agricultural sectoral and technical committees offer advice and information regarding trade issues that affect both domestic and foreign production of their commodities. Representatives are appointed jointly by the USTR and the Secretaries of Commerce and Agriculture. There are also six Agricultural Technical Advisory Committees for Trade for the most important agricultural sectors: animal and animal products; fruits and vegetables; tobacco, cotton, peanuts and planting seeds; sweeteners and sweetener products; grains, feed, and oilseeds; and processed foods (Terpstra, 2003). In addition, there are 16 Industry Advisory Committees for the following economic sectors: aerospace equipment; automotive equipment and capital goods; chemicals, pharmaceuticals, health/science products and services; consumer goods; customs matters and facilitation; distribution services; energy and energy services; forest products; intellectual

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property; non-ferrous metals and building materials; services and finance industries; small and minority businesses; steel; standards and technical trade barriers; technologies, services, and electronic commerce; textiles and clothing (Office of the United States Trade Representative, 2006). Moreover, the USTR maintains close consultation with Congress. Five members from each House are formally appointed as official congressional advisors on particular issues or negotiations (Office of the United States Trade Representative, 2005). As a result, there is extensive cooperation between the executive and the legislature. These ex ante control mechanisms constrain the president’s negotiating authority and give Congress the power to closely scrutinize the president and to influence the content of negotiations. Ex post control mechanisms A Senate or House committee can reverse fast track procedures, if the president fails to meet the requirements for consultation with congressional committees. This may occur if a majority in both houses of Congress passes a disapproval resolution within 60 days. In such a situation, fast track procedures for implementing bilateral or multilateral trade agreements are annulled. In the House of Representatives, a resolution of disapproval has to be launched by the chair or by a member of the Ways and Means or Rules Committees, whereas in the Senate it has to be introduced by the Finance Committee (O’Halloran, 1994). These gatekeeper committee provisions give Congress the power to deny fast track application to trade agreements. Given that fast track is considered an exercise of the House of Representatives’ and Senate’s rule-making power, it can be reversed at any time through unicameral annulment (Brainard and Shapiro, 2001). The fact that Congress may use its ex post veto power is a credible threat over executive actions and ensures that congressional concerns are taken into account in trade agreements. Even if these withdrawal provisions are seldom used, they make the fast track procedure a highly fragile mechanism. However, the US negotiating position in trade negotiations is not only a function of the relationship between Congress and the president, but also of the link between political parties and interest groups. In the highly competitive US electoral system, this link is closely related to the campaign contributions of interest groups to congressional candidates.

Link between parties and campaign contributions of interest groups Numerous studies (Bailey and Brady, 1998; Baldwin and Magee, 2000; Hall and Wayman, 1990; Rowley, 1995) show that elected representatives are most responsive to their re-election constituencies. Hall and Wayman (1990) found out that members of Congress are more responsive to organized

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business interests within their electoral districts than to disorganized voters. In line with this literature, I assume that Democrat and Republican congressional representatives respond to different interest groups. Labour and business are the core constituencies of the Democratic and Republican parties respectively. Several studies (Biersack, Herrnson, and Wilcox, 1999; Dark, 1999; Grier and Munger, 1986; Maitland, 1985) have demonstrated that the business industry Political Action Committees (PACs)2 contributed overwhelmingly to Republicans, whereas labour PACs donated to incumbent Democrats loyal to labour issues. More recent data confirms this tendency. From 1990 to 2006, the labour sector predominantly supported Democratic candidates (Center for Responsive Politics, 2007a), while the agribusiness sector mainly contributed to Republican candidates (Center for Responsive Politics, 2007b) (see Figures 3.1 and 3.2).3 Congressional and presidential elections are extremely expensive in the US. Campaign contributions buy access to the Congress and the administration, enabling firms and interest groups to make their case to members of Congress involved in writing legislation of interest to them. As Engel and Jackson (1998), and Bardwell (2000) note, business and labour PACs use campaign funds as a ‘carrot’ hoping that contributions will tip the decisions in their favour on key votes, but they also use campaign contributions as a ‘stick’ by holding back donations from members who vote against them. Engel and Jackson (1998) show that the contribution of labour PACs decreased for Democratic representatives who voted in favour of the NAFTA bill. The influence of organized labour unions, business and agricultural interest groups on each legislator will be assessed by taking into account the amount of campaign contributions received from each group to demonstrate why a Congress member supports or votes against free trade. Even though using campaign contributions of PACs does not provide a complete measure

Dems

Repubs

Total (in millions)

$100 $80 $60 $40 $20 $0 1990

1992

1994

1996

1998

2000

2002

2004

2006

Figure 3.1 Campaign contributions from the labour sector to Democrat and Republican representatives 1990–2006 Source: Own table based on data from the Center for Responsive Politics (2007f).

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of policy input, it gives us some idea of the number of interest groups attempting to exert influence over Congress and the US administration.4 The focus will be on major interest groups, such as the as the AFL-CIO for the organized labour sector, Business Roundtable for the business sector, leading farm organizations, and major commodity producer groups. The AFL-CIO assembles 55 national and international labour unions,5 represents about 10 million workers and is the largest federation of unions in the United States (AFL-CIO, 2007). Thus, it is one of the most representative labour groups. The Business Roundtable is a lobbying group that represents the 200 largest corporations in the United States. Campaign contributions of farm organizations There is a vast array of farm organizations in the US. In 2006, 274 agriculturalrelated interest groups maintained a PAC. Agricultural and commodity organizations are generous contributors to congressional campaigns. Recently released data on PACs’ contributions to federal candidates from the 1998 to 2006 election cycles report over $397 million in contributions from the agricultural sector and from food and agribusiness companies, with an average of $44 million per election cycle (Center for Responsive Politics, 2007b). There is a positive correlation between the magnitude of campaign contributions and the government support provided to that crop. The four highest agricultural campaign contributors (sugar, dairy, cotton, and rice) for federal candidates are also the commodities with the highest levels of domestic support. From 1998 until 2006, over 65 per cent of the major contributions from the PACs of the main farm bureau federations went to Republican federal candidates. Some of these federations even used their total financial contributions to support Republican candidates, for example, the Missouri Farm Bureau. Only a few farm organizations, such as the National Council of Farmer Co-ops, the National Farmers Unions and the North Carolina Farm Bureau, supported Democrat federal candidates through their PACs (Center for Responsive Politics, 2007e). The two major US farm organizations,6 the American Farm Bureau Federation (AFBF) and the National Farmers Union (NFU), are split along partisan and ideological lines. Whereas the AFBF is closer to Republicans and advocates a laissez-faire approach on agricultural policy, the NFU is closer to Democrats and supports the government’s price support policies for farmers (Coleman, Grant, and Josling, 2004). The AFBF is the largest of all American agricultural interest groups. It was created with the aim of developing a mass membership to promote the increase of agricultural production in the period during and after the First World War. From this point on, export considerations dominated the foreign policy dimensions of agriculture (Browne, 1988). The majority of AFBF members are large-scale farmers. Although the AFBF claims over 3.5 million members (more than the total two million of farms in the country), these

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Repubs

Total (in millions)

$50 $40 $30 $20 $10 $0 1990 1992 1994 1996 1998 2000 2002 2004 2006 Figure 3.2 Campaign contributions from the agribusiness sector to Democrat and Republican representatives 1990–2006 Source: Own table based on data from the Center for Responsive Politics (2007f).

membership numbers are increased by counting each member of a family when a person joins the AFBF (Carter, 1994). Altogether, PACs’ contributions of the agribusiness sector support majoritarian Republican representatives. In 2005–6, the PACs’ contributions from farm bureaus from the federal states with important agricultural sectors (Alabama, Arizona, California, Florida, Illinois, Indiana, Iowa, Missouri, North Carolina, Ohio, Texas, and West Virginia) went over 80 per cent to Republicans, especially in Illinois, Indiana, Arizona, and Iowa (Center for Responsive Politics, 2007g) (see Figure 3.2). The NFU has a total of 300,000 members in 22 states, represents mainly small farmers and has closer ties to the Democratic Party and to the labour unions. From 1996 to 2006 over 90 per cent of total contributions from the PAC of the NFU to federal candidates were given to Democrats (Center for Responsive Politics, 2007e). Republican congressional representatives are expected to respond more readily to pressure from business groups and from the AFBF, while Democrats tend to respond more readily to labour unions and NFU concerns. Thus, the relative influence of the AFBF and of the NFU is expected to vary, depending on which party controls Congress and the presidency. Since the AFBF and the NFU integrate farmers over territory, but not across commodities (Coleman, Grant, and Josling, 2004), this makes it difficult for them to define their positions with respect to commodity-specific legislation. As a result, in recent decades, interest representation has become fragmented along the lines of commodity producer groups. Campaign contributions of commodity producer groups There is also a vast array of commodity producer groups in the US. The most important of these groups include corn, soybeans, wheat, cattle, dairy, sugar, cotton, tobacco, rice, and peanuts.7 Hitherto, with the sole exception of

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cattle and soybeans, the producers of all these commodities have been the primary beneficiaries of farm bill programmes (Browne, 1988). In contrast to leading farm organizations that represent only producer interests, commodity producer groups represent a mixture of producer and agribusiness interests. While the National Association of Wheat Growers (NAWG), the American Soybean Association (ASA), the National Cattlemen’s Association (NCA), and the National Corn Growers’ Association (NCGA) merely represent producer interests, the National Cotton Council (NCC) and the National Milk Producers’ Federation (NMPF) represent producer and agribusiness interests (Carter, 1994). As in the cases of the AFBF and the NFU, commodity groups are also split according to their basic identification with free-market principles or with their support for government price support programmes. The commodity groups advocating minimal government interference include two major associations: the ASA and the NCA. The ASA is the collective voice of 27,000 soybean producers and represents 25 state soybean associations (American Soybean Association, 2007a, b). It is a conservative export-oriented producer group that actively supports agricultural trade liberalization (Carter, 1994). From 1999 to 2006, ASA campaign contributions to federal candidates went 65 per cent to Republicans and 35 per cent to Democrats (Center for Responsive Politics, 2007d, g, h, i). The NCA is the largest US agricultural commodity group. It represents 250,000 members and 59 state and industry-related organizations in the cattle industry. The NCA is export-oriented and against price supports for the cattle industry (Carter, 1994). From 1998 to 2006, over 80 per cent of total PACs’ campaign contributions from the NCA went to Republican candidates (Center for Responsive Politics, 2007j, k). By contrast, wheat, corn, peanut, pork meat producers, and sugar commodity groups want to keep and enhance domestic support programmes for their sectors. Wheat is the largest agricultural export product from the US. Two-thirds of wheat grown is exported. Therefore, the elimination of export subsidies is a central issue for wheat growers (Carter, 1994). Wheat producers are represented by the NAWG and the NCGA. Both function as integrated national organizations (Browne, 1988). The NAWG accounts for 85 per cent of the wheat grown in the US and is a powerful agricultural lobby group in American farm policy. The NAWG’s main concerns are to keep the present price support system, wheat export programme (food aid) and disaster relief for the wheat sector (Carter, 1994). From 1998 to 2006, over 60 per cent of the total campaign contributions from the NAWG went to Republican candidates (Center for Responsive Politics, 2007d, g, h, l). The NCGA is the principal representative of corn producers. The majority of its members are located in the Midwest and Great Plains. The NCGA advocates an interventionist agricultural policy, with higher price and income supports and production controls (with lower import quotas) (Carter, 1994). The numbers for this PAC are only available from 2004 onwards, but

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over 80 per cent of its campaign contributions went to Republican federal candidates (Center for Responsive Politics, 2007d). Pork meat producers are represented by the National Pork Producer Council, which has over 100,000 producer members (Carter, 1994). They are mainly concerned with improving the profitability of pork production through direct benefit programmes and in establishing import quotas for pork meat in trade bills to cope with imports from foreign producers (Browne, 1988). From 1998 to 2006, over 60 per cent of the campaign contributions from pork meat producers went to Republican candidates (Center for Responsive Politics, 2008a, e, f, g, h). Peanut producers are represented through the National Peanut Growers’ Group, an alliance of three long-standing regional groups from North Carolina, Virginia, and the Southwest. The peanut growers want to increase the demand for peanut products and maintain domestic support for the peanut sector (Carter, 1994). From 1998 to 2004, over 60 per cent of the total campaign contributions of peanuts growers went to Republican candidates (Center for Responsive Politics, 2007c, f). Sugar producer interests are divided along five distinct national and regional sugar interests: the American Sugarbeet Growers Association, the American Sugarcane League, the Florida Sugar Cane League, the Rio Grande Valley Sugar Growers (Texas), and the Hawaiian Sugar Planters’ Association.8 From 1998 to 2006 the total campaign contributions from the two major national sugar associations, the American Sugarbeet Growers Association and the American Sugarcane League, went over 55 per cent to Democrat candidates and 45 per cent to Republicans (Center for Responsive Politics, 2007c, f). This is one of the few agricultural sectors in which Democrats have higher campaign contributions than Republicans. Finally, the peak organizations of milk (NMPF), cotton (NCC), and rice represent overlapping producer and agribusiness interests. One of the main concerns of the NMPF is to protect dairy farmers from foreign competition (Carter, 1994). From 1998 to 2006, the total amount given to Republicans from PACs in the dairy sector increased from 57 per cent to 66 per cent (Center for Responsive Politics, 2008b, c). In the vegetables and fruits sector over 60 per cent of campaign contributions went to Republican candidates (Center for Responsive Politics, 2008d). Apart from the sugar sector, the majority of commodity producer groups support Republican federal candidates. Therefore, in multilateral trade negotiations, I expect a Republican-dominated Congress or a Republican president to protect the interests of these commodity groups.

US agricultural subsidies and international trade The US is the world’s largest single agricultural exporter with 25 per cent of total exports (United States Department of Agriculture, 2010). The US

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agricultural sector is large and diverse, but about 90 per cent of all farm programme payments are applied to just a small range of crops (oilseeds, grains, and peanuts) and cotton, which in turn produce about 40 per cent of farm cash receipts. In addition, the dairy sector is supported by a complex set of marketing regulations, which allow for price discrimination within the US, a small export subsidy programme and direct payments (Sumner, 2003a). A few other commodities (beef, sugar, and frozen concentrated orange juice) are also subsidized and insulated from world market prices (Roberts and Jotzo, 2001). In contrast, government subsidies for the meat sector, fruits or vegetables are low. If we use the WTO categories, amber box support for these commodities is well below the WTO de minimis level of 5 per cent of total revenue (Sumner, 2003a). The scale of the US market as well as its agricultural exports means that its agricultural policies have a large impact on world market supply and on world market prices. The US system of agricultural support works through the enactment of legislation for farm programme payments, the farm bills, which are periodically renewed and reformulated. To understand current US commodity programmes it is helpful to briefly outline some of the recent history of farm support. The present agricultural support system partly goes back to the first Agricultural Adjustment Act of 1933. During the Great Depression, gross farm income decreased by over 50 per cent. When Franklin D. Roosevelt was elected in 1933, he enacted the first farm bill to assist recovery of the farm sector (Cain and Lovejoy, 2004). This farm bill involved government measures to control supplies and prices by purchasing surplus production of storable agricultural products. The main aim of this government allotment plan based on price support was to guarantee that prices would not fall below a set level. Under this support system, farmers were only eligible for federal payments if they participated in voluntary production reduction programmes, such as acreage set-aside (Sheingate, 2003). Surplus stocks were removed from the market by the government under the ‘commodity loan’ programme and farmers were eligible for a variety of payments that essentially encouraged them to produce well in excess of market demand (Cain and Lovejoy, 2004). The consequence was that government stocks became so large that grain elevators were built in the Corn Belt and the Great Plains. Because support prices were too high to be competitive in export markets, in 1954 Dwight Eisenhower enacted the Agricultural Trade Development Assistance Act, which laid the basis for a permanent expansion of US agricultural products through the international Food for Peace Programme (Flinchbaugh and Knutson, 2004), which allowed foreign governments to pay for food in local currency. The 1970s were characterized by high prices and expanded US production largely through grain sales to the Soviet Union (Wilson, 2005). But in the early 1980s, world market prices dipped and US support prices were

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generally higher than world market prices. This led to growing stockpiles of wheat and resulted in one of the largest and most expensive acreagereduction programmes in US farm history, setting aside 20 per cent of US crop land (Sumner, 2003a). The US government reacted by introducing marketing loans and loan deficiency payments in the Food Security Act of 1985. This aimed primarily at reducing the accumulation of food stocks and increasing US export competitiveness and at moving away from price support towards income support. The ‘marketing loan’ programme replaced price support loans for the cotton and rice sectors. The government no longer purchased stocks of these commodities, but instead paid producers when the market price was below the loan rate (Sumner, 2003a). Loan deficiency payments were a variant of marketing loans that enabled the government to grant direct payments to producers who agreed not to receive loans under the marketing loan system (Roberts and Jotzo, 2001). At the same time, the 1985 farm act also allocated more than $1 billion per year to direct export bonuses for the wheat sector. Finally, a new long-term conservation reserve programme paid farmers to protect land resources against soil erosion by removing cropland from production for a ten-year period. Under this conservation programme about 36 million acres were set aside. In 1990, the ‘marketing loan’ programme was also extended to grains and oilseeds. Therefore, whenever an average local market price was below the local loan rate farmers received payments from the government (Sumner, 2003a). The 1985 farm bill also introduced export subsidies for some crops under the Export Enhancement Programme (EEP), which had substantial market effects. In the first years of the implementation of this programme, the accumulated public stocks were used by the US administration as bonus incentives for exporters to sell to selected markets. After government stocks ran down, commodity bonuses replaced cash export subsidies. From 1986 to 1990, the EEP was used extensively for wheat, with over half of total US wheat exports being subsidized. The EEP had the function of keeping domestic quantities low by exporting half of the production and of raising internal prices, while providing additional price support to US producers. As a result, these quantities of subsidized export crops lowered the world market price for wheat. Under the present multilateral agricultural trade regime, the US is allowed to subsidize 14.5 million tonnes of wheat exports. This constitutes about a seventh of world exports (Roberts and Jotzo, 2001). The next farm bill, the Federal Agriculture Improvement and Reform (FAIR) Act of 1996, continued to decouple direct farm payments from production (Wilson, 2005). In order to reduce soil erosion, this agricultural act introduced a conservation reserve programme that ended set-aside programmes and provided farmland owners with fixed income transfers based only upon past output and independent of current market conditions (Orden, 2003) Farmers

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signed 10–15 year contracts with the government granting them annual payments in return for leaving the land idle, to plant trees or grass (Roberts and Jotzo, 2001). The US government continued to make use of ‘marketing loan’ programmes that provided a price floor for farmers, but at the same time allowed the crop to be sold on the market. From 1998 onwards, when agricultural prices fell, Congress introduced market loss assistance payments, which augmented farm subsidies by 50 per cent and were again doubled in 1999, 2000, and 2001 (Sumner, 2003b). Thus farm subsidies were estimated to be twice as costly as before the adoption of the FAIR Act (Wilson, 2005). Even though subsidies introduced by the FAIR Act are regressive, independent of all factors of production and compatible with current green box rules, they have resulted in a doubling of farm subsidies.

US veto players 1999–2006 In the November 1994 midterm elections, Republicans obtained a majority of seats in both houses of Congress. In the House of Representatives, Republicans elected 230 legislators and the Democrats 204. In the Senate from a total of 100 seats, the Republicans now had 53 seats and the Democrats 47. Shortly after the election, on 29 November the House of Representatives ratified the 1993 Uruguay round GATT agreement by a vote of 288–46. Whereas Republicans supported it by a 121–56 margin, Democrats backed it 167–89. Two days later, the Senate also passed it with an overwhelming majority of 76 to 24 (Shoch, 2001). During the Clinton presidency (1993–2001) from 1995 onwards, Republicans had a majority of seats in both houses of Congress (see Table 3.1). Thus, Congress was an institutional veto player. Although there were several attempts to renew fast track negotiating authority in 1995, 1997, and 1998, they all failed owing to divergences between the Democratic president and the Republican-dominated Congress on the inclusion of labour and environmental standards in the fast track bill. Under the George W. Bush Junior presidency (2001–8), Republicans had a thin majority of seats in the House of Representatives (221 Republicans and 212 Democrats). From 2001 to 2003, the Senate was an institutional veto player. There was a stalemate situation with Democrats and Republicans both having 50 seats after one Republican senator had decided to become independent (see Table 3.1).

Conclusion The fast track negotiating authority of the USTR is a result of many years of rebalancing the competencies of the legislative and executive branches on trade politics. Delegation of power from Congress to the president is submitted to a number of oversight procedures that define ex ante the

Table 3.1

US Congress: seats by party in the House of Representatives and Senate 1993–2007 1993–1995

1995–1997

1997–1999

1999–2001

2001–2003

2003–2005

2005–2007

House of Representatives Dem. Rep. Ind. Total

258 176 1 435

204 230 1 435

207 226 2 435

211 223 1 435

212 221 2 435

204 229 1* 435

202 232 1 435

Senate Dem. Rep. Ind. Total

56 44 0 100

47 53 0 100

45 55 0 100

45 55 0 100

50 50 0 100

48 51 1 100

44 55 1 100

Source: Own table based on information from the Clerk of the House of Representatives (2006). * One seat vacant.

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scope of presidential activity and lay down the conditions under which fast track procedures apply. During the negotiations, the USTR also has to regularly consult and inform congressional committees and the different advisory committees about the state of negotiations. If one house or a committee of Congress considers that the president has failed to consult adequately with congressional committees, Congress can reverse fast track with a simple majority in both houses of Congress. This possibility of ex post veto gives Congress a credible threat over the executive and ensures that congressional demands are taken into account in a final trade agreement. The US negotiating position in trade negotiations is not only defined by the delegation of trade authority, but also by the link between parties and interest groups. In the US political system, the link between parties and interest groups is assessed through the campaign contributions of major interest groups. Trade policy is influenced by business groups, labour unions, and farmer organizations. Democrats and Republican congressional representatives respond to different interest groups. Whereas business groups are the core constituencies of the Republican Party, labour unions contribute overwhelmingly to Democrats. Thus, Democrats are expected to be more sensitive to labour issues and Republicans to demands from the business sector. In the agricultural sector, the leading farmers’ organizations are the AFBF and the NFU. The AFBF represents large-scale farmers, is closer to the Republicans and pleads for a laissez-faire approach to farm policy, while the NFU represents small family farmers, is closer to the Democrats and to labour unions, and supports government intervention in the agricultural sector. With the exception of the sugar sector, commodity producer groups support Republican federal candidates. The influence of the AFBF, of the NFU and of the different commodity producer groups is expected to vary depending on which party controls Congress and the administration.

4 EU Trade Politics

Introduction In multilateral trade negotiations, the EU is represented by the Commission and ‘speaks with one voice’ (Meunier and Nicolaïdis, 1999). This is a unique situation worldwide, and it is almost revolutionary to have a situation where nation states have voluntarily transferred sovereignty to the European level in a key area of external affairs (Meunier and Nicolaïdis, 1999). There is now a vast literature on EU trade politics and on the way that authority has been delegated to the Commission. This literature can be divided into five prominent strands of explanation. First, most studies apply the two-level game approach of Robert Putnam (1988) to EU trade politics (Clark, Duchesne, and Meunier, 2000; Collison, 1999; Meunier, 2000; Woolcock, 2005; Young, 2002). Within this strand of explanation, some scholars depict EU trade politics as a three-level game between the international and the national levels (Larsén, 2007; Paarlberg, 1997; Patterson, 1997). The second prominent strand applies the principal–agent approach to explain how authority has been delegated from member states to the Commission (Conceição-Heldt 2010, 2011; Damro, 2007; Delreux, 2008; Elsig, 2007; Kerremans, 2004b, c; Meunier and Nicolaïdis, 1999). Third, some studies compare the delegation of authority in the EU and in the United States (De Bièvre and Dür, 2005; Nicolaïdis, 2000) as well as the bargaining power of these two major actors in the Uruguay round negotiations (Clark, Duchesne, and Meunier, 2000). Fourth, there are scholars who describe EU trade policy since its inception by embedding it in the institutional framework (Baldwin, 2006; Elsig, 2002; Hayes, 1993; Johnson, 1998; Leal-Arcas, 2003; Nicolaïdis and Meunier, 2002; Smith, 2001; Woolcock, 2005; Woolcock and Hodges, 1998; Young, 1998, 2000). Finally, other scholars focus on the EU as an actor in multilateral trade negotiations (Fouilleux, 2004; Meunier, 2005; Meunier and Nicolaïdis, 2006; Paeman and Bensch, 1995; Schöppenthau, 1999; Young, 2007).

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There are considerable differences between scholars regarding the question of why member states decided to delegate trade authority to the EU level and on how to assess the relationship between the Council and the Commission. Concerning the first point of discord, there are two main diverging views. On the one hand, proponents of the ‘collusive delegation hypothesis’ contend that national governments delegated trade authority to the EU level with the aim of minimizing the influence of societal interests and thus to insulate themselves from protectionist pressures at the domestic level (Meunier, 2005; Nicolaïdis and Meunier, 2002; Woolcock, 2005). However, there has been little empirical research examining this view and the scarce empirical evidence that is available is ambiguous (Dür, 2006). Even though a few authors (Hocking and McGuire, 2002; Young, 2002) found evidence that member states and the Commission act relatively independently from interest group pressures, a large majority of authors (De Bièvre and Dür, 2005; Dür, 2006, 2008; Hoven, 2002; Milner, 1988) suggest that economic interest groups do actively influence trade policy. This wide range of studies, however, tells us little about the influence of interest groups at the domestic level.1 If Meunier (2005) is right that member states have decided to transfer policy-making to the EU level to design trade policies independently from protectionist pressures of interest groups, the French protectionist position on agricultural issues remains puzzling. By the same token, proponents of the principal–agent approach to EU trade policy disagree on whether the relationship between the Commission and the Council can be assessed in terms of cooperation or conflict, and whether the delegation of power enables the agent (the Commission) to act autonomously in relation to the principals (the member states). Kerremans (2004b), the most vocal proponent of the cooperative view, considers that in multilateral trade negotiations it is not in the Commission’s interest to act autonomously in relation to member states. On the contrary, he maintains the view that the Commission will use the EU and the WTO system to involve the member states sufficiently in the negotiation process at the international level, otherwise there is a risk that at the ratification stage member states will defect. The role of the Commission is more like a balancing act, in which the Commission has to find an equilibrium between its dependency on member states at the EU level, especially during the ratification process, and its autonomy during negotiations at the international level. By contrast, some other authors (Woolcock and Hodges, 1998; Young, 2006) consider the relationship between the Commission and the Council as conflict-ridden. They assert that the reluctance of member states to cede broader competences to the EU, and thus to widen the scope of trade power delegation to the Commission during the 1997 Amsterdam Intergovernmental Conference, can be explained by the distrust of the member states towards the Commission’s ability to represent their interests in international negotiations. For example, Woolcock and Hodges (1998)

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hold that several member states were not satisfied with the way the Commission had conducted the Uruguay round negotiations. For example, France rejected the Blair House agreement because it considered that the Commission had gone too far without support from the Council in making concessions to the US on agricultural issues. Meunier and Nicolaïdis (1999) assert that in the meantime member states have regained their lost trade sovereignty to a certain degree. Because in the Amsterdam Treaty member states have decided not to delegate full negotiating authority to the Commission over issues such as services and intellectual property rights, they even observe a rollback in one of the most integrated policy sectors. This view is problematic because a rollback situation would mean that some authority power would have been transferred back to the member states, something that did not occur. Member states did not renationalize trade policy, but they were reluctant to widen the scope of the delegation of power to the Commission on new trade issues.

Institutional structure of the EU political system From the very beginning the EC was assessed in terms of which actors (national governments or supranational institutions) dominate the European integration process, with a bifurcation between neo-functionalism and intergovernmentalism. In the last decade this debate has become less important as scholars have turned to mainstream international relations theories, especially rational choice institutionalism and social constructivism (Pollack, 2005). There is now an extensive literature focusing on how the EU political system works in practice (Bergström, Farrell, and Héritier, 2007; ConceiçãoHeldt, 2006a; Héritier, 2007; Hix, 2005; Kelemen, 2003; Pollack, 2005; Trechsel, 2005). The EU political system has been defined by Lijphart (1999b) as a prototype of a consensus democracy, while Hix (2005, p. 40) describes it as an ‘executive federalism’, in which the national governments play a central role in the initiation, adoption, and implementation of legislation at the federal (EU) level. This definition, however, completely neglects the role played by supranational institutions in the decision-making process. Kelemen (2003) goes one step further and defines the EU as a federal system characterized by the delegation of authority from member states to EU institutions. Even though the principal institutions of the EU do not correspond totally to the classical national classification of legislative, executive, and judiciary, the three main institutions involved in the decision-making process come close to it. The EU political system is characterized by a vertical separation of powers (between member states and EU institutions) and a horizontal separation of powers (between supranational institutions at the EU level). The EU has an asymmetrical bicameral legislature with a powerful upper chamber (the Council of Ministers), composed of representatives from

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the 27 member states, and a lower house (the European Parliament (EP)), composed of 785 directly elected representatives. The decision-making process in the EU involves three institutions: the Council of Ministers, the European Commission, and the EP. The European Commission has the agenda-setting power in all the issues covered by the single market, known as the first pillar of the EC. After the Commission begins the legislative process by presenting a legislative proposal, the Council deliberates on it (Conceição-Heldt, 2006b). Baldwin (2006) considers that trade policy is one of the most ‘federal’ EU policies because it relies more on the ‘Community method’: the Commission proposes, the Council decides, and the Commission executes. This study focuses merely on the interinstitutional interaction between the Council and the Commission. The role of the EP will not be taken into consideration because the EP is only consulted on agricultural and trade issues and does not have veto power at the ratification stage. Hitherto, when negotiating on behalf of member states, the Commission only informs the EP about the state of multilateral trade negotiations. At present, the EP can only influence trade issues by holding hearings and issuing reports. The Council of Ministers is the forum for intergovernmental and interinstitutional bargaining. In practice, the Council consists of a pyramid of meetings from working groups up to the ministerial level. The ministers representing their own governments are normally accompanied by technical personal, from the Committee of Permanent Representatives (COREPER) and from the national ministries. The most important councils by far are the General Affairs and External Relations Council, Budget Council, Agriculture Council, as well as the Economics and Finance Council (Conceição-Heldt, 2004). Trade policy issues are considered to be of substantial political importance and dealt with at the General Affairs and External Relations Council and the Agriculture Council, when agricultural policy issues are being considered. In the Commission, the directorate-general (DG) Trade is in charge of all trade issues. In practice, however, different DGs are involved in multilateral trade negotiations, including agriculture, environment, competition, health and consumer, employment and social affairs, as well as culture and audiovisual policy. At the committee level, there is the trade committee (133 Committee), and the Special Committee on Agriculture (SCA), which is in charge of all agricultural issues. The 133 Committee meets on a weekly basis at the senior and deputy level. This committee is made up of senior permanent officials dealing with trade at the permanent representations of the different member states and of representatives from the DGs trade and agriculture. The SCA is also made up of senior permanent officials from the agriculture ministries of member states plus a Commission representative (Grant, 1997). The SCA reports directly to the Council of Agriculture in the same way as COREPER reports to all other councils. Although COREPER has in theory the right to intervene in agricultural questions, in practice it almost never

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uses this right, leaving the SCA to prepare the items on the agenda of the Agriculture Council (Culley, 1995). All of the Commission’s agricultural proposals are first discussed at the level of specialized working groups, before they pass the draft legislative proposals up to the SCA for approval or further discussion. At a second stage, if the SCA disagrees on the content of a specific proposal, the SCA sends it to the Council. If the SCA agrees on a particular draft of legislation, regardless of its ministerial composition the next Council will only need to confirm it (‘A’ points). Other draft legislation proposals are put to agriculture ministers for overall discussion and decision (‘B’ points). Usually, the SCA does not vote, so that national representatives can come under considerable pressure from the other member states to accept a proposal, for example if they consider a certain point as being too technical to send it to ministers. A representative of the Commission from the DG agriculture is always present and participates actively in these meetings, for example by suggesting a compromise agreement together with the presidency of the Council. If the Commission refuses to change particular elements of a proposal, the issue is sent to the Council in the same way as would an objection raised by a member state. An objection by the Commission has, however, more weight than that of a member state, because if the Commission refuses to change its proposal, the Council can only modify it unanimously and the Council itself cannot initiate a proposal on issues falling under the exclusive competence of the EC. Even though the Commission keeps its right of proposal throughout the decision-making process, in practice changes are accepted rather informally, as long as they do not substantially modify the Commission’s original proposal. The Commission negotiates trade treaties under the overall responsibility of the trade commissioner, which is monitored by the 133 Committee during the negotiations. In the case of agriculture, however, the lead negotiator is the commissioner for agriculture. In addition, the Council of Agriculture ministers has the oversight over the Commission on all agricultural trade issues. Agricultural trade proposals are prepared in the DG agriculture, and then sent to the Inter-Services working group that is in charge of coordinating the various directorates with a stake in the policy. This working group is always presided over by the DG agriculture. As a next step, the Inter-Services working group informs the cabinets of the ‘most interested’ commissioners. It can also decide whether a proposal shall be submitted to the full college of commissioners for their approval or be passed directly to the 133 Committee. At this stage, the DG agriculture dominates the policy process (Moyer and Josling, 2002). After the agriculture ministers have approved the EU negotiating mandate on agricultural issues, this common position is sent to the General Affairs and External Relations Council for approval. Whereas the DG agriculture and the agriculture commissioner when preparing proposals have to try to maintain the confidence of member states

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and of agricultural interest groups, the DG trade has a broader perspective on trade policy and includes the interests of member states and groups from the industrial and services sector (Moyer and Josling, 2002).

Evolution of EU trade politics The main aim of the EC was to provide free movement of goods, people, capital, and services across borders. In order to achieve this, the six founding member states agreed that a common external trade policy was necessary to prevent member states from importing foreign goods at cheaper prices due to lower tariffs and then to re-export the products to another member state with higher tariffs (Johnson, 1998). The creation of a customs union in 1968 implied the establishment of a common external tariff, which would be applied uniformly to imports of goods and services coming from countries outside the EC. Meunier (2005) adds that the delegation of foreign economic policy to the EC aimed to strengthen the bargaining power of the EC in international trade negotiations. The main provisions of EU trade policy go back to the core provisions of the 1957 Treaty of Rome and have been modified only slightly on four occasions: in the 1993 Maastricht Treaty; in the 1999 Amsterdam Treaty; in the 2003 Nice Treaty; and in the 2009 Lisbon Treaty.2 EU trade policy-making is a twofold delegation process. On the one hand, with the adoption of the 1957 Treaty of Rome establishing the EC, the member states formally transferred the authority for negotiating and ratifying international trade agreements to a collective entity: the Council of Ministers. On the other hand, the Council transferred the negotiating authority in trade agreements to the Commission (Meunier, 2005). In the 1993 Maastricht Treaty, member states made several amendments to the text of some articles. These small changes, however, did not modify the substance of EU trade policy. A specific reference to the Commission’s competence to speak on behalf of the EC in GATT negotiations on matters of the Community’s competence was added to the text. This change, however, merely recognized the existing practice of the Commission representing the EC in the different trade rounds since the early 1960s (Johnson, 1998). Following the conclusion of the Uruguay round negotiations, member states were reluctant to accept the Commission proposal that only the EC as a whole should sign the agreements (Meunier and Nicolaïdis, 1999). The Commission decided to ask the European Court of Justice (ECJ) for an advisory opinion to solve the competence dispute. Even though the ECJ confirmed that the EC had the exclusive competence to conclude international trade agreements, it added that member states and the EU shared competence in ‘new trade issues’ (Meunier and Nicolaïdis, 2005). At the same time, the ECJ called on member states to cooperate in the areas of mixed competence because it was concerned that its opinion could lead

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member states to take individual positions in WTO negotiations and thus weaken the EU’s bargaining power. In the end, the Council presidency and the trade commissioner signed for the EC and individual member states signed for all the mixed competences issues (Johnson, 1998). This ECJ opinion confirmed the restrictive interpretation of the scope of the delegation of trade authority and it de facto established mixed competences between the EC and member states. This opinion also became the basis for the amendments introduced in the Amsterdam and Nice treaties. Meunier (2005) contends that the ECJ renounced the establishment of exclusive competence for new trade issues because most member states were cautious about further delegation of competences to the supranational level in the aftermath of the Maastricht ratification debates. The 1995 Amsterdam Treaty amended article 113 (and renumbered it 133) by allowing the widening of the scope of the exclusive trade competence from goods to negotiations on services and intellectual property in the future by unanimity voting in the Council of Ministers (Young, 2000). The expansion of the Community competence, however, would be on a case-by-case basis. This change had the advantage of allowing member states to extend trade competence to new issues independently from a formal treaty revision (Meunier, 2005). The Treaty of Nice (2003) lays out that agreements in services and intellectual property rights can be adopted by qualified majority. In contrast, trade in cultural and audiovisual services and transport issues have to be adopted unanimously. Since the Nice Treaty came into force in 2003, the general rule has been that trade in services is now under exclusive EC competence (Meunier, 2005). The Lisbon Treaty (2009) places all key aspects of external trade policy, such as goods and services, commercial aspects of intellectual property rights, under the exclusive competence of the EU. In addition, all aspects of trade policy will be taken through qualified majority voting, with two exceptions: trade agreements that include culture and audiovisual services as well as social, education and health services. A major change of the Lisbon Treaty is the increased role of the EP. Trade policy now falls under the co-decision procedure giving the EP together with the Council the right to approve all international trade agreements. In addition, alongside the 133 Committee, the EP will have to be regularly informed by the Commission about trade negotiations. However, the EP has no powers to authorize the Commission to enter into trade negotiations. In this way, the negotiating mandate of the Commission will still be drafted by the Council and the Commission without any formal involvement of the EP (Art. 207, Art. 218 Lisbon Treaty).

Delegation of power and control mechanisms Even though the delegation of power stretches back to the beginning of the European integration process, it was only in 1997 that Mark Pollack (1997)

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applied the principal–agent approach to the study of the EU. Using insights from the new economics of organization (Kiewiet and McCubbins, 1991; Moe, 1984), he has persuasively demonstrated that the delegation of authority involves agency losses. Even though agents are expected to act on behalf of the principals in collecting information, preparing draft legislative proposals, and representing them in international negotiations, the delegation of power can entail two agency losses for the principals: agency shirking and agency slippage. Agency shirking refers to a conflict situation between the interests of the principals and those of the agents. In contrast, agency slippage takes place when the structure of delegation in itself stimulates the agent to adopt a different position from the principals (Conceição-Heldt, 2010). In the particular context of trade negotiations, one also needs to specify whether agency costs occur because of hidden information or hidden action. The hidden information argument means that the agent possesses information that is not available to the principals owing to the prohibitively high costs (Conceição-Heldt, 2010; Kiewiet and McCubbins, 1991). During the negotiations at WTO level, it is useful to understand whether the structure of delegation allows the Commission to hide information from member states and how the latter react to this. Hidden action is an even trickier issue because member states cannot directly observe whether the Commission is negotiating in their best interests. One way of reducing this problem is to monitor the Commission closely. Similar to the situation with the US Congress, member states have three different types of oversight mechanisms: ex ante control mechanisms (the negotiating mandate of the Commission); control mechanisms during the ongoing negotiation process; and ex post control mechanisms (at the ratification stage).3 Although principals have these different control mechanisms at their disposal, the Commission also has a veto power at the beginning of the negotiating mandate and at the ratification stage. Ex ante control mechanisms allow the Commission to withdraw any proposal, provided that the changes are incompatible with the original negotiating proposal. At the ratification stage, the Commission can decide not to sign a trade agreement with third parties (Kerremans, 2004b). Thus, the Commission is considered as a veto player together with each member state. Ex ante control mechanisms: the negotiating mandate The first stage of delegation involves the act of transferring power from the member states to the Commission, so that the latter can act on their behalf. Even if the Commission has the exclusive competence on negotiating trade agreements, the Council still needs to issue negotiating guidelines, which lay down the framework within which the Commission negotiates at the international level.

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Since the agenda-setting power lies with the Commission, it elaborates the draft proposal of the negotiating directives. Although in theory, the mandate is approved under qualified majority voting, in practice, the Council approves the Commission’s negotiating mandate through consensus (Meunier and Nicolaïdis, 1999). The negotiating guidelines reflect the maximum concessions that member states are prepared to accept vis-à-vis each other at the beginning of the international negotiations (Kerremans, 2004a). On agriculture, the Council usually adopts clear and strict directives, but the Commission can also negotiate without having a formal mandate from member states (Kerremans, 2004b). Scholars diverge on the effects of the negotiating mandate upon trade negotiations. Kerremans (2004b) points out that the negotiating mandate simultaneously ties the hands of the Commission and of the member states, which can be counterproductive to the adaptive capacity of the EU in multilateral trade negotiations. Nicolaïdis (2000), in contrast, argues that the Commission has a rather broad and flexible negotiating mandate, without specifying whether there is any variation from issue to issue. After the approval of the negotiating mandate, Commission representatives under the authority of the trade commissioner conduct the international trade negotiations, within the limits stipulated by the negotiating guidelines of the Council. Control mechanisms at locum: the 133 Committee The Commission has the exclusive right to conduct trade negotiations on behalf of the member states, but it has to report regularly to the 133 Committee. This committee fulfils a police-patrol oversight role by closely examining the negotiating tactics of the Commission, with the aim of detecting and remedying any abuse of power and by its surveillance to discourage such violations.4 The Commission and member states have diametrically opposed interests. Whereas the Commission wants to negotiate without too much interference from the member states, the latter wish to maintain as much control as possible over the Commission. One way for member states to control their agent at locum is that in theory they can accompany the Commission to multilateral trade negotiations. In formal meetings, the Commission may be accompanied by the presidency or by representatives of member states, but in informal meetings the Commission participates alone and afterwards informs member states about the state of the discussions (Elsig, 2002). This is especially relevant because many important deals take place at the level of informal meetings. In practice, it is rather difficult for member states to gain access to the meetings because the number of seats per WTO member state is restricted to three and seven depending on the size of the meeting room. In meetings with 35 members (known as Room D or Room E meetings), there is a

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maximum of four places for the EU. These seats are reserved for officials of the European Commission, usually the directors-general of trade and agriculture accompanied by officials from their DGs. In addition, with a high number of meetings – sometimes 50 committees – taking place simultaneously, it is almost impossible for member states to follow in detail what is going on at the different committees. In agriculture, given the complexity of the issues, each EU member state has a trade representative in their permanent delegation to the WTO. These representatives have a more technical knowledge of what takes place at the WTO level than the national representatives of the member states in the 133 Committee. That is why the Commission prefers to negotiate with the latter.5 The consultation process between the Commission and the Council does not always run smoothly. Whereas the Commission prefers a loose form of consultation, member states favour constant information exchange. This can lead to conflicts between both institutions. One way of overcoming these problems is to use the 133 Committee and the SCA as an information platform for the Commission to check the maximum concessions ministers in the Council are prepared to accept (Kerremans, 2004a). Scholars disagree on the impact these power-sharing mechanisms between the Council and the Commission have upon the EU negotiating position at the international level. Paeman and Bensch (1995) consider it to have been a major handicap during the Uruguay round negotiations, leading to the adoption of lowest common denominator positions. By contrast, Vahl (1997) emphasizes that the Commission did not restrict itself to being an agent of member states by simply carrying out Council instructions. On the contrary, the Commission took its own initiatives and negotiated agreements that went beyond the stance of the lowest common denominator. Finally, Baldwin (2006) also considers that the present institutional framework allows for full transparency and consultation over the course of negotiations with the Commission in the driving seat, but that it is forced to take into account the demands made by member states. Ex post control: voluntary and involuntary defection After an agreement has been signed at the international level, it still has to be ratified at the European level. In order to explain why a ratification process might fail, Putnam (1988) makes an important distinction between voluntary and involuntary defection. Voluntary defection takes place when rational players break their words by not ratifying an agreement in the absence of enforceable agreements. Whereas voluntary defection occurs mostly in one-shot games, in the classical prisoners’ dilemma situation, involuntary defection defines a situation in which an agent is unable to guarantee ratification. In the EU, mixed competence issues fall under the unanimity voting procedure, that is to say, each one of the 27 member states can turn into a

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single veto player. Exclusive competence issues are decided upon with qualified majority voting, so that if a member state wishes to block a decision it will have to build a coalition with other member states to reach a blocking minority. At present, to reach a qualified majority a minimum of 232 votes out of a total of 321 (72.3 per cent) is required, and any member state can require that the votes represent at least 62 per cent of the EU’s total population.6 Since trade agreements are voted on as a package, every single member state is able to block an agreement. On trade policy issues, there are only institutional veto players (Council of Ministers and the Commission). These are in a broad sense collective veto players.

Actors’ positions on agricultural trade liberalization Member states EU member states have different priorities and positions on the different issues at stake in the WTO negotiations. On agricultural trade liberalization, EU member states have defensive and offensive positions. Some states are defending the status quo while others want to change the current system of agricultural subsidies. The group of countries that want to defend the current system includes Austria, Belgium, Cyprus, France, Germany, Greece, Hungary, Ireland, Italy, Lithuania, Poland, Portugal, and Spain. These countries oppose further reforms of the CAP, want to maintain the protection of the internal market in the agricultural sector, and keep export subsidies and domestic support payments. France is a central player when it comes to agricultural issues since it is one of the largest producers and exporters of agricultural commodities, with 20 per cent of total European agricultural production (Ministère de l’Agriculture et de la Pêche, 2007).7 In addition, France is the biggest beneficiary of CAP subsidies with €7.6 million per year, which comprises one quarter of the total direct farm aid from a total over €33 million, followed by Germany, Spain, the United Kingdom (UK),8 Italy, Greece, and Ireland. Almost all the new member states lie at the other end of the spectrum (see Figure 4.1). To date, these countries have not been large beneficiaries of the CAP because they are only being integrated gradually into the CAP system of direct payments in a ten-year phase-in system.9 Ireland will also be a major loser of a change to the status quo in agricultural policy. Irish farm exports to third countries are only possible with the aid of export subsidies, which makes Irish agriculture vulnerable to any changes in export subsidies (Institute for International Integration Studies, 2008). From 1999 to 2006, Germany has had a shifting position on agricultural trade liberalization. During the Social-Democratic/Green Coalition

84 Negotiating Trade Liberalization at the WTO 8000 7000 6000 5000 4000 3000 2000 1000 0 Fr

Figure 4.1

D Esp UK It Gre Ire Dk Pol Swe Aus NL Port Fin Bel Hun Cz Lith Svk Lat Lux Sln Est Cyp Mal

CAP direct payments 2006 in € million

Source: Own figure based on data from Agra Facts, 18 September 2007.

government (1998–2005), the German Green Party agriculture minister, Renate Künast, sometimes supported the liberal British position and at other times aligned with France’s position on trade liberalization. When the Christian- and Social-Democratic coalition government came to power in 2005, the agriculture portfolio came under the competence of the Bavarian Christian Democratic Party (CSU). This party adopted a more protectionist position on agricultural issues and lent support to the opponents of agricultural trade liberalization. However, the main priority for Germany remains trade liberalization for industrial products and for the services sector. The group of member states with a more offensive position on agricultural trade liberalization includes the Czech Republic, Denmark, Estonia, Finland, Latvia, Luxembourg, Malta, the Netherlands, Slovakia, Slovenia, Sweden, and the UK. This group of countries was formed mainly under the leadership of the UK. They consider that the use of CAP support should be strictly limited to rural development and their priority is trade liberalization in the services sector. For example, the UK has an industrialized and efficient agricultural sector that makes a relatively minor contribution to the economy as a whole and a long tradition of importing agricultural commodities (Marsh, 1999). The same is true for Finland and Sweden, which have very small agricultural sectors. They are merely concerned with the viability of rural areas and the protection of the environment (Ministry of Foreign Affairs of Finland, 2008; Swedish Ministry of Agriculture, 2008). The Netherlands and Denmark, however, have an export-oriented agricultural sector, which accounts for over 20 per cent of their total products exports (Hennis, 2005). Even though the Netherlands is a net exporter, many raw materials are imported, for example, soybeans and tapioca for fodder, cacao and

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coffee. This group of countries would thus clearly benefit from further agricultural trade liberalization. European Commission The agency side of the principal–agent relationship has hitherto received little attention in the literature. There is the classical statement made by Williamson (1985) that agents are ‘self-interest seeking with guile’. Bergman, Müller and Strøm, (2000) also note that delegation is problematic because an agent’s preferences might be different from those of the principals and because in most cases principals are not able to observe the agent when it is acting on their behalf. More recently, Delreux and Kerremans (2008) argue that agents are not merely puppets in the hands of principals. In this view agents and principals control each other interchangeably. Hitherto, however, scholars have paid little attention to an agent’s preferences or to how and under what conditions they are able to obstruct the control of the principals. Agents accomplish tasks in a manner that satisfies a high number of principals, be it because agents aim to increase their power or in order to stand up for their reputations. The preferences of an agent are a central issue for assessing the principal–agent relationship. I assume that the Commission acts not only as the agent of member states, but is also an actor with its own preferences. The Commission sees itself as the representative of the EC and as the only actor having the legitimacy to speak as an ‘advocate of the EC interests’. Although it is difficult to assess what ‘EC interests’ are, for the Commission one might assume this involves a further deepening of the European integration process. This goes hand in hand with the expansion of the scope of the EC’s competence to new policy fields and of increasing the influence of the Commission within it. In practice, the Commission must formulate mutually acceptable proposals with elements for which each member state can claim some credit. Otherwise, if some member states have the impression that a Commission’s proposal favours only some member states and will place them at a disadvantage, they are unlikely to accept it (Conceição-Heldt, 2004). The Commission’s position on trade liberalization is determined by several factors. These include the desire to increase its power in order to maximize the realization of its interests. In addition, there is competition between the various bureaucrats of the DGs involved in negotiations. There is also a desire to defend the interests of member states that appointed the commissioners in charge of the trade and agriculture portfolios (Meunier, 2007). Above all, given that the Commission represents member states in bilateral and international trade negotiations, the main interest of the Commission is to successfully conclude a trade deal. The Commission generally takes a pro-liberalization stance on trade issues. Some individual

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trade commissioners have supported the instigation of a new round of trade liberalization negotiations more strongly than others. Farmer and business groups The EU multi-level system increases the number of potential access points for interest groups at the Commission, the Council of Ministers, and the EP level. Interest groups can also lobby their governments directly via national or European associations (Dür, 2008). Interest representation at the European level is effectuated by leading European organizations, whose role is to represent their members to the EU institutions and to inform their members about the developments that are of interest to them at the EU level. The three leading agricultural confederations at the European level are the Committee of Professional Agricultural Organizations (COPA), the General Confederation of Agricultural Cooperatives (COGECA), and the European Farmers’ Coordination (Coordination Paysanne Européenne (CPE)). Whereas the COPA/COGECA represents large producers of agricultural commodities and intensive livestock farmers, the CPE represents small and family farmers. The COPA was created in 1958 as the first European-level representative organization. One year later, the agricultural cooperatives of the EC created their main organization, the COGECA. Both organizations work closely together, they share an office and general positions on trade issues as well as on the CAP. The COPA is made up of 60 organizations from the 27 EU member states (Committee of Professional Agricultural Organisations, 2008) and is one of the largest interest groups at the European level (Davis, 2003). The lobbying activities of the COPA/COGECA are directed towards all the relevant EU institutions. COPA’s presidium regularly meets the European commissioner for agriculture. There is close cooperation between the DG agriculture and the COPA. The COPA participates in the Commission’s advisory groups and transmits written positions of the COPA on specific stances to the Commission (Committee of Professional Agricultural Organisations, 2008). At the same time, national farm organizations lobby their national ministers to request that they speak in favour of COPA positions in the Council (Davis, 2003). Finally, the COPA also has regular contact with the EP, particularly with members of the Committee on Agriculture and Rural Development as well as with different parliamentary factions (Committee of Professional Agricultural Organisations, 2008). Even though the COPA/COGECA has often been described as having a monopoly over European farmer representation (Davis, 2003), its influence has declined in recent decades, especially because it has adopted a very conservative approach with respect to a freer trade regime. As a result, it has lost the support of those farmers who would benefit from trade liberalization and those favouring sustainable farming methods (Hennis, 2005).

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The CPE is the main opponent of the COPA/COGECA. It was created in 1986 by the French Confédération Paysanne, which also represents small family farmers and stands for sustainable agriculture (Confédération Paysanne, 2008). Since 1989 the CPE has been represented at the European level. During the mid-1990s, the CPE established a European network for sustainable agriculture together with consumers’ groups and environmental organizations (Hennis, 2005). Business interests are represented at the European level by the Union of Industrial and Employers’ Confederation of Europe. This business group has currently 39 members from 33 countries and is the spokesperson for business in Europe to the European institutions. On 23 January 2007, it changed its name to Business Europe (Business Europe, 2008c). Together with the COPA it is one of the largest interest groups at the European level (Davis, 2003). Although trade liberalization is one of the main priorities for Business Europe, it pays little attention to agricultural issues. In addition, Business Europe does not have a committee focusing on agricultural policy nor does it follow or participate in the CAP reform debates (Davis, 2003). For example, the International Relations Committee of Business Europe has several subcommittees dealing with the WTO, including ones on Trade and Investment, Market Access, Trade Policy Instruments, and Dispute Settlement Issues (Business Europe, 2008b), but agricultural issues are simply not dealt with. According to Davis (2003) the European business sector neglects agricultural issues because for them it is only one issue among many others that should not be allowed to hijack negotiations. Business Europe’s interest in agriculture arises from the concern that agricultural protection will lead to agricultural trade disputes and sanctions. The central question is whether these different interests groups are able to influence the negotiating position adopted by the EU in multilateral trade negotiations.

Domestic-level institutions in France Structure of the executive In the French political system, the president is in charge of foreign policy. However, when dealing with EU politics sometimes it is difficult to distinguish between domestic and external issues. Although the president is in charge of trade issues, agricultural issues fall under the competence of the agriculture minister, who under cohabitation arrangements always comes from a different party from that of the president. At the EU level, technical discussions, for example on CAP reform, take place at the level of the Council of Agriculture, in which France is represented through the agriculture minister, but the French president has the last word at the European Council level.

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A few studies deal with the impact of a divided executive on the French government at the European level. Paugam (2005) claims that there is no right/left partisan divide on trade, but at the same time contends that right-wing parties are more flexible on public services and left-wing parties on agriculture. Roederer-Rynning (2007) holds the opposite view, arguing that in France there is a left–right constellation on agricultural reform. She shows that the French agriculture minister from the Socialist Party from 1997 to 2002 supported the CAP reform, while President Jacques Chirac from the moderate right party Union for a Popular Movement (Union pour un Mouvement Populaire (UMP)),10 opposed it. Finally, Keeler (1996) maintains that farm interest groups have a privileged position at the national level because during the 1980s the major French agricultural confederation constituted the backbone of Chirac’s rural electoral support. Link between parties and farmer groups Agricultural interest groups are the main channel through which farmers can express their policy preferences. France has four main farmers’ organizations: the National Federation of Farmers’ Unions (Fédération Nationale des Syndicats des Exploitants Agricoles (FNSEA)), the Farmers’ Confederation (Confédération Paysanne (CP)), the Rural Coordination (Coordination Rurale), and the National Confederation of Family Farmers’ Unions (Mouvement de Défense des Exploitants Familiaux (MODEF)). The interest organization of French farmers is still characterized by ideological and partisan cleavages. On the right, the FNSEA is informally linked to the moderate right-wing party RPR/UMP and the liberal centre-right Union for French Democracy (UDF) (Hennis, 2005). The extreme right-wing Coordination Rurale is oriented towards Jean-Marie Le Pen’s National Front (FN) and is particularly strong in Brittany (Cordellier, 2006a; Richard, 1999). On the left, there is the socialist and ecology-minded CP (Cordellier, 2006b), and the MODEF, which is close to the Communist Party. Both organizations focus on small family farms. In recent years, the MODEF has practically disappeared because it has about the same profile as the CP (Cordellier, 2006c). The majority of French farmers vote for centre-right and even extremeright parties. Lachaux (1990) locates most livestock farmers towards the conservative end of the political spectrum, also Criqui (1992) describes the conservatism of farmers in Lorraine, a region specializing in the production of dairy products. Mayer (1995) has shown that during the 1990s two-thirds of farmers voted for the centre-right RPR/UMP or UDF or even the extremeright FN. In the first round of the 2002 presidential elections, 33 per cent of the farmers voted for Chirac, 21 per cent for Le Pen and only 13 per cent for the Socialist candidate Lionel Jospin (Mossuz-Lavau, 2003). The conservative FNSEA is still the largest organization with the broadest representation of about 320,000 farmers distributed (out of the total

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number of 763,953 professional farmers) through 22 regional federations and 94 departmental unions (Cordellier, 2006d). The unions are organized according to commodities. The majority of FNSEA members are large wheat producers and intensive livestock farmers. At the European level, the FNSEA is a member of the COPA. The FNSEA supports gradual agricultural liberalization, on the condition of including non-trade concerns (food security, food safety, the environment, rural communities, and animal welfare) in WTO negotiations (Fédération Nationale des Syndicats d’Exploitants Agricoles, 1999). At present, the Confédération Paysanne and the Coordination Rurale are the main rivals to the FNSEA, but they are much smaller than the latter. The CP assembles only about 15,000 farmers, and there is no official data on the exact number of farmers affiliated to the Coordination Rurale. The CP defends a sustainable agricultural model and opposes market-driven, exportoriented, and intensive industrial agriculture, as well as genetically modified organisms (GMOs) (Coleman, Grant, and Josling, 2004). At the European level, the Confédération Paysanne is a member of the CPE. Finally, the Coordination Rurale was created in 1991 under the aegis of right-wing cereal producers from the southwest of France as a reaction to the Uruguay round negotiations. Its main aim is to defend the family farm and to increase agricultural prices. In 1994, the Coordination Rurale united with the right-wing French Agriculture Federation (Fédération Française d’Agriculture), which has always opposed the modernization programmes of the FNSEA, by creating the Coordination Rurale–Union Nationale (Cordellier, 2006a). Since the establishment of the Fifth Republic, state–society patterns of interest intermediation in the agricultural sector can be divided into three phases: a corporatist phase (1958–81); a temporary pluralist phase (1981–96); and institutionalized pluralism (1996–present). The first corporatist phase corresponds to a monopolistic position of the FNSEA (1958–81). When Jacques Chirac became agriculture minister (1972–4), he institutionalized the FNSEA as the government’s privileged partner in the agricultural sector (Delorme, 1991). Using joint policy management (co-gestion), representatives of the state together with representatives from the FNSEA defined the goals and instruments of agricultural policy (Coulomb, 1991). In the temporary pluralist phase, in 1981, the Socialist Party broke the monopoly position of the FNSEA by giving three other unions the status of representative of the sector. These were the left-wing MODEF, the National Confederation of Working Farmers (Confédération nationale des travailleurs paysans), close to the Socialist party, and the extremely conservative French Agriculture Confederation (Coulomb et al., 1991). With the support of the Socialist Party, the Confédération Paysanne emerged in 1987 through the alliance of two left-wing unions: the National Confederation of Working

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Farmers and the National Federation of Working Farmers (Fédération nationale des syndicates paysans). This new farmer organization saw itself as an alternative to the FNSEA (Cleary, 1989). The stand of one of its leaders, José Bové, generated a great deal of media attention as a result of actions against a McDonald’s restaurant in Millau, and popularized it very quickly. The institutionalization of pluralism in 1997 by the Socialist government ended definitively the representation monopoly of FNSEA (Coleman and Chiasson, 2002). Today, different farm groups compete with each other for access to the agricultural policy-making process (Grossman and Saurugger, 2004). Even though the French agricultural sector only employs 3.5 per cent of the total active population (Ministère de l’Agriculture et de la Pêche, 2007), farmers and rural constituencies are still an important electoral group. One voter in ten comes from a farm household, and one in five voters is attached to a rural or agricultural area (Fouilleux, 2003). Moreover, the agricultural electorate is not only constituted by farmers, but it also includes those who process agricultural products and those who provide goods and services (such as machinery, agrochemicals and seeds) to farmers whose prosperity is dependent on the economic success of the farming community (Grant, 1997). Messerlin (1996) notes that one of the golden rules in French politics is to maintain, at any cost, a large rural electorate because, in contrast to the large and unpredictable swings among urban voters, farmers are a stable electorate. Keeler (1996) observes that a greater degree of the electoral power of farmers can only be explained by taking account of the higher electoral turnout of farmers. For example, in the 2004 regional elections, farmers were the professional group with the lowest rate of abstention, and in the region of the Paris Basin (e.g., Picardie), a region with large-scale commercial monocultures of cereals and oilseeds, the farmer electoral turnout was the highest, with 59 per cent of the total votes (Institut National de la Statistique et des Etudes Economiques Picardie, 2005). The link between French political parties and farm interest groups as well as the high electoral turnout of farmers in elections explain why this particular professional group has significant political weight in French politics and is crucial to understanding the French negotiating position at the EU level.

The Common Agricultural Policy and international trade The general objectives of the Common Agricultural Policy (CAP) were defined in the 1957 Treaty of Rome and have changed little since then. The CAP aims at increasing agricultural productivity, ensuring a fair standard of living for farmers, stabilizing markets, providing sufficient supplies of food, and ensuring that these reach consumers at reasonable prices (Art. 39 of the

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Treaty on the European Union). At the Conference of Stresa in July 1958, the then six EC member states established the three main CAP principles: the unity principle, the Community preference, and the principle of financial solidarity. The unity principle of the CAP meant that the agricultural markets of all member states were to merge into one single market with a common price level and unrestricted trade between member states. The Community preference principle refers to the CAP regime of import tariffs and export refunds designed to give preference to EU products over imported ones. This principle protects de facto domestic producers from foreign competition through a system of variable import levies (customs duties). Moreover, EC member states set a target and intervention price, as well as a common market organization for each agricultural commodity. Common market organizations fix a minimum price by which national agencies would buy products and take them off the market with the aim of reducing supplies and encouraging higher market prices (intervention prices). Each year, the Council of Agriculture sets a target price at a level expected to give a satisfactory level of return to farmers. The common market organizations were to intervene by purchasing as much of the produced crop as necessary to keep the price above the set level (the ‘target level’). In order to protect European farmers from the competition of international production, a system of high and fluctuating prices was introduced on all agricultural products from non-members. Products could generally only enter the European market if their price was equal to or above the price on the EC market. This price is commonly referred to as the ‘entry price’. When a given target price level on the international market was lower than the EC’s, the EC introduced a system of export refunds enabling European farmers to export agricultural products, which had not been sold on the EC’s market. These export subsidies reimbursed producers the difference between world prices and the EC price level. Export subsidies and import tariffs are still very high, in general more than 50 per cent higher than the world price (Magnusson, 2006). For example, rice has the highest tariff of 361 per cent, followed by sugar (297 per cent), wheat (156 per cent), and beef and veal (125 per cent) (Nicolas, 2000). These three CAP principles are closely interrelated. First, the establishment of a European market for agricultural products guaranteed the free flow of products within the common market. The Community preference principle provided a means of protecting the single market from external products produced at lower prices. Finally, through the principle of financial solidarity, the support mechanisms were centralized at the supranational level. In fact, these principles and instruments established for the CAP created a protectionist system contrary to the principles of non-discriminatory trade. These instruments have been widely criticized because this system of internal support prices meant that when the EC production exceeded

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internal demand, the surplus was dumped on the world market at a lower price than those of non-subsidized exporters. The CAP protects farmers from the now 27 EU member states and agricultural processors from international competition through import tariffs, direct payments, and export subsidies. In view of the large amount of subsidies paid every year to European farmers, the CAP has often been described as one of the main obstacles to agricultural trade liberalization. The EU system of export refunds and domestic support payments directly coupled to production are particularly controversial in international trade negotiations.

Conclusion EU member states delegated to the Commission the power to negotiate trade agreements. This delegation of power, however, did not go hand in hand with a total abdication of power from member states. The Commission negotiates on behalf of member states, but the latter closely monitor what the Commission is doing at the international level through three different oversight mechanisms: ex ante control mechanisms, when member states set up the negotiating mandate of the Commission; control mechanisms during the ongoing negotiations through the 133 Committee; and ex post control mechanisms at the ratification stage, in which member states can veto the agreement negotiated by the Commission. Decision-making in trade policy involves several specialized committees at the Council, including the 133 Committee and the SCA. On the Commission’s side, different DGs deal with trade issues that may range from trade to agriculture. Trade agreements are voted on as a package, and in practice in most cases decisions are taken through consensus. In this way, every single member state can block an agreement. Concerning agricultural trade liberalization, EU member states have defensive and offensive positions. The group of countries with a defensive position that wants to defend the current system includes Austria, Belgium, Cyprus, France, Germany, Greece, Hungary, Ireland, Italy, Lithuania, Poland, Portugal, and Spain. The group of member states with an offensive position pleads for a change of the current agricultural system and includes the Czech Republic, Denmark, Estonia, Finland, Latvia, Luxembourg, Malta, the Netherlands, Slovakia, Slovenia, Sweden, and the UK. The Commission usually holds a more liberal position on free trade than the majority of member states. The degree of interest alignment between member states and the Commission is important in helping to explain whether and how conflict might arise between them. If the degree of interest alignment is low, the agent risks conflict with the more defensive countries, but by the same token if the degree of interest alignment among

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member states is low, the Commission is expected to have more autonomy at the international level. But the EU negotiating position in multilateral trade negotiations is not only a function of the degree of interest alignment between the member states and the Commission, but also of the interest groups concerned. Interest representation at the European level is made by leading European organizations. Whereas industrial and employers’ interests are represented by Business Europe, agricultural interest groups are represented by the COPA, COGECA, and the CPE. The COPA and COGECA represent large producers of agricultural commodities and intensive livestock farmers. By contrast, the CPE represents small farmers and stands for sustainable agriculture with a special focus on food quality and safety. Since France would be the main loser from agricultural trade liberalization, this study takes a closer look at the French domestic institutions, namely cohabitation and the link between the party in government and French agricultural interest groups. Since the FNSEA is close to the centreright parties and the CP to the Socialist Party, this should make a difference to the French negotiating position at the European level.

5 Brazilian Trade Politics

Introduction In contrast to the United States, there are relatively few studies dealing with the executive–legislative relationship in trade policy in Brazil. Most of the existing studies describe the Brazilian trade policy in the twentieth century (Abreu, 2002; Cervo, 2003; Gabriel, 1999; Marconini, 2005; Silva, 2003; Veiga, 2005) or analyse the executive–legislative interaction from a juridical perspective (Almeida, 1990; Mazzuoli, 2001; Rezek, 2004). The few studies dealing with executive–legislative relationship in trade policy (Lima and Santos, 1998; Neves, 2003; Oliveira, 2007) do not analyse negotiations over a longer time period, or they focus merely on the interest groups involved in building up the Brazilian position (Carvalho, 2003; Jales, 2006; Neves, 2003; Santana, 2001). Other scholars explain the passivity of the legislature and of political parties on trade policy with the complexity of international negotiations and with their low level of salience in electoral campaigns (Oliveira, Onuki and Veiga, 2006). Finally, other studies apply the US model of delegation of trade authority to Brazil. Lima and Santos (1998) even underline that Brazil’s post-war foreign policy is characterized by the abdication of authority from the legislature to the executive. Lima (2002) and Neves (2003) explain the reduced participation of the legislature in shaping foreign policy by the convergence of preferences between the legislature and the executive branches. These studies overlook, however, that trade politics in Brazil are completely different from the existing US power-sharing mechanisms as the Brazilian president has the exclusive authority to negotiate trade agreements. The role of Congress is limited to accepting or rejecting international treaties with an absolute majority. Therefore, in Brazil it makes little sense to speak of abdication of power from the legislature to the executive, since there was never a gradual delegation of power from Congress towards the president. In contrast to the US system, Brazilian presidents have to build a coalition with several parties to have a majority in both chambers of Congress. The 94

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central question is whether the number of veto players and the link between parties and interest groups shape the Brazilian negotiating position in trade negotiations.

Brazilian trade politics National economic development model 1930–45 Until the beginning of the 1930s, the Brazilian national economic development model was based on agricultural trade exports of tropical agricultural products, especially coffee, sugar, cocoa, rubber, cotton, and tobacco. Brazil produced agricultural commodities and imported manufactured goods, especially from the United States (Silva, 2003). Under the Getúlio Vargas presidency (1930–45), the primary export model was gradually replaced by an import-substitution model that diversified industrial production and protected local infant industry sectors against competition from imported goods (Veiga, 2005). In the area of state–society relations, Vargas supported the organization of interest groups in corporatist federations, which had institutionalized access to the government, as well as representational monopoly for their sector. State federations from São Paulo, Rio de Janeiro, and Rio Grande do Sul created the National Industry Confederation (Confederação Nacional da Indústria (CNI)). These corporatist federations represented interest groups in government policy councils, such as the Federal Council of External Trade or the National Council of Industrial and Commercial Policy. This privileged access also included special legislative representation to business associations, who could send a total of 21 deputies to Congress (Weyland, 2004). In October 1945, the Vargas military presidency came to an end when the social movement, the National Democratic Union (União Democrática Nacional), struggled for a ‘redemocratization’ of the country. Trade politics under democratic governments 1946–64 From 1946 to 1964 Brazil was ruled by democratically elected governments. During this period, three major parties were represented in Congress: the National Democratic Union, the Social Democratic Party (Partido Social Democrático (PSD)), a conservative party with key politicians coming from the traditional agrarian sector, and the Brazilian Labour Party (Partido Trabalhista Brasileiro (PTB)), which was founded by Vargas’ supporters. These parties considered trade policy as a way of increasing the international solidarity among nations (Almeida, 1998). Brazil still had an economy based on the export of agricultural commodities, with coffee representing more than 60 per cent of its exports. This made Brazil very dependent on price fluctuations in world markets (Almeida, 2004). In order to stimulate Brazil’s industrial development, the government

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further developed the import-substitution industrialization model by introducing high tariff barriers and directing foreign investment towards the industrial sector (Gabriel, 1999). In the agricultural sector, the government created an agency that regulated the distribution of basic food and controlled agricultural imports and exports. In cases of emergency, it had the power to confiscate and dispose of private commodity stocks (OECD, 2005). The period from 1961 to 1964 was characterized by slow economic growth, rising inflation, and populism. The executive and the legislative branches were dominated by two completely opposed groups. While the executive represented urban, industrial sectors, the legislature was dominated by agrarian interests (Valença, 2000). During this period, labour unions accumulated significant political influence over the government of João Goulart from the centre-right party Brazilian Labour Party. This was perceived by major business organizations as a major threat. As a result, backed by the business sector and landowners, the armed forces overthrew the elected government of Goulart in March 1964 (Valença, 2000).1 At the international level, Brazil participated in the negotiations about the ITO and the GATT in 1947. The central issue for Brazil was to be able to use quantitative import restrictions to handle balance of payments difficulties. During the Kennedy round negotiations, Brazil proposed that developing countries should be able to withdraw their GATT obligations towards developed countries, if the latter introduced measures affecting their exports (Abreu, 1998). Moreover, developing countries established the Group of 77 to voice their interests in trade negotiations. At the same time, they sidestepped the GATT negotiations in 1964 by creating the United Nations Conference on Trade and Development (UNCTAD) to promote the integration of developing countries into the world economy. This led to the establishment of the generalized system of preferences in 1968, in which developed countries committed themselves to providing better market access to exports from developing countries (UNCTAD, 2008). Protectionist industrialization model 1964–85 From 1964 until 1985, power was completely in the hands of the military. The president Castelo Branco (1964–7) abolished the multiparty system and replaced it with a two-party system: the National Renewal Alliance (Aliança Renovadora Nacional (ARENA)) and the Brazilian Democratic Movement (Movimento Democrático Brasileiro). Formally single parties were not forbidden, but in practice the military established minimal requirements that were harder to fulfil. For example, a party was required to have at least 120 deputies and 20 senators. This obliged smaller parties, such as the National Democratic Union to join ARENA (Valença, 2000). In trade policy, the military regime kept the import-substitution model and re-enacted tight non-tariff import controls. In the agricultural sector, this period was characterized by substantial government intervention in commodity

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markets mostly via subsidized rural credit and price support mechanisms, which included government purchases and storage of excess production. There were highly skewed distributions of farm income and land ownership with large, unproductive landholdings. Apart from tropical products, the agricultural sector was not competitive. The central aim of the agricultural policy was to promote food security for an increasingly urban population and simultaneously to compensate the agricultural sector for the anti-export bias of the import-substitution model (Chaddad and Jank, 2006). Under the military regime, the relationship between the military and business groups was tense. The military governments still relied on special councils to coordinate economic policy, but they no longer included corporatist federations in these councils. Instead, the military governments preferred to rely on informal, individualized contacts and networks between the state and the business sector. This dissuaded firms from investing time and resources in leading business organizations. The business sector did, however, create the associations that were formally independent of the corporatist federations. Economic diversification had created new sectors, which were now represented through these new associations and no longer through the traditional structure of the corporatist federations (Weyland, 2004). The business sector’s discontentment with the military regime led them to initiate a campaign outside of corporatist federations against state intervention in the economy. In June 1978, a group of eight business leaders issued a manifesto, the ‘Document of the Eight’, in which they distanced themselves from the military regime.2 At the same time, the military regime faced significant pressure as a result of massive strikes in the industrial outskirts of São Paulo, organized by labour unions under the leadership of Luiz Inácio Lula da Silva from the labour union Confederation of Workers (Confederação Única dos Trabalhadores (CUT)) (Nylen, 2000). Lula da Silva had been the main figure of the ‘New Unionism’, a movement built against the former unions’ leadership and its profound connection with the state bureaucracy (Couto and Baia, 2006). Unions demanded greater representation of workers’ interests in Congress through a party because they considered that unions were highly vulnerable to state repression. Unlike unions, they expected that a party might be able to operate within and outside the state apparatus. The Workers’ Party was officially founded in 1980 and participated in the 1982 elections (Nylen, 2000). Adoption of a more liberal trade policy after 1985 Following the demise of military rule, the first civilian government led by José Sarney (1985–90) did not fundamentally change trade policy or increase the influence of the legislature on foreign policy. The new constitution simply preserved the principle of executive supremacy on foreign and trade policy.

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The debt crisis of the protectionist import-substitution model in the early 1990s led the president, Fernando Collor de Mello (1990–2), to a paradigmatic change in the general parameters of Brazilian foreign economic policy. He implemented a programme of unilateral reduction of import duties, eliminated NTBs, initiated trade liberalization within Latin America, and abolished state trading monopolies on wheat, coffee, and sugar. In 1987, the average tariff rate had been reduced from over 50 to 32 per cent. As a result of all of these measures, the government expected to increase domestic industry competitiveness (Abreu, 1998). These economic reforms eliminated export taxes and price controls in the agricultural sector, deregulated and liberalized commodity markets, and reduced trade barriers unilaterally. The adoption of these liberal and marketoriented policies and agricultural diversification enabled the agribusiness sector to grow rapidly. Brazil shifted its agricultural production from tropical products towards soybeans, meat, corn, and cotton. Today, the average applied tariff on agricultural commodities is 12 per cent. As a result of these changes, the Brazilian government currently provides low levels of support to its farmers. From 2002 to 2004 farm support accounted for 3 per cent of the gross value of farm receipts. This rate is far below the OECD average rate of 30 per cent and is on a par with that of New Zealand (2 per cent) and Australia (4 per cent) (OECD, 2005).3 From 1995 to 2002, the new president, Fernando Henrique Cardoso, changed import financing rules and temporarily introduced tariffs and NTBs on selected items to slow down the rate of imports for sectors affected by import competition (Kingstone, 2001). In the agricultural policy sector, Cardoso gave priority to land reform and family farming with the objective of alleviating rural poverty. Government expenditures were shifted to a new agricultural programme, known as the ‘agrarian organization’ through which about 500,000 new family farms were settled in expropriated land. In addition, the government adopted a new set of policies, which targeted family agriculture, such as subsidized credit lines. Finally, Cardoso also created a new ministry of agriculture in 2000, the Ministry of Agrarian Development, to supervise the family farms and land reform programmes. Since 2003, under the Lula presidency expenditures on these agrarian organization programmes were further increased (Chaddad and Jank, 2006).

Decision-making process in trade policy The Brazilian executive has the exclusive competence to negotiate international agreements, which must subsequently be submitted to Congress for approval. Even though trade negotiations are carried out by the Ministry of Foreign Affairs, the Ministries of Agriculture, Industry, and Foreign Trade are also involved.

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99

Brazil has a symmetrical bicameral national Congress: a 513-member directly elected Chamber of Deputies and an 81-seat Senate with representatives of 26 states, plus the federal district of Brasília. A bill laid before one of the houses must be revised and approved by the other. Following the approval by the Chamber of Deputies, the text is sent to the Senate (Rezek, 2004). In neither houses of Congress are deputies or senators allowed to present amendments to the text of an international treaty (Mazzuoli, 2001). The quorum required for the adoption of a treaty is an absolute majority of the total members of the Chamber of Deputies and Senate present at the session (50 per cent plus one of the membership of the assembly).4 Finally, the president must approve the treaty by issuing a legislative decree (Soares, 1994). Although foreign policy is under the prerogative of the executive, in order for an international agreement to be signed, the president requires the majority of legislators. This is especially important in the Brazilian political system of ‘minority presidentialism’ (Mainwaring, 1997). Since presidents’ parties only control a minority of seats in Congress, presidents need to build a multiparty coalition government to have a parliamentary majority.

High party fragmentation Brazil has a highly fragmented party system. In the present legislature (2007–10) no fewer than 21 political parties are represented in the Chamber of Deputies, up from 19 in the last legislature. I will distinguish between twelve parties that together have made up more than 90 per cent of the Chamber of Deputies from 1995 to 2010.5 There are altogether four axes in the Brazilian party system constituted by the Workers’ Party (Partido dos Trabalhadores (PT)), the Party of the Brazilian Social Democratic Movement (Partido do Movimento Democrático Brasileiro (PMDB)), the Party of the Brazilian Social Democracy (Partido da Social Democracia Brasileira (PSDB)), and the Liberal Front Party (Partido da Frente Liberal (PFL)). The PT dominates on the left of the party system as a socialdemocratic party, the PSDB and the PMDB are the two centre parties. Finally, on the right, the biggest party, the PFL is a conservative party dominated by single personalities. On the left-spectrum, there are six big parties: the PT, the Democratic Labour Party (Partido Democrático Trabalhista (PDT)), the Popular Socialist Party (Partido Popular Socialista (PPS)), the Brazilian Communist Party (Partido Comunista do Brasil (PCdoB)), the Brazilian Socialist Party (Partido Socialista Brasileiro (PSB)), and the Green Party (Partido Verde (PV)). There are four centre-right parties: the Liberal Front Party (Partido da Frente Liberal (PFL)), the Brazilian Labour Party (Partido Trabalhista Brasileiro (PTB)), the Progressive Party (Partido Progressista (PP)), and the Republican Party (Partido da República (PR)).

100 Negotiating Trade Liberalization at the WTO

At present, the PT is still strongly linked to the trade union CUT. There are four different factions within the PT that go from far-left to centre-left (Albuquerque, 2007b). The PT opposes the present international trade system and pleads instead for a stronger focus on the domestic market (Partido dos Trabalhadores, 2004).6 The PMDB is the largest national party. It emerged in the late 1980s from a group of PMDB dissidents led by (the then senator) Fernando Henrique Cardoso. This party advocates a social-democratic platform with an emphasis on market economy with a strong regulatory role for the state. The PFL is the strongest party on the centre-right of the party system, followed by the PP, PTB, and PR. It was created in 1984 by dissidents of the Social Democratic Party (Mainwaring, 1997) and is dominated by oldstyle political bosses and closely linked to sugar producers in the northeast (Oliveira, 2003). Brazil’s electoral system of open-list representation with a low threshold and districts of high average magnitude has created a highly fragmented and fluid party system. This makes it unlikely that the president’s party will obtain a majority of seats in Congress (Figueiredo and Limongi, 2000).7 Since Brazil’s return to a democratic system in 1985, all Brazilian presidents have governed with several coalition parties. For example, Fernando Henrique Cardoso governed with a five-party presidential coalition. The largest coalition to date occurred during the first term of Lula da Silva, when the government consisted of nine parties (see Table 5.1). Scholars explain this high party fragmentation with the crucial differences between catch-all and ideological parties (Mainwaring, 1999; Meneguello, 1998; Power, 2004). Politicians in catch-all parties believe that their political success lies more within their individual efforts than with the party label (Mainwaring, 1999). Moreover, the internal heterogeneity of catch-all parties blurs the importance of party labels. In electoral campaigns, parties play an insignificant role since candidates have to finance their own campaigns. This free-agent campaigning style leads to limited party discipline and loyalty once candidates are elected. Switching party allegiances is common among politicians to improve their career chances and contributes to the weakly institutionalized party system. Some party organizations are so weak that they almost disappear in the period between elections (Power, 2004). Brazil’s campaign finance law intensifies the individualistic and anti-party tendencies of the electoral system by giving candidates strong incentives to raise and spend money independently from their parties and by restricting the parties’ ability to influence the sources and flow of campaign funds (Samuels, 2001). Candidates are responsible for submitting an account of the campaign contributions after the elections, so that individuals and not parties are the major actors in the process of the acquisition of campaign contributions (Posada-Carbó, 2008).

Table 5.1

Presidents and governing coalitions in the Brazilian Congress 1996–2006

Presidents*

President’s party

Parties in the governing coalition

President’s party: number and % of seats

Coalition parties: number and % of seats

Parties outside the executive: number and % of seats

% of seats in the Senate

Institutional veto players

Partisan veto Players

Cardoso I 01/95–04/96

PSDB

PSDB-PMDBPFL-PTB

63 (12.3)

289 (56)

223 (43.5)

56 (69.1)

−

four

PSDB-PMDBPFL-PTB-PPBPPS

–

398 (77.7)

115 (22.3)

69 (85.2)

–

six

Cardoso II 04/96–12/98

–

Cardoso III 01/99–12/02

PSDB

PSDB-PMDBPFL-PTB-PPB

99 (19.3)

377 (73.7)

116 (26.3)

62 (76.5)

–

five

Lula I 01/03–12/03

PT

PT-PP-PTB-PDTPSB-PV-PLPCdoB-PPS

91 (17.9)

267 (52.5)

246 (47.9)

21 (25.9)

Senate

nine

PT-PP- PTB-PSBPV-PL-PCdoBPPS-PMDB

91 (17.9)

321 (62.5)

192 (37.4)

44 (54.3)

–

nine

PT-PP- PTBPSB-PL-PCdoBPPS-PMDB

91 (17.9)

316 (61.5)

197 (38.4)

44 (54.3)

–

eight

Lula II 03/04–12/05 Lula III 07/05–12/06

PT

Source: Own table based on information from Senado Federal (2008) and Câmara dos Deputados (2007). * A presidential coalition term ends when there is change in the number of coalition parties.

101

102 Negotiating Trade Liberalization at the WTO

The lack of party discipline has a twofold effect on Brazilian presidentialism. On the one hand, it makes executive–legislative relations unpredictable. Presidents cannot totally count on the support of their coalition parties, as they would in a political system with highly disciplined parties. On the other hand, fragmented multipartism might offer presidents opportunities to persuade deputies to join the president’s party coalition (Mainwaring, 1997).

Link between parties and interest groups Brazil’s trade politics has long been associated with a strong and autonomous state and with rather weak input from political parties and interest groups (Hurrell and Narlikar, 2006). Much of the literature (Schneider, 1997; Weyland, 1998, 2004) has underlined the limited influence of interest groups over economic policy in general. This pattern of state–society relations changed gradually after the mid1990s. The increasing complexity of trade issues and the difficulty in calculating the costs and benefits of a potential agreement makes Brazilian negotiators more dependent on the information provided by interest groups. In 1996, the National Industry Confederation created the Brazilian Business Coalition (Coalizão Empresarial Brasileira (CEB)) to exert influence on government in trade negotiations (Marconini, 2005). Presently, it represents the agricultural, industrial and services sector and constitutes over 170 business organizations (Confederação Nacional da Indústria, 2008b). The major business groups in Brazil are organized in the National Industry Confederation (CNI), the Industry Federation of São Paulo (FIESP), the National Agriculture Confederation (Confederação Nacional da Agricultura (CNA)), and the Association of Brazilian Exporters (Associação de Exportadores Brasileiros (AEB)) (Carvalho, 2003). Whereas the CNI represents 27 major industry federations, the FIESP is the leading regional manufacturing sector organization. It comprises 132 sectoral trade associations in São Paulo, where the largest industrial sector is located (Federação das Indústrias do Estado de São Paulo, 2008). The main trade organizations are the Confederation of Workers (Confederação Única dos Trabalhadores (CUT)), Labour Force (Força Sindical (FS)), and the General Union of Workers (União Geral dos Trabalhadores (UGT)). Since 2007 the UGT has been the leading organization of three unions: the General Confederation of Workers (Confederação Geral dos Trabalhadores (CGT)), the Autonomous Central of Workers (Central Autônoma dos Trabalhadores (CAT)), and the Social Labour Democracy (Social Democracia Sindical (SDC)). Trade unions have closer links to left parties. For example, the CUT, which is the biggest and most powerful trade union, is close to the PT. During electoral campaigns, business interest groups make financial contributions to several parties in order not to get too close to any one party.

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In general, the business sector is mainly represented by centre and centreright parties. Since parties have a weak institutional organization, lobbying takes place at the level of individual senators and deputies. In addition, the practice of unrecorded votes in Congress makes Brazilian deputies among the least accountable worldwide (Schneider, 1997). According to Weyland (2004), this explains why business groups prefer to lobby the executive directly and only rely on parties as supplements. Schneider (1997) also underlines that legislators do not care if a particular business group contributes to their campaigns when they run for re-election because in large districts, such as the state of São Paulo, deputies have so many different sources of financing that they do not need to worry about pleasing past contributors.

Veto players in Brazil 1999–2006 In Brazil, institutional veto players include the president, the Senate, and the Chamber of Deputies. Partisan veto players are the parties in the governing coalition, which vary according to the size of the coalition. The higher the number of effective parties in a presidential coalition, the more constrained the president should be in international negotiations because he has to take into account the position of the parties in the governing coalition. It is not only the number of veto players that is important, but the internal cohesion of the parties in a governing coalition also has considerable significance. George Tsebelis (1995) defined cohesion as the different policy positions within a party before a discussion or a vote in Congress. Internal cohesion means that a high degree of factionalization increases the number of veto players, making the formation of a negotiating position more difficult. In addition, when counting the number of veto players, one also has to consider their location (the absorption rule) (Tsebelis, 2002). If, for example, the president comes from a coherent and disciplined party, the president does not need to be counted. However, in Brazil’s situation of low levels of party discipline and cohesion, every single party has to be counted as a veto player. The Cardoso presidency can be divided into three distinct periods, each of which coincides with the building of a new presidential coalition. During the first term of Fernando Henrique Cardoso (1995–6), the presidential coalition government was made up of four parties: PSDB, PMDB, PFL, and PTB. Together these four parties had 289 of the total 513 seats in the Chamber of Deputies. The ideological distance between the four parties in the governing coalition was small: the two largest governing parties, the PSDB, the president’s party, with 62 seats, and the PMDB, with 107, are both centre parties. The other two governing parties, the centre-right parties, PFL and the PTB, had 89 and 31 seats respectively. Together, they held over 56 per cent of the seats in the Chamber of Deputies and 69 per cent of the seats in the Senate (see Table 5.1). Thus, there were four partisan veto players and no institutional veto player.

104 Negotiating Trade Liberalization at the WTO

From 1996 to 1998, two more parties, the PPB and PPS, joined the governing coalition, which now encompassed over 398 seats (almost 80 per cent of the total seats). As a result of this increase in the size of the governing coalition, the number of partisan veto players increased from four to six. The PPB is a centre-right party, which added 53 seats to the governing coalition. The inclusion of a left party in the governing coalition, the PPS, with only two deputies, increased the ideological distance between the governing parties. This small party withdrew from the governing coalition in December 1998. From 1995 to 1998, the PSDB, the president’s party, had only 62 of the 513 seats, a figure that corresponds to about 12 per cent of the total seats. In the Senate, the PSDB also had only 14 of the total of 81 seats (17 per cent). In the Chamber of Deputies, the presidential coalition had 377 seats (73 per cent of the total seats) (see Table 5.1). From 1999 to 2002, the number of veto players remained constant with five partisan veto players (PSDB, PMDB, PFL, PTB, and PPB). The two centre parties (PMDB and PSDB) had a total of 169 seats, and three centre-right parties (PFL, PTB, and PPB) held 173 seats in the Chamber of Deputies. The PFL became the party with the highest number of seats, with an increase from 89 to 105 seats (see Table 5.2). Under the first Lula da Silva presidency from 2003 to 2006, the Workers’ Party had only 91 out of the 507 seats in the Chamber of Deputies and 14 out of 81 seats in the Senate (17.9 per cent and 17.3 per cent of the total seats respectively) (see Tables 5.2. and 5.3). The parties that officially supported Lula during the 2002 elections (PT, PDT, PSB, PCdoB, PPS, PV, PMN, PL, and PTB) had together 219 votes in the Chamber and 30 in the Senate, 43 per cent and 37 per cent respectively (see Table 5.1). Thus, the presidential electoral coalition did not even have a majority of congressional seats, making it difficult to pass ordinary legislation, which requires 257 votes. Upon taking up office in January 2003, the central issue for Lula da Silva was how to transform his large electoral coalition into a stable governing coalition. He decided to enlarge his political alliance with a further two centre-right parties, the PTB with 26 seats and the PP with 49 seats (Arestis, Paula, and Ferrari-Filho, 2007). Thus, the governing coalition now controlled over 294 seats. The number of the seats did not remain constant because ‘migration’ across parties in the Chamber of Deputies is a continuous process. Melo (2000) suggests that the parties that belong to the coalition supporting the government are most likely to attract ‘migrant’ deputies. This is relevant even for those parties that occupy a central position within the coalition. The evidence from Lula da Silva’s first term partially corroborates this finding. Two of the conservative parties that supported the Lula government, the PTB and the PL, won the most deputies after the election. By July 2004, the PTB had already doubled the number of deputies and the PL also grew by almost 70 per cent. In contrast, some of the left-leaning parties of the governing

105 Table 5.2

Brazil: seats by party in the Chamber of Deputies 1996–2007

Left parties

Centre parties Centre-right and right parties

PT PDT PCB/PPS PCdoB PSB PV PMDB PSDB PFL PTB PDS/PPR/ PPB/PP PL PR

Others and independent parties Total

1996

1999

2003

2007

49 34 2 10 15 − 107 62 89 31 53

59 25 3 7 18 1 83 99 105 31 60

91 21 15 12 22 5 75 70 84 26 49

83 24 22 13 27 13 89 66 65 22 41

13 − 48

12 − 10

26 − 17

23 27 −

513

513

513

513

Source: Own table based on data from Câmara dos Deputados (2007).

Table 5.3

Brazil: seats by party in the Senate 1996–2007

Left parties

Centre parties Centre-right and right parties

Other parties and independents Total

PT PDT PCB/PPS PCdoB PSB PMDB PSDB PFL PTB PDS/PPR PL PPB/PP PR

1996*

1999

2003

2007

5 6 2 − 2 19 14 19 6 1 − 5 − 2

7 4 2 − 3 24 16 17 5 − 1 1 − 1

7 1 2 − 3 24 16 17 5 − 2 1 2 1

11 4 − 1 3 20 13 17 5 − − 1 4 2

81

81

81

81

Source: Own table based on data from Senado Federal (2008). * In the Senate, there are interchangeably filled 1/3 and 2/3 of the seats. In the 1994 legislative elections 2/3 of the senators (54 representatives) were newly elected and in 1998 1/3 (27 representatives).

106 Negotiating Trade Liberalization at the WTO

coalition, such as the PSB and the PCdoB, lost seats, while the PPS and the PV gained a few. Altogether, the number of deputies supporting the government’s coalition grew because many deputies withdrew from their parties. By July 2004, the two main opposition parties, the PSDB and the PFL, together had lost the support of a total of 40 deputies (Couto and Baia, 2006). After taking office, Lula da Silva’s first cabinet (2003–4) was a highly fragmented governing coalition of nine parties (PT, PDT, PSB, PCdoB, PPS, PV, PL, PTB, and PP). Moreover, the coalition was ideologically diffuse, incorporating parties from the left (PT, PDT, PSB, PCdoB, PPS, and PV) across to the centre-right (PL, PTB, and PP).

The Brazilian agricultural sector Presently, the agribusiness sector makes 8 per cent of Brazilian GDP and is one of the most dynamic sectors of the Brazilian economy. Agricultural products account for about 29 per cent of all Brazilian exports (World Trade Organization, 2007b), with 35 per cent of all jobs concentrated in this sector (Jales, 2006). From 1990 to 2006 total agricultural exports doubled and Brazil is now the world’s fourth largest agricultural exporter, after the US, France, and Canada (World Trade Organization, 2007b). In 2005, it had already surpassed the US as the country with the largest surplus in agriculture (Chaddad and Jank, 2006). Agricultural production growth is largely dependent on exports. Brazil is the world’s largest producer of coffee, sugarcane, oranges, orange juice, and citrus fruits; the second largest of soybeans, and third in tobacco and poultry; it is also a major producer of corn, rice, and beef. The EU is the major trading partner for Brazil, with more than 40 per cent of total agricultural exports. The fastest export growth is with China and Russia. However, a huge part of agricultural production is for the domestic market, and only 30 per cent of total agricultural production is exported. The share of agricultural production being exported is similar to that of the US, but lower than that of other agricultural exporters such as Australia, whose exports account for 70 per cent of the total agricultural production (OECD, 2005). Moreover, Brazil is endowed with a vast agricultural area. Only China, Australia and the US have a larger agricultural area. Hitherto, about threequarters of this land has been used for pasture, and it is estimated that agricultural production could rise significantly through the conversion of this land to arable cropland. In this way, there is still tremendous potential to expand agricultural production.

Conclusion Until the 1950s, Brazil had an economy based on the export of tropical agricultural products. Under the Getúlio Vargas military presidency

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107

(1930–45), the exporting model based on agricultural products was replaced by an import-substitution industrialization model, which protected local industries against competition from imported goods. The democratically elected governments from 1946 to 1964 expanded this policy of protecting Brazilian infant industry through high tariff barriers. During the military governments (1964–85), trade policy followed the patterns of the previous democratic governments. The interventionist import-substitution model was retained and the military government intervened in the agricultural sector by subsidizing rural credits and storing excess production with the aim of enhancing food security for the rising urban population. The agricultural sector was still unproductive, with high landholdings. Exports of agricultural products were concentrated on coffee, sugar, and other tropical products. At the beginning of the 1990s, the newly elected president Collor de Mello introduced a competitive integration model based on unilateral trade liberalization, reducing the average tariff rates on agricultural commodities from 32 per cent to 14 per cent. At the same time, Brazil has diversified its agricultural production away from tropical products towards soybeans, corn, and cotton. The adoption of this competitive integration model and the diversification of the agricultural sector led to a continuous growth of the Brazilian agribusiness sector from the mid-1990s onwards. Today, the agribusiness sector is one of the most dynamic sectors of the Brazilian economy. Thus, in the present round of multilateral trade liberalization, the main issue for Brazil is to improve agricultural market access. In Brazil, trade policy falls under the exclusive competence of the executive. The president has the exclusive authority to negotiate trade agreements, while Congress (Chamber of Deputies and Senate) only has the power to approve or reject international treaties with an absolute majority. Brazil’s electoral system of open-list representation and a low threshold has created a highly fragmented party system with low party discipline and a highly volatile party loyalty among deputies. Currently, there are 21 parties represented in Congress, but 12 parties assemble about 90 per cent of the seats in the different legislatures. There are six left-wing parties (the PT, the PDT, the PPS, the PCdoB, the PSB, and the PV), two centre parties (the PMDB and the PSDB), and four centre-right parties (the PFL, the PTB, the PP, and the PR). The president’s dependency on parties to build a governing coalition can lead to highly heterogeneous governing coalitions with a high number of partisan veto players. During the Cardoso presidencies the number of partisan veto players varied from four to six. The ideological distance between these four parties was small, with two centre (PSDB and PMDB) and two centreright parties (PFL and PTB). It was only between 1996 and 1998, when the PPS as a left party joined the governing coalition, that the ideological distance between the governing coalition parties increased.

108 Negotiating Trade Liberalization at the WTO

During Lula da Silva’s first presidency from 2003 to 2006, the number of veto players varied between eight from 2005 to 2006 and nine partisan veto players from 2003 to 2005. The governing coalition was ideologically diffuse with six parties from the left and three centre-right parties. When analysing the negotiating position of Brazil, the central issue is whether the ideological distance between the coalition parties and their differences on trade policies matter. Given the existence of such ideological differences, the greater the ideological distance between the parties in the governing coalition, the more difficult it should be for governments to retain cohesion and have a unified position on trade liberalization. Concerning the link between parties and interest groups and its impact on the government’s negotiating position, trade unions are close to left-wing parties, while business groups are represented by centre and centre rightwing parties. However, business groups prefer not to get too close to any party and usually support several centre and centre-right parties during the electoral campaigns. Given the parties’ high fragmentation and the unaccountability of Brazilian deputies, business groups prefer to lobby the executive directly and view lobbying deputies and senators as a supplement.

6 Australian Trade Politics

Introduction There are few studies dealing with the domestic determinants of Australia’s negotiating position in the Doha round. A majority of scholars focus on the impact of globalization on the Australian political economy (Cotton and Ravenhill, 2001; Kunkel, 2002; Oxley, 2003; Wesley, 2002), or deal with Australian foreign policy in general (Brereton, 2001; Downer, 2001; McDonald, 2005; Woolcott, 2005). Another stream of studies analyses the middle-power role of Australia in international relations (Capling and Nossal, 2003a; Cooper, 1992, 1997; Cooper, Higgot, and Nossal, 1993; Higgott and Cooper, 1990), bilateral trade relations between Australia and the US (Beeson, 2003; Capling, 2005; Findlay, 2002; Krever, 2006), the different emphases of Labor and Liberal-National governments’ economic policy responses on globalization (Conley, 2001; Leigh, 2002; Woolcott, 2005), or on the role of Australia in the multilateral trade system (Capling, 2001). Other studies focus on state–society relations in general or in the specific field of agriculture (Botterill, 2005; Trebeck, 1990; Warhurst, 1990). However, the few studies dealing with domestic-level variables are limited to analysis of the Uruguay round negotiations (Capling, 2001; Cooper, 1997). Australian trade policy-making remains the preserve of the executive and of the Department of Foreign Affairs and Trade (DFAT). The party in government defines Australian trade policy, and the parliament’s role is confined to the ratification of trade agreements. When the government has the majority of seats in the House of Representatives and in the Senate, there is little the parliamentary opposition can do to influence trade policy. Even though some authors (Capling, 2005; Flitton, 2003; Matthews and Ravenhill, 1988) point out that bipartisan agreement on multilateralism was the norm in Australian trade policy until 1996, if one takes a closer look at the evolution of Australian trade politics in the past five decades a more complex picture emerges. In this chapter, I underline that Labor and 109

110 Negotiating Trade Liberalization at the WTO

Liberal-National governments have different approaches to trade policy. While Labor governments tend to emphasize multilateral approaches to trade policy, Liberal-National governments have preferred bilateral trade relations.

Australian trade politics Australia’s trade dependence on Great Britain until 1956 Until 1956, Australia’s trade policy was highly dependent on commerce with Great Britain. With the creation of the British imperial preference system (the Ottawa agreements) in 1932 a preferential tariff treatment was given to countries in the British Empire known as the Dominions (Australia, Canada, India, New Zealand, and South Africa), with the aim of increasing trade between Britain and these countries. Australia exported agricultural commodities in exchange for importing British manufactured goods. During the negotiations on the establishment of the International Trade Organization, the Australian government of Labor prime minister Joseph Benedict Chifley (1946–9) considered that there was an imbalance in the multilateral trade rules proposed by the US in favour of industrialized countries because agricultural products and the issue of the industrial development of agriculture commodity-dependent countries were excluded from the negotiations (Capling and Nossal, 2003b). At the domestic level, there was a division between the proponents of the imperial preference system based on discriminatory bilateral relationships and the advocates of nondiscriminatory multilateralism. The Chifley Labor government, supported by the Departments of External Affairs, Commerce and Agriculture and the export-oriented agricultural sectors, such as beef and wheat producers, backed Australia’s participation in the GATT. By contrast, the domestic-oriented producers, such as the Associated Chambers of Manufactures of Australia (ACMA), the sugar and milk industry sectors, and the opposition Liberal and Country parties opposed the GATT agreement for the constraints it would put on the development of Australia’s industry policy (Capling, 2001). Trade policy of Liberal-Country governments 1956–72 In the mid-1950s, the British market for wool and wheat had declined and Australia started to diversify its trade relations (Capling, 2001). The government of Robert Gordon Menzies withdrew from the Ottawa agreements in 1956 to enable Australia to sign a bilateral trade agreement with Japan in 1957, with the aim of securing better market access for agricultural products (Krever, 2006). From 1956 to 1972, Australian trade policy was defined by Robert Menzies and John McEwen from the Country/National Party, who was in charge of foreign affairs and trade (Cooper, 1997).1 The Country Party held enormous influence in the government of Menzies because their seats along with

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those of the Liberal Party were enough for victory over the Labor Party. The strong link between the Country Party and farmers’ groups led to an overrepresentation of farmers’ representatives in federal parliaments, where they obtained key ministerial positions (Halpin, 2005). Every Australian trade and agriculture minister in Liberal-National governments since 1956 until today has been a representative of the Country Party (The Nationals, 2008). McEwen expanded its influence over the entire range of departments with responsibility for economic affairs by uniting the Department of Commerce and Agriculture with the Department of Trade and Customs (Cooper, 1997). Several balance of payment crises in the 1950s led the government to introduce temporary import restrictions, tax concessions to increase farm production, and also to adopt generous pricing policies for the wheat sector (Gruen, 1990). Australia attempted to change the imbalance between industry and agriculture through an international political economy that linked the promotion of agricultural exports to an extension of restrictive trade practices (Cooper, 1997). In the 1960s, structural adjustments in Australian agriculture resulted in a decline in the number of farms and in the rural labour force. The Country Party reacted to these changes by broadening the narrow sectional base of the party to include workers in manufacturing industry (Warhurst, 1990). McEwen pursued a policy of high tariff protection for manufacturing industry, so that industry would not challenge the continuing high tariffs on imported raw materials, which benefited farmers but pushed up industry’s costs (Brown, 1999). This ‘protection all round’ industry policy led to the creation of a Tariff Board, which classified all manufacturing industries into three categories: low, medium, and high levels of protection (Gruen, 1990). In the agricultural sector, the government introduced financial assistance to farmers through guaranteed prices, as well as production and marketing boards. The latter stored commodities, fixed prices, and created production or marketing quotas. These policy instruments were seen as a quid pro quo for tariff protection provided for the manufacturing sector (Brown, 1999). First tariff reductions of the Labor government 1972–5 After twenty-three years of Liberal-National governments, with the election of the Labor government under Prime Minister Gough Whitlam in December 1972, there was a shift in Australia’s approach towards trade policy. Whitlam wanted to reduce tariffs and to promote trade liberalization (Capling, 2001). The government decided to no longer support unviable industries through import protection. One of Whitlam’s first measures was to replace the Tariff Board with the Industries Assistance Commission in 1974. This new commission would examine any form of direct or indirect assistance to producers in all economic sectors with the aim of providing

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an efficient distribution of benefits for producers and consumers (Gruen, 1990). In July 1973, the Whitlam government reduced the average level of assistance in all economic sectors, cut all tariffs by 25 per cent, and phased out subsidies on the dairy sector (Leigh, 2002). This was the biggest single tariff reduction, made to reinvigorate Australian trade policy. However, one year after the implementation of these tariff cuts, the rate of unemployment had doubled. As a result across-the-board tariff reductions were highly discredited (Gruen, 1990) and a new Liberal-National government elected, under the leadership of Malcolm Fraser. Increasing protection under Liberal-National governments 1975–83 Malcolm Fraser had made the issue of protection for vulnerable Australian industries a centrepiece of his electoral campaign. He aimed to gain votes from the Labor Party’s traditional blue-collar workers in the auto, textile, footwear, and steel industries (Cooper, 1997). Even though the Liberal and National Country parties had criticized the 25 per cent tariff cut, when they came to power they did not reverse it, but instead increased industry assistance. From 1976 to 1978, the average effective rate of assistance to motor vehicles, textiles, and footwear industries more than doubled (Leigh, 2002). In addition, the Fraser government imposed new quantitative restrictions on imports for these three sectors (Capling, 2001). In the aftermath of the 1973 world economic crisis, the Australian agricultural sector went through a recession driven particularly by the Japanese embargo on Australia’s beef imports, which caused a 60 per cent reduction in Australia’s total beef exports, and the significant reduction of trade with Britain after its accession into the EC in 1973 (Harris, 1990). During the Tokyo round of trade negotiations, Australia’s main concern was to secure a good outcome in agriculture with tariff rate reductions, better market access and the reduction of subsidies in exchange for further tariff cuts in industrial products (Harris, 1990). Since the EC and the US opposed the inclusion of agricultural issues in the trade liberalization negotiations, Australia decided to negotiate a number of bilateral agreements with the US, Canada, Japan, and the EC, which led to only minimal improvements in market access (Capling, 2001). At the national level, the National Farmers’ Federation (NFF) was created through the amalgamation of the Australian Woolgrowers’ and Graziers’ Council and the Australian Primary Producers’ Union in 1979 (Botterill, 2005). In this way, Australia now had an agricultural federation that spoke on behalf of farmers. Since its inception, international agricultural liberalization has been one of the most important priorities of the NFF. The NFF rejected price and supply controls as mechanisms for the stabilization of farm incomes, and advocated the removal of protection measures from all industries. The NFF considered that new market opportunities for export

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industries would far outweigh any benefit received from protectionist policies (National Farmers’ Federation, 2008b) and that a policy of domestic support accompanied by import protection was unsustainable for the Australian agricultural sector (Botterill, 2005). Multilateralism under Labor governments 1983–96 When the Labor government of Prime Minister Bob Hawke came to power in 1983, the Australian economy went through a period of recession with a fall in national income, a massive increase in foreign debt and a persistent trade deficit. In the agricultural sector, Australian farmers had to deal with a worldwide collapse in the prices of several commodities in 1985 (Cooper, 1997). The Hawke government (1983–91) reacted to this economic crisis by replacing a domestic-oriented economic policy with an international export-oriented policy that decreased tariffs unilaterally (Leigh, 2002) from a general level of 15 per cent to 5 per cent (Conley, 2001). But tariffs in some sensitive sectors such as automobiles, textiles, clothing, and footwear remained high at 25 per cent (Krever, 2006).2 During this period, trade unions also changed their position towards free trade. In 1987, the Australian Council of Trade Unions (ACTU) had issued a report suggesting that the government decrease tariff rates and that the manufacturing sector should become competitive (Australian Council of Trade Unions, 1987). The business sector was disappointed, and the Confederation of Australian Industry (CAI) created the Business Council of Australia (BCA), which took a more liberal position because its members were more competitive than small and medium-sized firms. Similar to the ACTU, the BCA considered that the government could help industry by removing obstacles and support long-term competitiveness by building good infrastructure, supporting education and training, but not through high tariffs (Business Council of Australia, 2008). The Hawke government established new advisory committees and expanded consultations with interest groups, especially with trade unions, represented by the ACTU, and the business sector (Capling, 2001). But the National Farmers’ Federation lost its special status as an economic sector by being excluded in these tripartite consultations. The NFF vocally opposed these changes, including by demonstrations in 1985 outside the parliament in Canberra (National Farmers’ Federation, 2008b). Following these demonstrations, Hawke established agricultural advisory groups, including the Agricultural Trade Group within the Trade Department (Cooper, 1997). The Labor Party opposed the agricentric trade policy of the Liberal-National governments and wanted instead to shift away from Australia’s traditional dependence on the highly vulnerable primary sector through economic diversification towards high-tech manufactured goods and services, which in the 1980s made up only 10 per cent of exports. This approach was opposed by the NFF, which still considered agricultural exports as central

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to Australia’s trade policy. A second point of discord between the government and the NFF was the government’s intention to phase out guaranteed minimum prices for the agricultural sector (Cooper, 1997). At the international level, the Hawke government took an active stance in the Uruguay round by creating the Cairns Group. As a middle-power3 and commodity-exporting country, Australia tried to compensate for its lack of structural power in international politics by engaging itself more constructively in coalitional diplomacy at the international level (Cooper, 1997). The Labor government of Prime Minister Paul Keating from 1993 to 1996 continued the unilateral trade liberalization initiated by Hawke.

Bilateralism under Liberal-National governments 1996–2007 In the Australian political system, Liberal-National governments are important to the agricultural sector and rural areas because of the role of the Nationals within it. The number and allocation of portfolios between the Liberal Party and the National Party/Nationals is negotiated between the two leaders on the basis of each party’s share of parliamentary seats. In practice, the leader of the Nationals takes the portfolio of deputy prime minister and the Nationals are allocated many of the portfolios important to rural Australia, such as agriculture and trade (Warhurst, 1990). When the Liberal-National government came to power 1996, John Howard, the leader of the Liberal Party, became the new prime minister and Tim Fischer, the leader of the National Party, was nominated as deputy prime minister and also took charge of the trade portfolio. Alexander Downer, a former leader of the Liberal Party, was nominated minister of foreign affairs. The importance of trade to the rural agricultural electorate within LiberalNational constituencies is corroborated by Howard’s unwritten policy of appointing a National Party member of cabinet to the positions of minister of trade and of agriculture. During the Howard government (1996–2007), all three ministers in charge of trade (Tim Fischer (1996–9), Mark Vaile (1999–2006), and Warren Truss (2006–7)) and all the agriculture ministers (John Anderson (1996–8), Mark Vaile (1998–9), Warren Truss (1999–2005), and Peter McGauran (2005–7)) came from the Nationals. From the very beginning, the Howard government promised to pursue a more ‘aggressive’ and ‘results-oriented’ trade policy. In contrast to the Labor Party’s middle-power diplomacy and its focus on multilateralism (Capling, 2005), the new government wanted to shift the foreign and trade policy agenda towards bilateralism (Kunkel, 2002) and to improve its relationship with the United States (Krever, 2006). The government’s first White Paper on foreign and trade policy in 1997, ‘In the National Interest: Australia’s Foreign and Trade Policy’, underlined that the main aim of Australia’s foreign and trade policy was to pursue the national interest, which meant bringing security to Australia, better jobs,

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and a higher standard of living for Australians. The main focus of the foreign and trade policy would be on the Asia-Pacific Economic Cooperation (APEC) and the reinforcement of bilateral trade relationships with its main trading partners, namely the US, Japan, and China (Australian Department of Foreign Affairs and Trade, 1997). The Liberal-National government considered that previous Labor governments had neglected Australia’s immediate trade interests in the realm of increased market access for agricultural commodities. The newly elected government intended to adopt a ‘tougher’ approach to trade by drawing up a list of countries that had not complied with world trade rules and had harmed Australia’s interests. This new approach to trade policy was supported by the business sector, the Australian Chamber of Commerce and Industry (ACCI), and the NFF (The Weekend Australian, 13 January 1996). In the agricultural sector, in close collaboration with the NFF, in 1997 the Liberal-National government developed the ‘Agriculture – Advancing Australia’ programme, which aimed at improving international competitiveness through a range of programmes including payments to farmers leaving the agricultural sector (Halpin, 2005).

A ‘Westminster-inspired’ democracy The Australian political system corresponds to what Arend Lijphart (1999a) calls a ‘Westminster-inspired’ democracy, that is, it is majoritarian in the executive–parties dimension, but consensual on the federal–unitary dimension. In the executive–parties relationship, there is executive dominance over the legislature, a two-party system, a majoritarian disproportional electoral system, and a pluralist interest group system. Executive power is concentrated in one-party majority cabinets. Since 1945 the Labor or the Liberal-National parties have formed the governments. The Liberal-National parties have been in long-standing coalition. Both parties have similar policy positions. The National Party is a regional party only represented in five states (Queensland, New South Wales, Victoria, South Australia, and Western Australia). The majority voting system has led to a three-party (Labor, Liberals, and Nationals) representation in the House of Representatives. By contrast, the proportional representation voting system in the Senate has led to a sixparty representation: the Australian Labor Party (ALP), the Liberal Party of Australia (LPA), the Nationals, the Australian Greens, the Australian Democrats,4 and the One Nation Party.5 The Lijphart conjecture of a pluralist interest group system in Australia, however, does not hold because in trade policy only a few interest groups with links to specific parties have been granted access to the decision-making process. In the federal–unitary dimension, Australia is visibly consensual–federalist with federal and decentralized governments. The legislative power is divided

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between two equally strong but differently constituted houses, the House of Representatives and the Senate. The constitution can only be changed by extraordinary majorities, and bills are subject to a judicial review of their constitutionality, by constitutional courts (Lijphart, 1999a). To summarize, the Australian political system combines the principles of American federalism (two directly elected and symmetrical chambers, judicial review of the constitutionality of bills and chambers at the states level) with the Westminster parliamentary institutions (one-party majority cabinets and a two-party system). By contrast, in the area of state–society relationships, Australia is rather closer to the neo-corporatist tradition, in which only a few privileged interest groups are consulted.

Decision-making process in trade policy Foreign affairs and trade policy is a prerogative of the executive. Although trade agreements are discussed in a parliamentary debate, the parliament’s role is generally limited to commenting on the government’s policy. At the ratification stage, there is little the parliament can do but accept the government’s position provided that the government in power has a majority of seats in both houses of parliament. The main players in Australian trade policy are the executive (prime minister, foreign affairs minister, and trade minister) and the ministries concerned (DFAT, Agriculture, and Industry). The DFAT has an Office of Trade Negotiations that is in charge of different areas of the WTO negotiations and has a special negotiator for agriculture (Australian Department of Foreign Affairs and Trade, 2008b). The executive decides to sign a trade agreement based on information obtained during formal and informal consultations with major interest groups. The DFAT holds formal consultations with key business advisory groups at the Trade Policy Advisory Council (TPAC) and at the WTO Advisory Group, which are both chaired by the trade minister (Australian Department of Foreign Affairs and Trade, 2007a). While the TPAC deals with all trade issues with the exception of WTO negotiations, the WTO advisory group focuses solely on WTO issues. The composition of the TPAC includes business leaders and the heads of federal government agencies dealing with trade and economic matters, as well as the Agriculture Trade Consultative Group. The members of this group include the leaders of major producer organizations, as well as the ministers for trade and agriculture (Capling and Nossal, 2003a). The WTO advisory group includes experts from industry, trade unions, NGOs, and academia (Joint Standing Committee on Foreign Affairs, 2002). However, it is very difficult for scholars to assess the substance of what occurs during these meetings because the records of consultations are kept secret.

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Beginning in 1994, all of the opposition parties accused the Labor government of secrecy in international negotiations due to the weak involvement of parliament. In December 1994, opposition parties made use of their majority in the Senate to present a report that suggested several changes to Australia’s signature of international agreements. These included strengthening the role of parliament and improved consultation with industry, NGOs, and civil society. The Senate first recommended that the government should report annually to parliament on actions taken to implement treaties and that it should establish a joint parliamentary committee on treaties with extensive powers. Finally, prior to any treaty negotiations a report on the impact of each new treaty should be prepared and considered by this new committee. However, shortly after the Senate legislation was tabled, parliament was dissolved. During the election campaign the Liberal-National parties promised that once in power they would implement the report’s recommendations (Capling and Nossal, 2003a). It was in this context that the new Liberal-National government introduced several changes in May 1996 that gave the Australian parliament greater control over international affairs. First, international treaties signed by the government had to be tabled in parliament at least 15 sitting days prior to ratification. Second, trade agreements had to include a report on their impact on the Australian economy. Third, the government established a new parliamentary Joint Standing Committee on Treaties (JSCOT) (Australian Department of Foreign Affairs and Trade, 2007a). The JSCOT is made up of 16 members from both houses of parliament and from government and opposition parties: nine members from the House of Representatives and seven from the Senate. Nine members are from the government, six from the Labor Party, and one from the Australian Democrats (Joint Standing Committee on Treaties, 2007). Its main function is to review and report on all bilateral, regional and multilateral agreements proposed by the government before the Australian government signs it (Australian Department of Foreign Affairs and Trade, 2007a).

Link between parties and interest groups The Labor party, ALP, was founded by the trade union movement and today represents the urban working class and the middle class. The foreign policy of the Labor Party has been linked to three broad themes: independence, the Asia-Pacific region, and internationalism. Independence refers to the development of an independent view of Australia. The ALP also committed itself to engage in the Asia-Pacific region and to internationalism by standing for the rights of smaller nations in the context of international organizations (Brereton, 2001). The ALP supports free trade as a means of generating economic growth and advocates that Australia should play an active role

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in multilateral trade negotiations through its middle-power diplomacy (The Australian, 20 September 2006). The Labor Party is closely linked to the key labour organization, the ACTU, which brings together 46 unions. Single major unions include the Australian Manufacturing Workers’ Union, which represents 130,000 workers from all areas of manufacturing, the Australian Workers’ Union, which represents 130,000 members in a diverse range of industries (Australian Workers’ Union, 2008), and the Australian Industry Group, which represents 10,000 employees in the manufacturing, construction, automobile, telecommunications, and transport sectors (Australian Industry Group, 2008). Former ACTU president Bob Hawke became the leader of the ALP and then prime minister of Australia in 1983. Other former ACTU presidents, who now hold ministerial portfolios under the current Labor government, include Simon Crean, the minister for trade, and Martin Ferguson, the minister for resources, energy and tourism. The ACTU supports trade liberalization under the condition that labour standards and tariff protection for domestic industries are included in negotiations (Australian Council of Trade Unions, 2001). Given the strong links between the Labor Party and trade unions, I expect Labor governments to adopt a position closer to these interest groups than Liberal-National governments. The centre-right Liberal Party LPA is predominantly conservative with a base in the middle class, rural population, and the business sector. For example, Alexander Downer, the foreign minister under the Howard government from 1996 to 2007, was the executive director of the Australian Chamber of Commerce and Industry from 1983 to 1984, before his election to the federal parliament. The central aim of the Liberals is to strengthen Australia’s relationship with the United States, to develop closer engagement with the Asia-Pacific region, to further develop Australia’s capacity to compete internationally, and to benefit from free trade (Liberal Party of Australia, 2008). Finally, the Nationals are a regional party founded by farmers’ organizations in 1920. In New South Wales and Western Australia, the farmers’ associations were even affiliated to the party (Brown, 1999). The leading farm organization, the NFF, represents state farm organizations and national commodity councils and is still closely linked to the Nationals (Halpin, 2004).6 Until the end of the 1980s, over 80 per cent of the National Party federal MPs had been actively engaged in farmers’ organizations (Warhurst, 1990). Today, the official position of the NFF is that its members live in many different electorates and are represented by all political parties (The Australian, 12 June 1997).

Veto players in Australia 1999–2006 The Liberal and National parties won four elections consecutively in 1996, 1998, 2001, and 2004. In the legislature period 1996–8, the Liberal-National government had 94 seats (75 from the Liberal party and 19 from the

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Nationals) out of the total 148 seats. In the 1998–2001, 2001–4 and 2004–7 legislatures, the Liberal-National government had 80, 82 and 87 seats, respectively (see Tables 6.1 and 6.2). The WTO negotiations from 1999 to 2006 fell under the Liberal-National government. Using the absorption rule of Tsebelis (2002), the Liberal and the Nationals will be counted as one partisan veto player, because there is no ideological distance between them and they compete in different states for electoral votes. In the Australian Westminster System, the government in power has a majority of seats in the House of Representatives, so that this house cannot be considered as an institutional veto player. In contrast, the government does not always have a majority of seats in the Senate. Even though elections to both houses of parliament take place every three years, in the Senate only half of the seats from territorial senators are renewed every three years. Thus, the number of institutional veto players varied depending on whether the government had a majority of seats in both houses of parliament. From 1996 until 2005, there was an institutional veto player, the Senate (see Table 6.2).

Table 6.1

Australia: seats by party in the House of Representatives 1996–2007

Legislature/ Parties ALP LIB NP Others Total

1996–1998

1999–2001

2002–2004

2005–2007

49 75 19 5 148

67 64 16 1 148

65 68 14 3 150

60 74 13 3 150

Source: Own table based on data from Parliament of Australia (2008).

Table 6.2

Australia: seats by party in the Senate 1996–2007

Legislature/ Parties ALP LIB NP AD GRE PHON* Others Total

1996–1999

1999–2001

2002–2004

2005–2007

29 31 6 7 2 – 1 76

29 31 4 9 1 1 1 76

28 31 4 8 2 1 2 76

28 33 6 4 4 – 1 76

Source: Own table based on data from Parliament of Australia (2008). * PHON: Pauline Hanson, One Nation Party.

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The Australian agricultural sector Australian merchandise exports in 2006–7 were made up of 61 per cent agricultural commodities, 26 per cent manufactured products and 13 per cent other merchandise exports (Australian Department of Foreign Affairs and Trade, 2007b). Two-thirds of total Australian agriculture production is exported. In order of importance Australia’s top five merchandise export markets are Japan, China, the Republic of Korea, the US, and New Zealand (Australian Department of Foreign Affairs and Trade, 2008d).7 Australia is a traditional exporter of a wide range of agricultural products, from bulk commodities (wheat, barley, sugar, and cotton) to value-added products (bovine meat, dairy products, and wine). In terms of quantities, wheat and barley dominate agricultural exports, but in terms of value, bovine meat export to the US and Asia has surpassed all other products (Australian Department of Foreign Affairs and Trade, 2008c). Since Australia has a small internal market with 21 million people and the agricultural sector is export-oriented, the main issue for Australia in multilateral trade negotiations is to secure export markets for its agricultural commodities.

Conclusion Labor and Liberal-National governments have different approaches to trade policy. Whereas Labor governments oppose Australia’s traditional dependence on agricultural exports and focus instead on the diversification of trade policy towards the industrial and services sectors, the main emphasis of Liberal-National governments is on the increase of agricultural exports. In addition, the three main Australian parties are linked to different interest groups. The Labor Party is closely linked with the leading Australian labour organization, the ACTU, the Liberal Party to business groups and the Nationals to the farmers’ organization, the NFF. Until 1956, Australia’s trade policy consisted essentially of exporting agricultural commodities to Great Britain and importing British manufactured goods. Australia began diversifying its trade policy in 1957, when it signed a bilateral agreement with Japan. Until 1972, Liberal-National governments pursued a protectionist trade policy on industrial products with high tariffs to protect Australian infant industries. But the agricultural sector was also strongly subsidized by providing guaranteed prices and protecting farmers from competition from imports. The Whitlam Labor government in 1972 was the first one to reduce the average tariff rate of assistance to the manufacturing industry and to the agricultural sector. At the beginning of the 1980s, the new Hawke Labor government replaced the domestic-oriented economic policy by an export-oriented policy by gradually decreasing of tariff levels for industrial and agricultural products to 5 per cent. In addition, the Labor government wanted to shift away from

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the traditional Australian dependence on agricultural exports. This shift in the foreign economic policy of the Labor government towards trade liberalization was also supported by the major trade union, the ACTU, which wanted the manufacturing sector to become internationally competitive and export-oriented. When the Howard government came into power in 1996, there was again a shift in Australia’s trade policy towards bilateralism. The LiberalNational government distanced itself from the trade policy pursued by the previous Labor government by underlining that increasing market access for Australian agricultural products would be its main priority.

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Part III Negotiating Trade Liberalization

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7 Seattle Ministerial Conference 1999

International-level negotiations Identification of issues and the initial negotiating positions of the actors The Seattle ministerial meeting taking place from 30 November to 3 December 1999 was expected to mark the launch of a new round of multilateral trade negotiations. Trade ministers, however, failed to agree on the negotiating agenda. The Seattle ministerial meeting was part of the pre-negotiation phase. There are two interrelated aspects to the first stage of negotiations: the identification of issues and actors taking up their initial negotiating positions. When presenting their opening positions, negotiators can use three different bargaining strategies: maximalist, equitable, and integrative positioning. When actors adopt the maximalist position, they ask for more than they expect to obtain. Actors choosing the equitable position are searching for an outcome that is fair to all concerned. Finally, an actor selecting the integrative strategy is searching for alternative solutions in the hope of reaching an agreement that works for all parties. In the first stage of negotiations bargaining parties commit to their opening positions. Each side wants their demands to be seen as being credible. When a party has a high opening demand they are likely to allow time for their position to have an effect on the expectations of the other bargaining parties (Williams, 1983). Deep divisions and no time pressure to make concessions When trade and foreign ministers met in Seattle, the key issue was to decide on the topics for the agenda of a new round of multilateral trade negotiations. The most important issue was liberalization of trade in agricultural products and services, such as banking, insurance, and telecommunications. The Seattle ministerial meeting began on 1 December 1999 and was chaired by the USTR Charlene Barshefsky, who decided to exercise her right 125

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to set up ‘green room’ meetings (Das, 2000). Participation in these meetings is restricted to only a few delegations. The idea behind these ‘green room’ meetings was that informal meetings could result in an agreement between the major trade powers as had occurred during previous trade rounds. During this first stage of negotiations, WTO members’ positions diverged considerably. The EU asked for a broader negotiating agenda that included investment and competition policy and incorporated the principle of multifunctionality for agriculture. This refers to the non-trade objectives of agriculture, such as environmental protection, food security, and rural development. In addition, the EU wanted negotiations to be conducted using the single undertaking approach that links progress in one issue to progress in another (European Commission, 1999). By contrast, the US wanted services, labour standards and environmental protection included in the negotiating agenda; it rejected the inclusion of the concept of multifunctionality and the use of the single undertaking approach (Bayne, 2000). The USTR even proposed the establishment of a standing working group on international labour standards (Sek, 1999). This demand to address workers’ rights when negotiating trade agreements had been a crucial issue for Democrats during the discussions in the US Congress to renew fast track negotiating authority. The leading organization of small farmers, the NFU and the key labour union, the AFL-CIO, which through PACs support Democratic Party representatives, had asked for the inclusion of labour standards and environmental protection in the negotiating agenda. However, with the exception of the EU and Japan, all other WTO members opposed this demand (The Economist, 9 December 1999). In the area of agricultural trade liberalization, the USTR had asked for a total elimination of export subsidies and for a substantial reduction in trade-distorting domestic support subsidies. The EU and the G-10 immediately rejected the elimination of export subsidies and instead demanded the inclusion of the concept of multifunctionality in negotiations over agriculture (World Trade Organization, 1999a). This demand was opposed by Australia, which considered this concept to be a ruse that would allow the EU to circumvent WTO rules on domestic support (Kunkel, 2002). Australia sought a narrow negotiating agenda focusing upon trade liberalization in agriculture, manufacturing, and services (The Australian, 1 December 1999). When presenting its opening negotiating position, similar to the approach taken by the US, Australia adopted a maximalist position by demanding the total elimination of export subsidies, a substantial reduction in trade-distorting domestic support, as well as better market access through a deep cut in all tariffs (Cairns Group, 1999). The demands voiced by the leading Australian farmer federation, the NFF, which had requested the complete elimination of export subsidies and improved market access, corresponded exactly with the position adopted by the Australian government in Seattle.

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At that time, Brazil was a member of the Cairns Group, and therefore it backed the Cairns Group opposition to the inclusion of the concept of multifunctionality in negotiations. Brazil demanded the total elimination of agricultural export subsidies, the end of tariff rates, and the reduction of trade-distorting domestic support. Even though the Brazilian government was made up of five partisan veto players, two of whom came from centre and three from centre-right parties, they shared a united position on opposing the linkage between trade, environment, and labour standards in the context of the WTO (Carvalho, 2005). Under the leadership of South Africa, developing countries issued the Fancourt Commonwealth declaration, in which they listed their priorities for the upcoming trade round. First, they asked for greater market access in the sectors in which they have a comparative advantage, namely agriculture and textiles, as well as for the slowing down of tariff escalation for processed products (Commonwealth Human Rights Initiative, 1999). Second, they opposed the inclusion of investment and competition issues on the negotiating agenda as well as environmental and labour standards (Bayne, 2000). The latter were considered to be a new mechanism for allowing developed countries to impose protection against imports from developing countries (Krueger, 1999). During the second day of negotiations, the working group on agriculture prepared a draft proposal that tried to strike a compromise between the contradictory negotiating positions of the US, the Cairns Group, the EU, and the developing countries. The chairperson, Charlene Barshefsky, reiterated that the draft text was only an initial list of subjects to be dealt with in the new round of trade negotiations, but delegations retained their initial position (World Trade Organization, 1999c). Informal meetings continued through the night of 3 December. However, the working groups were unable to agree on a negotiating agenda. At this stage, the draft agenda was a catalogue of contradictory positions, rather than a basis for negotiation. Accordingly, Barshefsky decided to suspend the negotiations (World Trade Organization, 1999b). The Seattle ministerial meeting was the focus of tremendous media attention because of the accompanying demonstrations and public protest. Some of these demonstrations were organized by NGOs, particularly anti-globalization groups, such as People’s Global Action. Indeed, Nau (2001) goes as far as to argue that these protests were the principal reason for the failure of the Seattle meeting. This study argues against this view. Its main argument is that the Seattle meeting ended in disarray because of the unwillingness of major WTO players to make concessions on the issues to be included in the negotiating agenda. The unwillingness to concede at this negotiating stage can only be explained by domestic political constraints and the lack of time pressure to make concessions.

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Domestic institutions United States Failure to renew fast track negotiating authority under a divided government The USTR Charlene Barshefsky came to the Seattle ministerial meeting without the fast track authority to negotiate the agenda for a new multilateral trade round. After the expiration of fast track negotiating authority in 1994, several attempts to renew fast track in 1995, 1997, and 1998 failed owing to divergences between President Bill Clinton and the Republican-dominated Congress. Whereas Republicans were against the inclusion of labour and environmental standards among the overall negotiating objectives of the fast track bill, Democratic representatives wanted to have these issues included in the fast track bill (Devereaux, Lawrence, and Watkins, 2006). The attempt to renew fast track in 1997 failed because President Clinton gave up his original bill that had included the protection of workers’ rights by other countries and environmental protection in exchange for a Republican congressional bill that had listed in its overall negotiating objectives the protection of workers’ rights by other countries in the section environment and other matters. As a result, when the bill was scheduled for a vote, Clinton had the support of at least 170 of 227 Republicans but just 42 of 205 Democrats. Thus, President Clinton decided to cancel the vote on the fast track authority bill. The majority of Democratic representatives opposed a fast track that excluded the protection of workers’ rights and environmental standards because they had received their campaign contributions predominantly from labour unions, especially from the AFL-CIO, which wanted a fast track bill to include these issues (Devereaux, Lawrence, and Watkins, 2006). In addition, the advent of NAFTA and increased capital mobility between the US, Canada, and Mexico meant that during this period, in the US, there were concerns over the benefits of trade liberalization (Elliott, 2000). Some of the Democratic representatives who had voted in favour of NAFTA felt that they had been duped because the enforcement mechanisms for labour and environmental provisions were weak (Gibson, 2000). In September 1998, six weeks before the congressional elections, Republicans tabled a new fast track bill. For President Clinton this was the wrong time to vote on fast track (Devereaux, Lawrence, and Watkins, 2006). He was more concerned with appeasing the AFL-CIO, which was supporting Al Gore’s presidential candidature. Although few American workers are unionized, they are concentrated in four states (Illinois, Michigan, Ohio, and Pennsylvania). These four states were considered crucial for Al Gore’s election chances (The Economist, 25 November 1999). The failure to renew fast track negotiating authority in 1995, 1997, and 1998 confirms previous studies (Epstein and O’Halloran, 1996; Milner and

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Rosendorff, 1997) that divided government slows down or even impedes international trade agreements. While Republicans opposed the inclusion of labour and environmental standards, Democratic representatives wanted to have these issues addressed in future trade agreements because they received considerable electoral campaign support from trade unions. Position of interest groups Interest groups were sharply divided on the issue of the inclusion of binding labour and environmental standards in a new fast track bill. Whereas trade unions close to the Democratic Party favoured its inclusion, the business sector closer to the Republican Party opposed it. Labour unions opposed the renewal of fast track and supported further trade liberalization under the condition that it would include workers’ rights and environmental protection. According to the Congressional Quarterly Almanac, during the 1997 debate over fast track, the AFL-CIO spent about $1 million on advertising in districts of undecided representatives (cited in Gibson, 2000). Members of the United Steelworkers alone sent 160,000 handwritten letters to Congress protesting against the bill on fast track. Unions had previously opposed the signing of NAFTA in 1993, which they viewed as an agreement that only protected US investments in Mexico but did not care about workers’ rights. Environmental and civil society groups also supported the position of labour unions. The National Wildlife Federation, one of the largest NGOs in the US, and the Public Citizen’s Global Trade Watch openly opposed the renewal of fast track authority. They had even published three reports blaming NAFTA for compromising food safety and promoting environmental degradation in Mexico, while failing to create new jobs (Devereaux, Lawrence, and Watkins, 2006). In contrast, business interest groups and the AFBF supported a new fast track bill and further multilateral trade liberalization. The Business Roundtable even funded a coalition, the American Lead on Trade, with the aim of building support for a version of fast track legislation that could be approved by Democrats and Republicans. The coalition was joined by more than 550 trade associations and companies, including the National Association of Manufacturers and the US Chamber of Commerce (Devereaux, Lawrence, and Watkins, 2006). The leading farmer organization of large-scale farmers, the AFBF, considered it crucial for US negotiators to have fast track negotiating authority to negotiate trade agreements that opened up new markets for US exports. Accordingly, it asked for the elimination of export subsidies and the reduction of tariff barriers (American Farm Bureau Federation, 2001). By contrast, the leading organization of small farmers, the NFU, aligned itself with the Democratic Party and labour unions. The NFU supports trade

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liberalization on condition that a safety net is created for US farmers and that fair prices for family farmers are ensured, as well as safe, high-quality and healthy food for consumers. In addition, the NFU is against the delegation of trade authority to the president and has asked for the establishment of stronger congressional oversight mechanisms before and during trade negotiations (National Farmers Union, 2008). European Union 1999 CAP reform and WTO negotiations In March 1999, EU member states had agreed on a new CAP reform that would decouple payments from production and gradually replace them with direct compensatory aids for heavily subsidized sectors. The Commission justified the need for further reform with the forthcoming Eastern enlargement and the expiration of the ‘peace clause’ in 2003. From that date onwards, trade-distorting domestic support subsidies linked to production would no longer be exempted from countervailing and retaliatory actions. EU farm ministers underlined the fact that CAP reform had to be linked to the establishment of a new pillar on rural development policy and that agricultural trade liberalization should not call into question the principle of Community preference and the European agricultural model, which is based on multifunctional, sustainable farming, and food quality (European Commission, 1999). Member states’ positions on the CAP reform were divided into an anti-reform and a pro-reform group. Denmark, Finland, Greece, Italy, the Netherlands, Sweden, and the UK supported the Commission’s reform proposal. By contrast, Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, Portugal, and Spain opposed the link made by the Commission between CAP reform and WTO negotiations (Agence Europe, 23 May 1998). The French agriculture minister, Louis Le Pensec, from the Socialist Party, opposed further price cuts in the cereals, dairy, and livestock sectors because of their impact on farmers’ incomes in the region of the Massif Central and in the Paris Basin (Le Monde, 2 April 1998). Le Pensec had been elected by a rural constituency in Brittany (Quimperlé-Finistère), a region with an important dairy sector, so that his main concern was whether the CAP reform would take sufficient account of the interests of small farmers (Hennis, 2005). It was the first time that a French government accepted the need to move away from industrial agricultural production towards sustainable quality agricultural production with more financial support for small farmers (Agence Europe, 20 January 1999). The position of the French Socialist government can be explained by its close link to the farmer organization Confédération Paysanne, which pleads for the maintenance of employment and rural life within a sustainable agriculture model. In July 1999, the French government had also adopted a new agricultural law that put more emphasis on the protection of the

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environment and on the maintenance of the landscape (Coleman and Chiasson, 2002). In March 2009, member states agreed on CAP reform that reduced price support for the cereal, dairy, and beef sectors. The overall approach of the 1999 CAP reform for these sectors was based on a combination of lower support prices and direct compensatory aid. European Commission’s negotiating mandate At the end of June 1999, the General Affairs and External Relations Council adopted the EU’s general negotiating guidelines. The Council agreed on the principle of single undertaking (i.e., nothing is decided until agreement has been reached on all issues), called for the inclusion in the negotiating agenda of the Singapore issues (i.e., investment, competition, trade facilitation, and public procurement), the concept of multifunctionality in agriculture, and duty-free access for products from the LDCs to begin in 2003 (Agence Europe, 23 June 1999). The Commission’s negotiating mandate on agriculture was very defensive. EU member states agreed on reducing market access tariffs, only if the geographical indications for EU products were taken into account in the negotiations. The EU would accept reductions in export subsidies, with the condition that less transparent forms of export support, such as export credits, state trading enterprises (STEs) or food aid were also included under the category of export subsidies (European Commission, 1999). At the same time, the EU wished to keep the system of domestic support with the blue and green boxes. Finally, the Council also specified that the Commission had to inform and consult regularly with the 133 Committee and with the SCA during the negotiations (Agence Europe, 1 October 1999). The reinforcement of this oversight mechanism goes back to a French demand to reinforce the consultation between the Commission and the Agriculture Council, so that the latter should be allowed to examine all possible repercussions before the opening of negotiations with concerned third countries. Council–Commission relationship In this first negotiating stage, the Commission and the Council widely agreed on the general EU position on trade negotiations and therefore to a single voice at the international level. Already in 1997, the agriculture commissioner, Franz Fischler, had declared that the defence of direct payments to farmers would be the EU’s irrevocable position at the next round of WTO negotiations on agriculture (Agence Europe, 17 November 1997). The reductions in price supports in the new CAP reform would be offset in order to take account of the farmers’ role in the preservation of the landscape and environment. Previously, at an EU–Australia meeting, Fischler reiterated that European farmers’ economic

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and social interests would not be ‘sacrificed at the altar of free trade’ (Agence Europe, 14 February 1997). This position of the Austrian agriculture commissioner was in line with that of the more protectionist member states. This convergence of interests between member states and the Commission can also be explained by the need to re-establish confidence between the Council and the Commission. This confidence had been considerably shaken during the Uruguay round negotiations, especially when the Commission signed the Blair House I agreement, without the backing of all member states. In addition, the proposal of trade commissioner Leon Brittan in 1997 to create a transatlantic free trade area had created some mistrust between the Commission and some member states owing to the implication of such an agreement for the agricultural sector. Position of interest groups The COPA/COGECA (hereafter COPA) rejected the Commission’s justification for the need to reform the CAP before the beginning of multilateral trade negotiations and considered it a tactical error for the EU to make concessions in advance (Agence Europe, 17 July 1999). The COPA asked for the inclusion of the concept of multifunctionality, so that agricultural trade liberalization did not bring into question the principles of the CAP. Moreover, COPA is against tariff capping and pleads instead for each country to be allowed to designate an appropriate number of sensitive products (Committee of Professional Agricultural Organisations, 2007). The COPA demanded that export credits be revised, special safeguard provisions be reinforced, and the peace clause extended beyond 2003 (Agence Europe, 12 May 1999). This position was also supported by the French FNSEA, which underlined that the European multifunctional agricultural model had to be taken into account during WTO negotiations (Fédération Nationale des Syndicats d’Exploitants Agricoles, 1999). After the Seattle meeting, the COPA considered that it was preferable to have no agreement at all than to have a bad one. At the same time, it warned the Commission that under no circumstances could it be a question of using agricultural issues as a bargaining chip for agreements in other sectors (Agence Europe, 14 December 1999). The leading organization of small farmers, the CPE, criticized the COPA for defending the European industrialized model of agricultural production. Instead it demanded a sustainable model of agriculture that puts rural employment, the internal market, as well as the quality and the safety of agricultural products at the centre of the CAP (Agence Europe, 18 February 1999). At the international level, the CPE is represented through the international agricultural movement Via Campesina, which is against the inclusion of agricultural issues in the WTO negotiations and pleads instead for food sovereignty for all countries (Agence Europe, 8 December 1999). By contrast, for the European business sector, Business Europe, the main priorities are industrial market access, services liberalization, better WTO rules to

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prevent abuse of anti-dumping, and improved dispute settlement procedures to better enforce the rules (Business Europe, 2008a). The EU’s negotiating position in Seattle asking for the inclusion of the Singapore issues in the negotiating agenda was closely aligned to the demands of the European business sector. Brazil Informal consultations in trade policy The presidency of Fernando Henrique Cardoso (1995–2002) gave priority to expanding exports and strengthening regional trade through MERCOSUR (Veiga, 2005). Cardoso established different consultation procedures on trade policy issues in 1995 by creating a board of foreign trade to improve the coordination of ministries involved in trade policy. In order to enhance access to information on trade negotiations, he also established an informal consultation process with representatives of the business sector, labour unions, and civil society. A few months before the Seattle meeting, in June 1999, the ministry of external relations established two different working groups – the Thematic Groups and the Inter-ministerial Working Group on International Trade of Goods and Services – to discuss the Brazilian negotiating position (Marconini, 2005). The Thematic Groups are roundtables that discuss in depth the different negotiating issues. They include the ministries dealing with trade issues and representatives from the business sector and trade unions. By contrast, the Inter-ministerial Working Group on International Trade of Goods and Services had the main objective of formulating the Brazilian negotiating position in multilateral trade negotiations. It is made up of representatives from the business sector, labour unions, NGOs and the ministries concerned with trade issues. Interest group representatives are simply ‘guests’ of the coordinating departments within the Ministry of External Relations on the basis of criteria defined by the government.1 In contrast to the US congressional oversight procedures, which require the president to consult with Congress before, throughout, and after the negotiations, the Brazilian president can at any time simply abolish this informal consultation process. Parliamentary discussion on the Brazilian negotiating position Although the presidential governing coalition was made up of five partisan veto players, this did not constrain the position of the executive at the international level. Partisan veto players, given the small ideological distance between the two centre parties (PSDB and PMDB) and three centre-right parties (PFL, PTB, and PPB), all supported the government’s negotiating position. They were all united in favour of further agricultural trade liberalization because it would lead to an increase in agribusiness production and to an expansion of exports. After the Seattle meeting, there was a discussion in the Chamber of Deputies on the Brazilian negotiating position. Two left-leaning parties, the

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Workers’ Party (PT) and the Brazilian Socialist Party (PSB), with 59 and 19 seats respectively, criticized the inability of the government to take a more offensive position in trade negotiations. Deputies from these two parties suggested that Brazil should focus on the internal market and on enhancing regional trade cooperation because multilateral trade liberalization was a win game only for industrialized countries, since they were able to keep their markets closed to agricultural products coming from poor countries, such as Brazil. The government underlined that the main issue for Brazil was to overcome protectionist measures in the international agricultural trade regime and to increase Brazilian influence in multilateral trade negotiations (Jornal da Câmara, 7 December 1999). Although there was a parliamentary discussion on the Brazilian negotiating position, it took place after the Seattle meeting, so the Congress was a forum for debate without influencing the negotiating position of the Brazilian government. Position of interest groups Leading Brazilian business interest groups that were organized collectively in the Brazilian Business Coalition (CEB) favoured further trade liberalization and were in constant contact with the Brazilian delegation to Seattle. In February 1999, the Brazilian agricultural confederation, the CNA, together with the Brazilian Association of Agribusiness created the Permanent Forum of International Agriculture Negotiations with the goal of improving the coordination among the agriculture sector in the WTO and MERCOSUR. Although the CNA is also a member of the Brazilian business coalition there were different positions on trade liberalization within this coalition. Whereas the agricultural sector had a more offensive position, some industry sectors (e.g., chemical and electronic industry) were rather defensive. The principal aim of this new forum was to reinforce the position of agribusiness within the ministry of agriculture, a traditional ally of the agricultural sector (Carvalho, 2003). The CNA supported the complete and total elimination of export subsidies as well as food aid, better market access through the reduction of tariffs, reduction of domestic support measures that distort international trade, and revision of the green box criteria, and opposed the inclusion of the concept of multifunctionality in agriculture (Confederação da Agricultura e Pecuária do Brasil, 2002). While the agribusiness and the business sectors in general supported trade liberalization, Brazilian unions had a defensive position because they feared the negative impact of trade liberalization on workers’ salaries and on the employment rate. The three biggest trade confederations opposed the government’s position of increasing agricultural exports. The CUT, the largest Brazilian labour confederation, pointed out that the government’s priority should be the production of agricultural commodities for the internal market and the support of small farmers. In Seattle, the CUT aligned itself with

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the AFL-CIO in favour of the inclusion of social and environmental standards in the negotiating agenda (Carvalho, 2003). But the Cardoso government did not really need to take the positions of labour unions into account since they are the main constituency of the opposition Workers’ Party. Australia Anti-globalization campaign of the One Nation Party The 1998 Australian federal election campaign was dominated by the debate over the need for tax reform and by anti-globalization campaigns (Conley, 2001). The One Nation Party advocated tariff barriers to protect Australian enterprises from ‘unfair’ foreign competition, positioned itself as the supporter of small farmers, and criticized the loss of sovereignty through WTO membership. It was the first Australian political party to raise questions about Australia’s free trade approach (Capling, 2005). Pauline Hanson, the founder of the One Nation Party, accused the Liberal-National government of aggressively promoting agricultural trade liberalization with no concern for the rural population. During the June 1998 Queensland parliamentary election, the strongest electoral base of the National Party, the One Nation Party won 11 of 89 seats (Canberra Times, 6 November 2000). At the federal-level elections in October 1998, however, the Liberal and the National Parties suffered only marginal seat losses. While the Liberal Party lost nine of their 75 seats, the National Party lost only three of its 19 seats. Thus, the Liberal-National government still had a comfortable majority (80 out of the total 148 parliamentary seats) (Parliament of Australia, 2008). In the meantime, Tim Fischer announced his decision to resign in July 1999 as party leader and deputy prime minister. He was succeeded by John Anderson as leader of the National Party and deputy prime minister (Weekly Times, 26 May 1999). The trade portfolio was given to Mark Vaile, also from the National Party. Position of interest groups When preparing for the new round of multilateral trade negotiations, the DFAT arranged formal consultations with interest groups through the TPAC. At the same time, the government of Prime Minister John Howard also reacted to demands from the state and territory governments for greater participation in the government’s multilateral trade policy through the creation of a new advisory committee, the National Trade Consultations Forum, which assembled ministers and senior officials from the federal government and the state governments to discuss trade policy issues (Capling and Nossal, 2003a). Following the Seattle meeting, the deputy secretary of the DFAT, Peter Charles Grey, declared that Australian interests in the WTO could be categorized under three headings. First, international agricultural reform remained

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a key element of Australia’s trade policy objectives: without improved market access for agricultural commodities there would be no successful outcome for the round. Second, Australia had strong and growing interests in services and manufacturing exports. Third, the dispute settlement mechanism was a key element of the WTO system, essential for Australia to improve market access (Joint Standing Committee on Foreign Affairs, 2002). Before and during the Seattle meeting, the leading farmer organization, the NFF, and the sugar industry took an active stance in negotiations to promote agricultural trade liberalization. The NFF hosted parallel meetings of the presidents from the leading farmer organizations in the Cairns Group countries by establishing a new group, the Cairns Group Farm Leaders, which assembles key farm organizations from all the Cairns Group members (National Farmers’ Federation, 2008a). During the WTO ministerial meeting the farm leaders met with Cairns Group ministers. The main purpose of this initiative was to show that farm groups and governments spoke with one voice. The second initiative consisted of the formation of an alliance with an American think tank, the Cordell Hull Institute, with the objective of building support for substantial liberalization in the agricultural sector among business leaders around the world by holding a series of high-level trade policy roundtable meetings. The Australian government backed this initiative.2 The Australian sugar industry (especially Queensland Sugar Ltd) established the Global Alliance for Sugar Trade Reform and Liberalization. This organization groups together the world’s major sugar producers, both exporters and importers. The Australian sugar industry viewed a combination of tariff reduction and quota expansion as suitable mechanisms for substantially increasing market access. It also demanded the total elimination of export subsidies and export credits. On domestic support, it wanted to obtain product-specific reductions in all trade-distorting support (blue and amber boxes) (Joint Standing Committee on Foreign Affairs, 2002).

Conclusion The Seattle ministerial meeting falls under the pre-negotiating phase, in which the major WTO players indicated their positions on the various issues on the negotiating agenda. In an early stage of negotiations, there is no time pressure to concede, especially because at this point in time concessions are perceived by the other negotiators as a sign of weakness. Australia and Brazil started negotiations with a maximalist bargaining position, asking for a total elimination of export subsidies, of all trade-distorting domestic subsidies and a deep cut in all tariff rates. The problem with this bargaining strategy is that it can lead to long negotiations and even to the breakdown of negotiations, especially if all actors start with maximalist positions that are unacceptable to the others.

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The US demand of including workers’ rights and environmental protection and the EU demand of including investment and competition policy in the negotiating agenda was opposed by developing countries. On agriculture, there was a sharp division between the EU and the G-10 on the one hand and Australia, Brazil, and the US on the other following the EU demand of having the concept of multifunctionality included in the negotiating agenda. The failure of the Seattle ministerial meeting to reach an agreement on a new agenda for a new round of trade negotiations was first and foremost the product of the major players’ inability to make symbolic concessions on the content of the draft declaration. This can be explained by going back to the domestic institutions. The USTR Barshefsky came to the Seattle Meeting without the authority to undertake fast track negotiations. After the expiration of fast track negotiating authority in 1994, under the Clinton administration there had been several failed attempts to renew fast track after disagreements between the Republican-dominated Congress and the Democratic president on the inclusion of labour and environmental standards in a new fast track bill. In addition, interest groups were divided on further trade liberalization and on the enactment of a new fast track bill. Business groups and the AFBF, close to the Republican Party, supported trade liberalization and a new fast track bill. By contrast, trade unions, the NFU, and environmental groups, closer to the Democratic Party, opposed it. The importance of campaign funding by business and labour groups, as well as divided government, emerge as the key issues that influenced Republican and Democratic representatives’ voting decisions on the several failed attempts to renew fast track negotiating authority. Because of the domestic deadlock on the fast track negotiating authority, President Clinton and the USTR went to the Seattle ministerial meeting with very little room for flexibility in negotiating the agenda for a new multilateral trade round. The EU did not move from its negotiating position of having the concept of multifunctionality in agriculture included in the new negotiating agenda because member states had clearly defined which issues were to be a part of the new trade round and under which conditions they would make concessions. Major agricultural interest groups were divided over the EU’s negotiating position. Whereas the COPA underlined that the negotiations should not go beyond what had been agreed in the 1999 CAP reform, the CPE opposed WTO negotiations per se and proposed instead a sustainable agricultural model with a focus on the internal market. In Brazil and Australia, there is no ex ante political control in the formulation of foreign policy. The Brazilian president Cardoso established informal consultation mechanisms with interest groups through the Thematic Groups and the Inter-Ministerial Working Group on the International Trade of Goods and Services.

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The agribusiness and the business sectors supported agricultural trade liberalization, while labour unions opposed it owing to the negative effects it might have on workers’ salaries. The agribusiness sector represented through the CNA requested the elimination of export subsidies and food aid, the reduction of tariff rates and of trade-distorting domestic support, and opposed the use of the concept of multifunctionality in agriculture. These demands voiced by the CNA were integrated into the Brazilian negotiating position. All three major labour confederations opposed the government’s strategy of increasing agricultural exports and demanded instead a focus on production for the internal market and support for small farmers. Since the CUT is the main constituency of the Workers’ Party, the Cardoso government could simply ignore its demands. Even though the presidential governing coalition was made up of five partisan veto players, two centre parties and three centre-right parties, they all supported agricultural trade liberalization that would have resulted in an increase in agricultural exports. Thus, the high number of veto players did not have a negative impact on the Brazilian negotiating position. In Australia, the Liberal-National government was challenged by the new One Nation Party, which criticized Australia’s free trade approach. During the Seattle meeting, the Liberal-National government supported a narrow negotiating agenda and opposed the inclusion of labour and environmental standards and the concept of multifunctionality in agriculture. In line with the demands put forward by the NFF and the sugar sector, Australia called for an elimination of all forms of subsidies, for substantial reductions in domestic support and better market access. These domestic political constraints and the lack of time pressure explain why WTO members failed to agree on the negotiating agenda for a new trade round at the Seattle ministerial meeting.

8 Doha Ministerial Conference 2001

International-level negotiations A first assessment of actors’ negotiating positions Negotiations on agricultural trade liberalization started formally in March 2000 at the Committee on Agriculture level. WTO members agreed on a timeframe that allowed members to table initial proposals up until the end of December 2000. They also agreed on a schedule of meetings for the first phase of negotiations (World Trade Organization Special Session of the Committee on Agriculture, 2000c). In June 2000, Australia, the US, and the EU were the first members to outline their positions on export subsidies and domestic support. On behalf of the Cairns Group, Australia asked for a total elimination of all forms of export subsidies, with a gradual reduction totalling 50 per cent to begin in 2004. Australia and Brazil opposed the negotiation of a new ‘peace clause’ (World Trade Organization Special Session of the Committee on Agriculture, 2000d). Under this provision, agricultural subsidies conforming to the green box cannot be challenged under the WTO agreements. Similar to Australia, the US sought to have all agricultural products included in the negotiations, to abolish the special safeguard mechanism (SSM), to eliminate differences between different countries’ levels of tariff reduction commitments, to reduce most trade-distorting domestic support, to eliminate export subsidies and to restrain STEs, to increase all tariff quota volumes, and to reduce trade barriers on GMOs (World Trade Organization Special Session of the Committee on Agriculture, 2000i). By contrast, the EU and the G-10 started with a very defensive position, requesting the retention of the status quo on blue box support because it allows the granting of direct aid decoupled from production and the inclusion of non-trade issues in the negotiating agenda (World Trade Organization Special Session of the Committee on Agriculture, 2000e, f). The US, Canada, and Australia were opposed to keeping the blue box, which in their view 139

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had not really constrained the total EU production. They proposed instead to integrate the blue box support into the amber box, which is subjected to reductions (World Trade Organization Special Session of the Committee on Agriculture, 2000a). During this meeting, several WTO members tabled new proposals. The EU submitted a proposal on export competition, in which it emphasized that not only export subsidies, but also other forms of export support had to be included in the negotiating agenda (World Trade Organization Special Session of the Committee on Agriculture, 2000e). The Cairns Group submitted a new paper on domestic support, which proposed the reduction of trade-distorting domestic support by 50 per cent in the first phase, the revision of the criteria for green box support, and the inclusion of special and differential treatment (SDT) for developing countries, LDCs, and net foodimporting developing countries (World Trade Organization Special Session of the Committee on Agriculture, 2000b). In December 2000, the EU tabled its negotiating proposal on agriculture. The European Commission emphasized that the main aim of the EU was to achieve a balance between trade concerns (market access, export subsidies, and domestic support) and non-trade concerns (the multifunctional role of agriculture). Concerning market access, the EU proposed that the Uruguay round formula be used, which reduces tariffs using a simple average and allows for a minimum reduction per product. The EU also wanted to keep the SSM, which allows for temporary increase in import duty to deal with price falls or import surges, and to reinforce the legal protection for EU quality products through the creation of a register for geographical indications or names of origin (World Trade Organization Special Session of the Committee on Agriculture, 2000g).1 The EU accepted to negotiate on the reduction of export subsidies, on the condition that other forms of export aid, such as export credits, food aid, and monopoly practices of STEs, were included in the negotiations. In the area of domestic support, the EU proposed to maintain the blue box and green box support. A specific reduction should be applied to the various amber box subsidies, which boost exports, such as the US loan deficiency payments. Finally, the EU agreed to provide duty-free access to all products from the LDCs, with the exception of sugar, bananas, and lemons (Agence Europe, 6 February 2001).2 The EU negotiating proposal was discussed with great intensity. While the G-10 agreed with the main points put forward by the EU, the majority of WTO members rejected the EU proposal. Pakistan, India, and Australia accused the EU of protecting European farmers at the expense of agricultural producers in developing countries (World Trade Organization Special Session of the Committee on Agriculture, 2000h). The EU demand of retaining the SSM was supported by a large group of countries, which included the G-10 and the ten members of the Association of Southeast Asian Nations (ASEAN). By contrast, the US and the Cairns Group opposed the retention of

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the SSM because it was only a transitional mechanism in the Agreement on Agriculture. On export subsidies, the US, the Cairns Group, Japan, and the ASEAN countries opposed the EU’s proposal of linking a reduction of export subsidies to all other forms of export aid (World Trade Organization, 2000). Finally, the EU request to maintain the present blue box measures was supported by the G-10 and opposed by the US and the Cairns Group. The latter wanted not only to eliminate disparities between support levels, but also to entirely eliminate agricultural domestic support and export subsidies (World Trade Organization, 2000). In the next meeting of the Committee on Agriculture, at the end of March 2001, African countries submitted a very detailed joint proposal that emphasized the importance of agriculture for their economic development. They underlined that the high levels of protection and domestic support in developed countries meant that they were forced to compete with highly subsidized products from developed countries. The existence of these cheap imports offered them little incentive for increasing local production. In the area of market access, African countries asked for credits to develop their agricultural trade, to reduce tariff levels for developing countries’ exports, to reduce tariff escalation in developed countries, for tariff-free and quotafree market access for exports of LDCs, to keep the SDT, and to introduce an SSM for developing countries. On domestic support issues, they proposed a review of the criteria for green box support. They wanted to have a food aid guarantee, and at the same time demanded the establishment of a mechanism to ensure that food aid would not disrupt domestic production in recipient countries. Finally, they asked for technical and financial aid to enhance their agricultural productivity and to establish an inter-agency fund to assist them if the prices rose above a certain level (World Trade Organization Special Session of the Committee on Agriculture, 2001). In other words, the African group asked for the inclusion of a ‘development’ dimension in the negotiating agenda (Pangestu, 2000). In this first phase of the negotiations, all proposals and statements that had been tabled were considered. The second phase of informal meetings consisted of detailed discussions on market access, export competition, and domestic support. The discussions were organized topic by topic and the meetings were informal. As a result, there is no official record and there are no official documents. These meetings were part of the preparations leading up to the Doha ministerial meeting. Doha ministerial conference 9–14 November 2001 At the Doha ministerial meeting, the subjects discussed included market access for industrial and agricultural products, liberalization in the services sector, and intellectual property rights (World Trade Organization, 2001c). In order to make sure that every member was sufficiently informed about progress on the proposed draft declaration, informal meetings took place at

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the same time as the formal meetings between trade ministers (Gallagher, 2005). Furthermore, a special group, the ‘Friends of the Chair’, was set up with the function of resolving specific controversies that arose in the smaller groups. This group subsequently reported back to the chairs of the main groups (World Trade Organization, 2001c). In the aftermath of terrorist attacks on 11 September 2001, the US was more determined than ever to initiate a new round of trade negotiations. The USTR, Robert B. Zoellick, pointed out that the most important message from the Doha meeting must be nations’ commitment to free trade (World Trade Organization, 2001b). The change from a Democratic to a Republican administration also made it possible for the US to remove their insistence upon the inclusion of binding labour and environmental standards in the Doha declaration (Panagariya, 2002b). In Doha, WTO members agreed on the Doha ministerial declaration, which consisted of a broad list of negotiating issues, such as implementation of the present agreements, agriculture, services, non-agricultural (industrial) market access products (NAMA), trade and environment, Singapore issues, trade-related intellectual property rights (TRIPs), geographical indications, SDT for developing countries, technical cooperation and capacity building (aid for trade), and dispute settlement. A deadline for the completion of the Doha negotiating agenda was set for 1 January 2005. In order to take the demands of developing countries into account, the new trade round was called the Doha Development Agenda (World Trade Organization, 2001a). WTO members agreed that SDT for developing countries, which includes longer time periods for implementing trade agreements, should be an integral part of all elements of the negotiations and committed themselves to guaranteeing duty-free and quota-free market access for products originating from LDCs (World Trade Organization, 2001d). Doha ministerial declaration on agriculture In the area of agriculture, the Doha ministerial declaration called for comprehensive negotiations on improving market access, reducing export subsidies with the aim of phasing them out, substantial reductions on trade-distorting domestic support, and the inclusion of non-trade concerns (World Trade Organization, 2001c). The vague wording of ‘substantial reductions in trade-distorting domestic support’ left much room for a wide range of interpretations. From the very beginning, it was unclear what ‘substantial’ meant. The Cairns Group considered the wording ‘substantial’ to be too weak, but accepted it as a general opening for negotiations in all categories of subsidies (World Trade Organization, 2001c). By contrast, the EU and the G-10 considered that the wording reduction of export subsidies ‘with a view to phasing [them] out’ went too far. Accordingly, they underlined that members were only committed to work ‘in the direction of’ such elimination and had not agreed on a deadline for reaching such a goal.

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The Doha declaration did not make it compulsory to scrap export subsidies, but simply to negotiate their reduction. Export subsidies now included all kinds of agricultural aid, including US export credits, as well as STEs used mainly by Canada and Australia. The EU regarded the reference to ‘reductions’ of export subsidies as a success because it weakened the proposal of the Cairns Group that had asked for a total elimination of export subsidies (Agence Europe, 15 November 2001). In addition, the EU and the G-10 countries underlined that they would only negotiate production-linked subsidies. Moreover, green box subsidies were explicitly exempted from the Doha declaration as the support under this category has minimal trade-distorting effects. The Cairns Group considered that green box subsidies do distort trade because of their sheer volume ($78 billion per year). Accordingly, they proposed to define more narrowly the criteria for eligible programmes and to limit green box government spending. Finally, the inclusion of non-trade concerns and the inclusion of geographical indications was a concession made to the EU and to the G-10. Time framework for the Doha round The Doha declaration set a timetable for the conclusion of the agricultural negotiations that included three deadlines: establishment of specific rules and formulae on agricultural trade liberalization by 31 March 2003; submission of negotiating proposals not later than the Cancun ministerial conference in September 2003; and setting a final deadline for the conclusion of the negotiations by 1 January 2005. The Doha declaration also set intermediate deadlines for tasks to be completed before the next ministerial conference. WTO members should circulate their first draft proposals by 31 March 2003 and before the Cancun meeting present their negotiating proposals. Finally, by January 2005, the negotiations should be concluded as part of a single undertaking. Setting deadlines and embedding negotiations in a time dimension was important in order to structure negotiations and to force negotiators to think about the completion of parts of an overall agreement within a certain period of time.

Domestic institutions United States Congressional negotiations on new trade and farm bills In January 2001, the new US president George W. Bush announced that the renewal of fast track negotiating authority would be a top priority on his agenda (Destler, 2005). Republicans only had a narrow majority in the House of Representatives (221 to 212 Democrats), and in the Senate there was a stalemate situation, with Democrats and Republicans both holding 50 seats. After Senator Jim Jeffords announced in May 2001 that he would

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become independent, the number of Republican seats was reduced to 49, giving Democrats the control of a majority in the Senate for the first time since 1994 (Delta Farm Press, 6 June 2001). This meant that Democrats had all the majority privileges in the Senate, including the chairmanship of the Senate Finance Committee, which shifted from Charles Grassley (R-Iowa) to Max Baucus (D-Montana) (Kerremans, 2003). This change in circumstances meant that it would now be even harder to gather a Republican majority in Congress behind a new fast track bill. In June 2001, the senior Republican of the Ways and Means Committee, Phil Cane (Illinois), with the support of 62 other Republicans, presented a fast track bill (HR 2149) that completely excluded labour and environmental issues. The House Republicans immediately approved the bill at the Committee level and even wanted to bring it to a floor vote before the summer break. However, the House Democrats opposed it. For Dick Gephardt (D-Missouri), the fast track bill proposed by the Republicans represented the most extreme view on labour and environmental standards, and Sander Levin declared that it would never gain Democratic support (Destler, 2005). Since the Republican Party had only a thin nine-seat majority in the House of Representatives, the US administration would only be able to pass the trade bill with the support of some Democrats. Moreover, at this stage it was unclear if all Republicans would support a new trade bill because, as recently as one year earlier, 33 Republicans and 22 Democrats had backed a resolution to have the US withdrawn from the WTO (Destler, 2005).3 In October 2001, Bill Thomas (R-California) presented the Bipartisan Trade Promotion Authority Act (HR 3005, hereafter the TPA bill), which included enforceable labour and environmental standards, but made no reference to sanctions for enforcing them in trade agreements (Devereaux, Lawrence, and Watkins, 2006). On 9 October, the TPA bill passed in the Ways and Means Committee by 26 to 13, with 24 Republicans and only two Democrats supporting it (Destler, 2005). In order to have the bill approved on the floor, Bill Thomas still had to gather a bipartisan majority behind the bill. In order to convince five or six House members to support the bill in exchange for specific concessions for their constituencies (Kerremans, 2003), he now focused on Republican members particularly responsive to pork barrel politics (Destler, 2005). A new farm bill, the Farm Security and Rural Investment Act of 2002 (hereafter the 2002 farm bill), had been introduced in the House in July 2001 and was being discussed at the same time as the new fast track bill. Several senators opposed the bill owing to additional costs and the subsidies on overproduction. Representatives from rural constituencies had threatened to vote against fast track unless the farm legislation was enacted first. The chair of the House Agriculture Committee, Larry Combest (R-Texas), agreed to vote in favour of the TPA bill, if in exchange the administration increased farm

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subsidies for a variety of commodities, such as cereals and cotton. Moreover, the introduction of a new amendment on the inclusion of special provisions in the TPA bill on import-sensitive products and cyclical and perishable agricultural products was a way of buying the support of at least three additional votes from three members from Florida: two Republicans, Dave Weldon and Cliff Stearns, and one Democrat, Jim Davis (Kerremans, 2003). Thus, in May 2002, the Farm Security and Rural Investment Act passed with large majorities in Congress: House Democrats supported the farm bill by 137 to 63 and Republicans by 141 to 73; in the Senate, the support was only slightly weaker, with 64 votes in favour and 35 against (Wilson, 2005). Given that in November 2002 there had been Senate elections with some close competitions in states, such as Iowa and South Dakota, increasing the agricultural support from major agricultural commodities was also a way for the Republican Party to try to win more votes in these Midwestern states, which all have important agricultural sectors (The Economist, 9 May 2002). The agricultural commodities most valuable to them, including cereals, soybeans, and dairy products were all included in the new agricultural subsidies. In Iowa and South Dakota, two Democrats were re-elected, Thomas R. Harkin and Tim Johnson respectively. Finally, in Missouri, the Republicans were able to win a new seat with the election of James Talent, who replaced the Democrat Jean Carnahan (US Senate, 2008). Until the last moment, the administration was rather reluctant to put the trade bill to a vote, and it even urged Republican House leaders to withdraw it from the agenda because it was uncertain about whether a majority would support it. By the time they had arrived at this point, DeLay had taken over leadership of the process from Thomas and put the bill on the floor for a vote. When the normal period of voting ended without a majority in favour of the TPA bill, DeLay simply held the vote open until one of the representatives switched his position. Jim DeMint (R-South Carolina) changed his initial ‘no’ vote into ‘yes’ and was immediately followed by two other textile faction members from North Carolina, Robin Hayes and Cass Ballenger. On 6 December 2001, the House of Representatives passed the TPA bill by a vote of 215 to 214. From 212 Democrats, only 21 supported the bill and 23 from 221 Republicans voted against it. In exchange for his vote, DeMint received a letter signed by the Republican leadership (Hastert, DeLay, and majority leader Dick Armey [R-Texas]) with specific concessions for the textile industry in his constituency (Destler, 2005). After the TPA bill passed in the House of Representatives by this narrow one-vote majority, the chair of the Senate Finance Committee, Max Baucus (D-Montana), immediately introduced a new trade bill, the ‘Trade Act of 2002’ (HR 3009), which linked trade promotion authority to a new TAA programme. As Kerremans (2003) points out, this strategy of linking the TPA bill to TAA was a way of increasing the pressure on the House leadership and the administration to accept a more generous TAA programme in terms

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of coverage and budget. For example, eligibility was broadened to include farmers and secondary workers employed in business sectors that supply factories that close down owing to foreign competition (The Economist, 1 August 2002). The inclusion of TAA moved the trade bill more in the direction of the priorities of the Democrats and was essential to securing of a majority in favour of the TPA bill. In June 2002, the TPA bill passed in the House with a very narrow majority of 215 ‘yes’ votes and 212 ‘no’ votes along partisan lines: 183 House Democrats rejected the trade bill and only 25 supported it, while the House Republicans approved it with a broad majority of 190 ‘yes’ votes and 27 ‘no’ votes (US House of Representatives, 2002a). From the total 50 Democratic senators, 29 voted against, 20 in favour and one abstained. Among the 49 Republican senators, 44 voted in favour and five against (US Senate, 2002). On 6 August 2002, the president signed the TPA bill into law. Major provisions of the 2002 Trade Promotion Authority bill The TPA bill begins with a general statement that links the expansion of international trade to the national security of the US. Trade agreements are considered to be crucial for economic growth and US leadership in the world. The TPA bill lists 17 principal negotiating objectives for agreements, which include agriculture, industrial goods, services, labour and the environment, TRIPs, and electronic commerce (US House of Representatives, 2002b). In the area of agricultural issues, the main priority for the US was to improve foreign market access for US products, especially for cereals. The TPA listed the following negotiating objectives: reduction or elimination of tariffs and export subsidies; maintenance of agricultural support programmes for family farms; inclusion of adjustment periods for importsensitive US agricultural products; elimination of STEs; addressing unjustified requirements affecting new technologies (such as GMOs and sanitary and phytosanitary regulations); elimination of practices that adversely affect trade in perishable or cyclical products; maintaining bona fide food assistance programmes and preserving US export credit programmes (US House of Representatives, 2002b). In order to obtain support from members with important agricultural constituencies, the TPA now requires the USTR to identify ‘import-sensitive’ products before undertaking tariff reduction negotiations on these products. These include more than 200 specific agricultural commodities, such as dairy products, fruits and vegetables, sugar, beef, tobacco, and wool (Sek, Hanrahan, and Beth, 2002). In the TPA bill, Congress established a Congressional Oversight Group (COG) to better supervise the USTR in multilateral trade negotiations by formulating specific negotiating objectives and strategies. The COG is a bipartisan subcommittee of the House Committee on Ways and Means that complements the already existing close consultation of the USTR with the congressional advisors on trade policy, with five members from each house (Office of the United States Trade Representative, 2007). The COG on Trade is chaired by the chairperson

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of the Committee on Ways and Means of the House of Representatives and the chair of the Senate Finance Committee. It is made up of the chairmen and ranking members of the House and the Senate, which have jurisdiction over any law affected by trade agreements currently under negotiation (US House of Representatives Committee on Ways and Means, 2002). Congress also elaborated a very detailed three-step ‘fire-alarm’ oversight mechanism that requires the president to consult with Congress before, throughout, and after the negotiations. First, the president is required, before initiating negotiations or signing an agreement to provide written notice and to consult with the relevant Committees (at minimum the House Ways and Means and Senate Finance Committee) and the COG at least 90 calendar days prior to entering into negotiations concerning US objectives. Second, the president is also required, during the negotiations to consult with the Ways and Means and Agriculture Committees and the COG. Finally, before entering into any trade agreement, the president must consult with the relevant committees and the COG concerning the nature of the agreement, how and to what extent the agreement will achieve the applicable purposes, the objectives of the act, and all matters concerning implementation (US House of Representatives Committee on Ways and Means, 2002). The consultations at the level of congressional committees include interest groups affected by the proposed agreement. Positions of major interest groups on the new trade bill Interest groups were divided on the issue of renewal of fast track authority. Whereas business interest groups supported the TPA bill without labour and environmental standards, trade unions continued to oppose TPA without these same provisions. In May 2002, in a letter to Senate, the AFL-CIO, together with 135 of the nation’s most influential NGOs and the NFU citizens’ groups, unions, consumers groups, family farm advocates, and environmentalists, declared their opposition to fast track. They used this letter to call on the Senate to ensure that the benefits of trade were broadly shared out, the environment protected, and that ordinary citizens had full access to the decision-making process on trade agreements (AFL-CIO, 2002; National Farmers Union, 2006). By contrast, the AFBF, together with 80 other commodity groups, in June 2001 supported the renewal of fast track negotiating authority for the president (American Farm Bureau Federation, 2001). European Union Council–Commission relationship In November 2000, the Council of Agriculture adopted the general EU negotiating position, which included further reductions in domestic support in accordance with the 1999 CAP reform and the multifunctional role of agriculture (Agence Europe, 22 November 2000). These general negotiating guidelines on

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agriculture were then forwarded to the General Affairs and External Relations Council, which adopted them in December 2000. In September 2001, trade ministers from the EU member states met informally with the trade commissioner Pascal Lamy and agreed that the negotiating guidelines issued for Seattle remained valid for the Doha meeting (Agence Europe, 8 September 2001). The Council of Ministers gave the Commission a broad negotiating mandate on agriculture issues, thus assuring the EU’s flexibility in the upcoming negotiations. At this stage, the relationship between Council and Commission was primarily cooperative. Within the Commission, there were no differences between trade and agriculture commissioners on the EU negotiating position. Pascal Lamy broadly agreed with Franz Fischler that the EU was ready to negotiate reductions in tariff barriers, only if the other negotiating parties accepted the inclusion of non-trade aspects of agriculture in the negotiations (Agence Europe, 3 October 2001). Brazil Parliamentary discussion on trade liberalization After the Doha ministerial meeting, deputies from the governing coalition Osmar Terra (PMDB), B. Sá (PSDB) and Osório Adriano (PFL), unanimously supported the Brazilian agriculture minister Marcus Vinicius Pratini de Moraes (from the PFL) in the Chamber of Deputies for his position against agricultural trade protectionism (Jornal da Câmara, 19 November 2002). From May 2001, the central issue discussed in the Chamber of Deputies was whether Brazil should become a signatory to the Free Trade Area of the Americas (FTAA). There was a meeting of representatives of the Brazilian parliament with representatives of 33 other American countries to discuss these issues. The Brazilian delegation was represented by the presidents of several committees dealing with trade issues. All were from parties that were part of the governing coalition. By contrast, deputies from the opposition parties were excluded from the Brazilian delegation (Jornal da Câmara, 24 May 2001). In May 2001, for the first time, there was a proposal to amend the constitution that would have resulted in power being shared between Congress and the president, similar to the provisions contained in the US fast track negotiating authority. The Workers’ Party even proposed the introduction of an ex ante control mechanism to provide a formal negotiating mandate for the executive, whenever the president was to negotiate trade agreements. But this proposal was rejected by a majority of representatives (Jornal da Câmara, 19 November 2002). Australia Establishment of the WTO Advisory Group Trade unions and environmental groups criticized the way the government had defined Australia’s negotiating interests, arguing that the government had

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totally ignored their positions on the social and environmental impact of trade agreements (Capling and Nossal, 2003a). In June 2001, Mark Vaile reacted to this criticism by announcing that Australia would create a new advisory group, the WTO Advisory Group, to better define its negotiating proposals for the Doha ministerial meeting. This advisory group included representatives from the major leading Australian organizations, such as the NFF, ACTU, and the BCA (Australian Department of Foreign Affairs and Trade, 2001). The BCA, the leading business organization, openly supported the negotiating position of the government in the WTO. The BCA’s position is that a country like Australia, with a small and open economy and no membership of any major trading bloc, has a ‘vital national interest’ in global free trade because it increases access to new markets. In informal consultations with the government, the BCA advocated the continuation of multilateral trade negotiations, while at the same time supporting the negotiation of bilateral free trade agreement (FTA) with the US, China, Japan, South Korea, and ASEAN countries (Business Council of Australia, 2008). All trade unions opposed trade liberalization without the inclusion of core labour standards in trade agreements as well as some protection of domestic industries (Australian Council of Trade Unions, 2001). The ACTU criticized Australia’s dependence on agricultural exports. It proposed instead that Australia should develop its manufacturing sector to provide jobs and have a stable economy in the future (Australian Council of Trade Unions, 2003). This was also the official position of the opposition Labor Party.

Conclusion At the Doha ministerial conference, WTO members agreed on a broad negotiating agenda in the Doha ministerial declaration in order to integrate the demands of all actors. The ambiguous terminology of the Doha declaration reflected the significant differences among major players. Broadly speaking, the division was between three major groups: agricultural exporting countries, such as the Cairns Group and the US, industrialized countries that highly subsidize their agricultural sector, for example, the EU and the G-10, and finally developing countries that were primarily concerned with the inclusion of SDT in the negotiating agenda. At the Doha ministerial meeting, WTO members agreed on ‘substantially’ improving market access, reducing ‘with a view of phasing out’ export subsidies, substantially reducing trade-distorting domestic support, including non-trade concerns in negotiations, providing SDT for developing countries, and taking their demands on food security and rural development into account. The fuzzy wording of ‘substantial’ and ‘reduction with a view of phasing out’ left room for different interpretations. It reflected the differences between different groups of countries with more offensive positions,

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such as the US, Brazil, and Australia, and those with a defensive position, including the EU. The Doha ministerial declaration provided not only a broad framework for the upcoming negotiations, but it also established a timetable for the conclusion of the negotiations. This timetable envisaged 31 March 2003 as the deadline for member states to agree on specific formulae and rules for further agricultural trade liberalization. At the Cancun ministerial conference in September 2003, according to the agreed timetable, they would submit their negotiating proposals. By January 2005, the negotiations would be concluded. At this second stage of negotiations, it was important to set intermediate deadlines for establishing a negotiating structure as well as to put pressure on negotiators to agree on the tabled issues within the agreed timeframe. Before and during the Doha ministerial meeting, the US Congress was discussing a new trade and also a farm bill. Although there was a Republican president and the House of Representatives was Republican-dominated, the Republican Party had only a thin nine-seat margin in the House. Between May 2001 and 2003 the Senate was an institutional veto player because Democrats had a one-seat advantage, with 50 seats against 49 Republican seats. With this thin House margin and a Democratic-dominated Senate, the administration needed the support of some Democratic representatives because it was not clear that all Republican representatives would vote in favour of the new TPA bill. Republican representatives in the House Agriculture Committee threatened to vote against the new TPA bill, if the farm bill was not put to a vote before the TPA bill. In order to gather the support of the House of Representatives, the administration agreed to increase agricultural subsidies for wheat and cotton producers. In addition, to obtain the support of Democratic representatives from Florida, the administration included a special provision in the TPA bill for import-sensitive, cyclical, and perishable agricultural products. In terms of the executive–legislature relationship, the new TPA bill strengthened the oversight mechanisms of Congress by establishing a new bipartisan committee, the COG, which consults with the USTR before and during multilateral trade negotiations. In addition, Congress established a very detailed three-step fire-alarm mechanism that requires the president to consult with Congress before, throughout, and after negotiations. In the EU, member states simply confirmed the broad negotiating guidelines of the European Commission issued for Seattle. The EU agreed to negotiate on further reductions of domestic support in line with the 1999 CAP reform, reductions of export subsidies, and market access under the condition of including non-trade concerns in the negotiating agenda. In Brazil, there was unanimous support from the governing coalition parties on the Brazilian negotiating position asking for better market access,

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the reduction of domestic support, and the elimination of export subsidies. At this stage of negotiations, the high number of partisan veto players was irrelevant. Before the Doha meeting, the main issue under discussion was whether Brazil should sign the FTAA in 2005. In Australia, labour unions, environmental groups, and the opposition Labor Party criticized the focus of the Liberal-National government on agricultural issues and its complete neglect of the manufacturing sector. In June 2001, the trade minister, Mark Vaile, decided to create a new advisory group, the WTO Advisory Group, which included representatives from major business groups, labour unions, academia, and NGOs.

9 Cancun Ministerial Conference 2003

International-level negotiations Presentation of detailed negotiating proposals In October 2002, the United States presented a detailed negotiating proposal asking for reductions in domestic support and the total elimination of export subsidies over a five-year period. In the area of market access, the US proposed the use of the Swiss formula that harmonizes tariff levels through substantial tariff reductions, so that tariffs on agricultural products would not be higher than 25 per cent, tariff-rate quotas on agricultural imports for sensitive products would increase 20 per cent, and the Special Safeguard Mechanism (SMM) would be phased out over a five-year period. The US position on domestic support suggested reducing the amber box to a limit of 5 per cent of each country’s total agricultural production and keeping the de minimis exemptions. It proposed blue box reductions over a three- (for developed countries) and five-year period (for developing countries) (US Department of Agriculture, 2002). But the US proposal made no reference to green box support (see Table 9.1). The more defensive position of the US regarding minimal amber box reduction can be explained with the, at that time, recent passing of the 2002 farm bill, which increased agricultural expenditure by extending direct payments and creating new countercyclical payments (Sumner, 2003b). On behalf of the Cairns Group, Australia presented a negotiating proposal, in which it suggested introducing overall caps on green box spending (e.g., 5 per cent of annual agricultural production), the removal of some income support programmes from this box (Cairns Group, 2002a), and the elimination of amber boxes that exceeded de minimis levels of support. In its place, Australia suggested the creation of a new mechanism that would allow developing countries and LDCs to impose an additional duty to protect their agricultural industries from subsidized products (Cairns Group, 2002b). Finally, Australia demanded the total elimination of export subsidies through a reduction of annual export subsidies by 50 per cent over a 152

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three-year period (for developed countries) and a six-year period (for developing countries) (Cairns Group, 2002c) (see Table 9.1). The EU reacted by adopting a more defensive negotiating position. With the support of the G-10 countries, the EU suggested using the Uruguay round formula for reducing tariffs. This formula foresaw progressive reductions of on average 36 per cent and a minimum reduction of 15 per cent. Amber box support would be reduced by 55 per cent starting from the 2006 binding commitment level and de minimis exemptions would be eliminated, whereas domestic support in the green and blue boxes categories would be retained. The EU accepted a 45 per cent reduction in export subsidies for products of interest to developing countries, if export credit guarantees were also included under the category of export subsidies (Hanrahan, 2003) (see Table 9.1). In order to reconcile these three different negotiating proposals, the chairperson of the WTO Committee on Agriculture, Stuart Harbinson, prepared a draft text in March 2003, known as the ‘Harbinson text’. The Harbinson text: trying to find a middle ground Regarding market access, the Harbinson text recommended the reduction of tariffs through a categorization of products by the level of the starting tariff (a banded approach), a compromise between the Uruguay round approach and the Swiss formula. The text foresaw three bands of tariff rates with reductions over five years: for tariffs higher than 90 per cent ad valorem (percentage of price), the average cut would be reduced by 60 per cent subject to a minimum reduction of 45 per cent per tariff line (minimum cut for each product). For agricultural tariffs lower than or equal to 90 per cent but greater than 15 per cent, the simple average reduction would be 50 per cent, subject to a minimum reduction of 35 per cent. Finally, for all agricultural tariffs lower than or equal to 15 per cent, the average reduction would be 40 per cent subject to a minimum cut of 25 per cent. For developing countries, the Harbinson text foresaw four bands of tariff rates and a ‘special products’ category (see Table 9.1) (World Trade Organization, 2004a). The Harbinson text recommended the elimination of export subsidies over a ten-year period. Concerning domestic support, the amber box category should be reduced by 60 per cent and new rules would be established to cover export credit and food aid. Blue box support should be capped and then reduced by 50 per cent over five years. The blue box would be integrated into the amber box category, and the de minimis exemptions would be cut by half over five years (see Table 9.1) (World Trade Organization Special Session of the Committee on Agriculture, 2003). The EU rejected the Harbinson text as a basis for negotiations because it placed the greatest adjustment burden on the EU. The EU also opposed subjecting blue box subsidies to the same rules as amber box support. In contrast, the US and the Cairns Group accepted the Harbinson text as

154

Market access

Domestic support

Elimination of export subsidies over a five-year period; end of export monopolies for STEs

Harmonization of tariff levels among countries, with no tariff higher than 25% (Swiss formula); increase of tariff-rate quotas by 20% for sensitive products; gradual abolishment of the SSM over five years

Reduction in the amber box subsidies, with a limit to 5% of each country’s annual agricultural production; keep the de minimis exemptions; reduction in the blue box support over a three years (developed countries) and five years (developing countries)

Elimination of export subsidies within three years (developed countries) and six years (developing countries), with an initial reduction of 50%

Swiss formula; creation of a new mechanism allowing developing and LDCs to impose an additional duty to protect their agricultural sector from subsidized products

Introduction of overall caps on green box subsidies (5% of annual agricultural production); elimination of the amber box de minimis support for developed countries that exceed 5% of their agricultural production

Reduction of export subsidies by 45%; inclusion of STEs and credit aid in the category of export subsidies

Reduction of tariffs by 36% on average, with a 15% minimum reduction (Uruguay round formula)

Reduction of amber box support by 55%; elimination of amber box de minimis exemptions; keep the current rules in the green and blue boxes categories

Elimination of export subsidies over ten years

Classification of products by the level of starting tariff (banded approach); three bands of tariff rate reductions for developed countries over five-years and smaller reductions for developing countries over ten years

Amber box reduction by 60%; blue box reduction by 50% over five years; integration of the blue box in the amber box category; cuts in the de minimis exemptions by 50% over five years

Harbinson text

US proposal

Export subsidies

Cairns Group*

Summary of the negotiating positions in the agricultural negotiations

EU

Table 9.1

Sources: Own table based on data from Cairns Groups (2002a, b, c), US Department of Agriculture (2002), and World Trade Organization Special Session of the Committee on Agriculture (2003). * The negotiating proposal of the Cairns Group includes the negotiating position of Australia and Brazil. It was only after the building of the G-20 in August 2003 that Brazil first took a negotiating position independent of the Cairns Group.

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a point of departure for the negotiations, but considered that the ten-year phase-out schedule envisaged for the elimination of export subsidies was too long. In line with the position of the US Congress, the USTR opposed the 60 per cent reduction of amber box support because it would still enable the EU to use more amber box support than the US. Moreover, in the 2002 TPA bill Congress had set out the preservation of export credit programmes as a major negotiating objective (Hanrahan, 2003). For these reasons the USTR would not accept the inclusion of these support programmes in the category of export competition support, a category that under the proposal faced reduction and eventual elimination. The Australian government considered that the tariff reductions of the Harbinson text would not result in improved access to markets protected by tariff quotas (Weekly Times, 19 February 2003). During the negotiations, the NFF had urged the Australian government to reject this proposal because it would not help to dismantle agricultural trade protection (Weekly Times, 2 April 2003). As a result of the degree of difference, WTO members were unable to meet the deadline of 31 March 2003. This deadline had been established in the Doha ministerial meeting for reaching agreement on how to reduce agricultural tariff barriers on market access, export competition, and domestic support. EU–US joint proposal and the emergence of the G-20 In August 2003, the EU and the US presented a joint paper on agriculture to move negotiations forward. On domestic support, the EU–US proposal foresaw a reduction of the amber box support according to a percentage rate to be negotiated. WTO members should be able to use blue box subsidies based on fixed areas and yields (like the US countercyclical payments), or payments made on 85 per cent or less of the base level of production or livestock payments based on a fixed number of animals (as employed in the EU). By the end of the implementation period, blue box support should not exceed 5 per cent of the total value of agriculture production and the sum of the permitted de minimis support should be reduced (EU–USA Framework Proposal, 2003). In contrast to the banded approach, the EU and the US called for the application of a blended formula that separated products into three groups. One group of tariffs would be reduced according to the Uruguay round approach, allowing for the negotiation of the average and minimum reductions. A second group of tariffs would be reduced using the Swiss formula. A third group of tariff rates would be duty-free for the LDCs, and developing countries would have longer implementation periods and lower tariff reductions (EU–USA Framework Proposal, 2003). Regarding export competition, the proposal focused essentially on three items: export subsidies, export credits, and the abolition of privileges of STEs. It suggested the elimination of export subsidies over a period of

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time. These would be negotiated for a specific list of products of particular interest to developing countries. The US agreed to the reduction of export credits in parallel with export subsidies. Finally, there should be a change (‘adjustment’) on the full benefits of special and differential treatment (SDT) to ‘significant’ net agricultural exporting countries (EU–USA Framework Proposal, 2003). This was a specific reference to emerging economies, such as Brazil and Argentina. Compared to their original proposals, the EU–US joint proposal may be characterized as a step back for the US and a step forward for the EU. The US went one step back owing to the newly enacted farm bill, whereas the EU could be more flexible because of the recent reform of the CAP. The EU–US joint proposal limited the proposed elimination of export subsidies to products of particular interest to developing countries. In this way, the US abandoned its initial position, which had called for the full elimination of export subsidies. The EU–US joint proposal, however, took a step back from the previous proposals because it did not include any specific details on percentages for tariff or domestic support reductions. In addition, the proposal wanted to exclude net agricultural exporting countries from the benefits of SDT. Australia and Brazil criticized the EU–US joint proposal for its vagueness on how to further reduce domestic support. In addition, Australia opposed the elimination of the privileges for STEs, because Australia uses it for the monopoly export arrangements for its wheat exports (Agra Facts, 15 August 2003). After the presentation of the EU–US joint paper, a new coalition of a group of developing countries, the G-20,1 under Brazilian leadership, presented a counter-proposal. The G-20 proposed the reduction of domestic support subsidies on a product-specific basis, the elimination of blue box support, the reduction or restriction of green and amber box subsidies for developed countries, and the complete elimination of export subsidies. Regarding domestic support, the G-20 advocated deeper reductions than those proposed by the EU–US joint paper. On market access, the G-20 followed the blended approach only for developed countries, adding that reductions must offer meaningful market access in an ‘effective and measurable way’ and would be higher on processed products (reducing tariff escalation). The G-20 wanted to have a longer implementation period for developing countries, without specifying average and minimum reductions. The G-20 demanded an extension of SDT for all developing countries and a total elimination of export subsidies for all tropical products (World Trade Organization, 2003d). The G-20 also requested that agricultural trade and development be linked as a way of contributing to the eradication of poverty in rural areas (G-20, 2005a). This was also the position of the party of the newly elected Brazilian president Luiz Inácio Lula da Silva, the Workers’ Party, and of the Brazilian trade union CUT closely linked to it. Lula da Silva exhibited leadership by creating this coalition. It was a way of demonstrating to domestic constituencies

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that he intended to take a more offensive position on multilateral trade negotiations. The Workers’ Party had a rather defensive position on trade liberalization for industrial products and agricultural commodities because, as the party of the CUT, it feared the negative impact of further trade liberalization on workers’ salaries and on the employment rate in the industrial sector. Moreover, the CUT and the PT favoured the production of agricultural commodities for the internal market. During the Cardoso presidency, the Workers’ Party had more or less opposed the government’s trade policy strategy of increasing agricultural exports because it would lead to a situation of dependency upon industrialized countries. In line with the position of the CUT, Lula da Silva criticized industrialized countries for their demand that tariff rates in the industrial sector be eliminated, while at the same time refusing to open their markets for agricultural trade products (Confederação Única dos Trabalhadores, 2007). At this point in negotiations, WTO members had yet to agree on which of these negotiating proposals should be discussed at the Cancun ministerial meeting. Hence on 24 August 2003, the chair of the General Council, Carlos Pérez del Castillo, circulated an annex with comments on all these negotiating proposals, which would then be submitted to the Cancun conference as a draft ministerial declaration, known as the Pérez del Castillo text (World Trade Organization, 2004a). Cancun ministerial meeting 10–14 September 2003 There were four central issues to be discussed in the Cancun meeting: agriculture, NAMA, Singapore, and development issues (World Trade Organization, 2003g). During the first day of the ministerial meeting, a newly formed group of four African countries (Benin, Burkina Faso, Chad, and Mali), the C-4, which were highly dependent on cotton exports, asked for the total elimination of domestic support and export subsidies for cotton over a three-year period starting on 1 January 2004 (World Trade Organization, 2003f). The C-4 underlined that total subsidies in developed countries amounted to almost as much as the value of world trade in cotton (World Trade Organization, 2003e). The US, which highly subsidizes the cotton sector, reacted very defensively by pointing out that distortions in cotton were not only caused by subsidies in the sector, but also by industrial policies that support production of synthetic fibres and high tariffs on finished products. This was a direct criticism of the EU, which declared that its production and exports were too small to have an impact on world cotton prices (World Trade Organization, 2003e). Following two days of discussions, the positions of delegations were still far apart. The ACP group circulated a new paper, in which they asked for SDT treatment for developing countries, the use of an SSM, the preservation of PTAs,2 and longer implementation periods. On market access, they called for higher tariff reductions for developed countries and opposed the

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blended formula proposed in the EU–US joint framework because it would allow developed countries to put products with high tariffs in the flexible ‘import sensitive’ category (World Trade Organization, 2003b). At the Cancun meeting, the Cairns Group was significantly weakened by the emergence of the G-20. Nine states left the Cairns Group in order to join the G-20. At the same time, Australia was not really engaged in the multilateral level negotiations because it was negotiating an FTA with the US (Capling, 2005). The WTO director-general, Mike Moore, and the EU publicly criticized Australia for being unable to provide the leadership needed in the Cairns Group to move the negotiations forward. As the conference’s halfway point passed, the Mexican foreign minister, Luis Ernesto Derbex, circulated a draft declaration, known as the Derbex text. On agricultural issues, the Derbex text integrated the EU–US joint proposal and the G-20 proposal, but it did not include any percentages for tariff or subsidy reductions (World Trade Organization, 2003c). The EU, US, the Cairns Group and the G-20, however, rejected this draft text because they considered that their particular demands had not sufficiently been taken into account (World Trade Organization, 2003a). On the cotton issues, the Derbex text remained vague and did not address the demands of the C-4. The pending draft declaration proposed instead that the WTO director-general should consult with the Food and Agriculture Organization and the International Trade Centre to help these countries to diversify their economies (World Trade Organization, 2003c). This largely reflected a US proposal of the chair of the Senate Agriculture Committee, Thad Cochran (R-Mississippi), who had urged the administration not to give in to the African countries’ demands for reducing subsidies (Inside US Trade, 15 September 2003). In a ‘green room’ meeting, Derbez proposed that the talks focus only on trade facilitation and government procurement and exclude investment and competition from the negotiations. But the ACP countries declared that they would only accept negotiations on the Singapore issues under the condition that there were further concessions on SDT and on cotton issues (Inside US Trade, 15 September 2003). Brazil underlined that it was only prepared to discuss the NAMA and Singapore issues if the US and the EU removed their agricultural export subsidies and reduced their domestic support (Jornal da Câmara, 5 September 2003). The European trade commissioner, Pascal Lamy, had just requested that EU member states agree to drop two of the four Singapore issues (investment and competition negotiations) and only proceed with government procurement and trade facilitation. At the 133 Committee level, EU member states did not formally oppose this request. Pascal Lamy took the absence of voicing of any opposition as a sign of support for his position on unbundling the issues. He proceeded only with trade facilitation and government procurement (Inside US Trade, 15 September 2003). Even though Lamy indicated that the EU could back away from its demands for talks on these two issues, Malaysia and India opposed the

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inclusion of government procurement (Inside US Trade, 15 September 2003). Although delegations had not yet discussed the pending agriculture text, Derbex decided to end the meeting abruptly with no official statement other than an instruction to trade officials to ‘continue working on outstanding issues’ at the working group level.

Domestic institutions United States The 2002 farm bill: increasing domestic support With the passage of the 2002 farm bill, the US augmented the level of federal agricultural subsidies for the cereals, cotton, peanut, sugar, and dairy sectors. These domestic support measures affect imports or exports directly and thus have an impact on international trade negotiations because they authorize export-price subsidies, food aid, and export credit guarantee programmes (Sumner, 2003a). A range of measures contained in the 2002 farm bill increased agricultural spending for domestic support by introducing a safety net mechanism for the cereals and cotton sectors and by providing countercyclical payments that are triggered when the ‘effective price’ of a product falls below a certain target price based on fixed areas and yields. They are considered to be less trade-distorting than loan payments because they do not directly affect prices or producer returns. The 2002 farm bill extended fixed direct payments to soybeans. These were decoupled from production and were granted for each eligible crop in a specific reference period, irrespective of the current price and the area planted. In addition, it introduced special support programmes for the peanut, sugar, and dairy sectors (US House of Representatives, 2002a). This new farm bill marks a policy shift towards more domestic support subsidies and puts into question the US commitment to decouple farm payments. Implications of the 2002 farm bill for WTO negotiations The new farm bill had important implications for WTO negotiations. First, US negotiators were less eager to agree to lower domestic support levels in exchange for additional market opening or lower export subsidies. In the EU–US joint proposal from August 2003, the US asked that blue box subsidies be kept in order to include the US countercyclical payments. Second, the 2002 farm bill enhanced the reputation of the US as a major source of distortion in world markets. Third, the message from the US to other countries was that production-distorting farm subsidies are an essential part of agricultural policy (Sumner, 2003b). Fourth, the US lost credibility and was no longer in a position to pressure other trading nations to reform their agricultural sectors (Rodgers and Cardwell, 2003). The 2002 farm bill provided a stark example of the tension between the US calling for agricultural liberalization at the international level, while domestically increasing support for US farmers.

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Congressional reaction to the G-20 coalition The US Congress reacted to the emergence of the G-20 coalition by putting pressure on the administration to retaliate against those countries supporting the G-20. The chairperson of the Senate Finance Committee, Charles Grassley (R-Iowa), suggested that the Bush administration should not negotiate FTAs with Costa Rica and Guatemala unless they backed out of the G-20 coalition. The US should go forward with a Central-America Free Trade Agreement (CAFTA) that would only include the three Central American countries (El Salvador, Honduras, and Nicaragua) that were not members of the G-20 (Inside US Trade, 19 September 2003). Grassley also threatened with exclusion from the FTAA of Brazil and all other Latin American countries in the G-20. In line with this position, the USTR emphasized that the US would look at a country’s role in the G-20 when selecting countries with which to negotiate FTAs (Inside US Trade, 19 September 2003). After this threat, small Latin American countries (Colombia, Costa Rica, Ecuador, Guatemala, and Peru), which were negotiating regional and bilateral trade agreements with the US, left the G-20 coalition (Jank and Queiroz, 2005). House Democrats also supported this position. They stated that the driving force behind selecting countries to negotiate trade agreements should be the economic benefits they would bring. If the US had, however, two potential partners with equal economic benefits, then it was legitimate to select countries according to their positions in multilateral trade negotiations (Inside US Trade, 19 September 2003). Position of major agricultural groups with respect to the G-20 demands Following the Cancun meeting, the AFBF, together with other major farm groups, sent a letter to the US president, in which they opposed the G-20 demand for a general extension of SDT to all developing countries (Inside US Trade, 31 October 2003). In the EU–US joint paper there was a reference that SDT for developing countries could not be extended to ‘significant’ net agricultural exporting countries. But this provision was not included in the Derbez ministerial text. US agricultural interest groups were particularly worried about increasing competition from Brazil and Argentina, and asked the US administration not to give these countries the right to designate themselves developing countries (Inside US Trade, 31 October 2003). European Union Modification of the Commission’s negotiating mandate Although the Commission had presented a new proposal in October 2002 recommending the reduction of customs duties, domestic market support, and export subsidies, member states were divided on this proposal. Whereas Denmark, Finland, Germany, the Netherlands, Sweden, and the

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UK supported this proposal, Austria, Belgium, France, Greece, Ireland, Italy, Luxembourg, Spain, and Portugal opposed the 55 per cent reduction in domestic support and the 45 per cent reduction in export subsidies as being too high at this stage of negotiations. In addition, Ireland and France asked for a gradual elimination of export subsidies only for those products relevant for developing countries (Agence Europe, 22 January 2003). This was in line with the demands of major national and European interest groups, such as the COPA, the FNSEA, and the CPE (Le Figaro, 23 January 2003). At the General Affairs Council meeting in January 2003, ministers modified the Commission’s WTO negotiating mandate in a way that integrated the demands of those member states that considered the Commission’s concessions to be excessive at this stage. First, France and Ireland were reassured that the negotiating mandate referred to a gradual phasing out, rather than the abolition of export subsidies. Second, the negotiating guidelines now only made reference to the reduction of export subsidies for products relevant for developing countries (Agence Europe, 28 January 2003). France emphasized once more that it would ‘ensure throughout negotiations’ that the Commission respected the negotiating mandate, whose basis was limited to the Agenda 2000 agreement (Agence Europe, 29 January 2003). This modification of the Commission’s negotiating mandate was then integrated into the EU–US joint proposal, in which the EU and the US proposed the elimination of export subsidies over a period to be negotiated, but only for a list of products, to be defined, of particular interest for developing countries. The 2003 CAP reform: decoupling direct payments from production In mid-July 2002, Franz Fischler presented a new CAP reform proposal that consisted essentially of decoupling direct payments from production, introducing a cross-compliance principle (support should be made dependent upon farmers’ compliance with the preservation of the environment, animal welfare, and food quality), a switching of agricultural subsidies to rural development policy, and price cuts for milk and wheat (Agence Europe, 9 July 2002). Member states’ positions on the Commission’s proposals for the mid-term review of the CAP can be divided into two groups, an anti-reform and a pro-reform group. While the first group consisted of Austria, Belgium, France, Greece, Ireland, Italy, Luxembourg, Portugal, and Spain, the second one was composed of Denmark, Germany, the Netherlands, Sweden, and the UK (Agence Europe, 17 July 2002). When presenting the reform proposal to member states, Fischler noted that a new CAP reform was necessary in order to integrate the new Central and Eastern European countries (Nedergaard, 2006). In addition, Fischler underlined that decoupling direct payments from production would increase the EU’s room for manoeuvre in WTO negotiations (Agence Europe, 16 October 2002). Shifting support from direct payments to rural areas would also help

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to reduce the pressure on the EU concerning agricultural support, since it would be part of the green box subsidies (Agence Europe, 6 November 2002). He also put pressure on member states to quickly agree on the CAP reform because any delay would weaken the EU negotiating position at the WTO and could even block negotiations (Agence Europe, 6 November 2002). In January 2003, Fischler presented a new proposal that removed the complete decoupling of direct support from production and replaced it with a gradual reduction from 2006 onwards. Once more, only Denmark, Germany, the Netherlands, Sweden, and the UK supported the new proposal. By contrast, Austria, Belgium, Finland, France, Ireland, Italy, Luxembourg, Portugal, and Spain opposed the decoupling of direct payments from production (Agence Europe, 21 January 2003). On 18 June 2003, the Greek presidency of the European Union presented a new compromise proposal on the CAP reform that foresaw decoupling aid for cereals by 75 per cent, for the beef meat sector member states would be allowed to keep a link between aid to production up to 25 per cent in regions where there was a risk that production and land would be abandoned. The French agriculture minister considered this rate of decoupling to be too high and the decoupling system adopted in the beef sector too complex (Agence Europe, 19 June 2003). This was a central issue for France because decoupling support from production would fundamentally affect the cereals and cattle sectors, which were strongly represented in the FNSEA. In the end, France accepted the compromise proposal that partially decoupled direct payments from production because it permitted member states to decide when to start the implementation of the reform and because France was, together with Portugal, isolated within the Council. Since the agricultural issues are decided under qualified majority voting, France was afraid that the Commission could put the reform proposal to a vote as it stood and, in this way, overcome the French blockade. Thus, France preferred to move from its initial position of rejecting decoupling of direct payments from production by reiterating that it would accept partial decoupling, on condition that there was a longer implementation period. At the same time, in February 2003 at the French–African Summit, French president Jacques Chirac called for helping the LDCs in their economic development. By agreeing to the phasing out of export subsidies, he was also responding to the pressure from NGOs criticizing CAP subsidies as the main reason for the ruin of farmers in developing countries (Le Monde, 27 June 2003). The centrepiece of the 2003 CAP reform was the decoupling of direct payments from production. However, pressure especially from France to avoid the decoupling of direct support resulted in a complex CAP payments scheme. This scheme allowed for the payment of subsidies independent of production volume (Nedergaard, 2006), through a hectare-based single payment scheme (SPS) (Swinbank and Daugbjerg, 2006) based on the total aid received during the 2000–2 reference period. The SPS covers aid payments

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for cereals, oilseeds, set-aside land, beef, and sheep premium (Agra Facts, 26 June 2003). In addition, financial support in the SPS was made dependent upon farmers’ compliance with the preservation of the environment, animal welfare, and food quality, known as the principle of cross-compliance (Agra Facts, 27 June 2003). If farmers do not comply with this principle they will be sanctioned by a partial or total aid reduction (Agence Europe, 27 June 2003). The 2003 CAP reform transferred subsidies to the rural development policy pillar (aid modulation). Each farmer receives a franchise of €5,000 in aid and young farmers receive €3,000 per year for quality products (Agence Europe, 27 June 2003). Following the conclusion of the 2003 CAP reform, member states underlined that that the margin for manoeuvre provided by the reform may only be used in WTO negotiations if the other countries follow suit and make equivalent agriculture concessions (Agence Europe, 23 July 2003). Fischler reassured member states that the CAP reform would not be the starting point for WTO negotiations and that the EU would not pay twice for market access and domestic support concessions (Agence Europe, 27 June 2003). The Commission then sent a document to the WTO director-general emphasizing that the reform made the CAP more trade-friendly by moving a large part of EU agricultural support into the green box (Agra Facts, 13 August 2003). Reaction of major agricultural groups to the CAP reform The CAP reform was, however, strongly criticized by farmers’ organizations. The COPA asserted that the ‘à la carte’ implementation options for decoupling support would lead to higher production costs and would force farmers to abandon the agricultural sector. Moreover, the COPA criticized the European Commission for using the CAP as a bargaining tool at the WTO (Agence Europe, 28 June 2003). Before the Cancun ministerial conference, the COPA underlined the fact that the Commission had to ensure that the ‘Community preference’ remained a priority and that blue box support was retained. The EU had already made substantial concessions on domestic support through the CAP reform. Therefore, it would be crucial that the WTO negotiations did not lead to a further undermining of EU market prices and of the European multifunctional model of agriculture (Agence Europe, 5 July 2003). The family farm union, the CPE, opposed the reform because decoupling direct payments would lead to an increase in the number of small farmers abandoning agricultural activity. Concerning the WTO negotiations, the CPE considered that the EU was trying to trade European farming for other sectors, such as services and investments, ahead of the Cancun meeting (Agence Europe, 28 June 2003). Implications of the CAP reform for WTO negotiations The 2003 CAP reform, also called Fischler reform, did not come anywhere close to meeting the demands of other WTO members for a rapid

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elimination of export subsidies, nor did it significantly reduce import barriers. The Fischler reform shifted market price support to direct aid payments on the basis of the area farmed and the livestock kept. Thus in relation to blue box support the EU switched it to payments into the green box category, creating at least some bargaining leverage (Swinbank and Daugbjerg, 2006). The CAP reform was designed to ensure that many support subsidies that hitherto fell under the blue box category could simply be shifted to the green box category. The main objective of the reform was not really to reduce support to farmers, but to shift payments from the first pillar (market production) to the second (rural development policy). Thus the new CAP rules for the transfer of SPS were formulated to comply with the green box rules, which require that payments must be determined by clearly defined criteria (Rodgers and Cardwell, 2003). The other central issue in terms of the AoA and the ongoing WTO negotiations was the extent of the rupture between agricultural support and production. According to the AoA, in order to qualify as decoupled income support, no production shall be required. The Fischler reform did not, however, make SPS conditional upon production but on the cross-compliance principle. Finally, from the beginning of WTO negotiations, the EU proposed the inclusion of non-trade concerns in agricultural trade negotiations. Nontrade concerns are closely linked to the recognition of the multifunctional role of agriculture. The cross-compliance principle that specifies the rules to be observed by producers receiving the single payment scheme underpin the EU’s negotiating position in the present round of trade negotiations. Brazil A new heterogeneous governing coalition When Lula da Silva was elected Brazilian president in October 2002, he distanced himself from the opposition of his party and the CUT by holding a moderate position towards trade liberalization (Hunter, 2006). After the presidential and legislative elections, the Workers’ Party, the PT, held only 91 of 513 seats in the Chamber of Deputies and 14 out of 81 in the Senate; the parties that officially supported Lula during the 2002 elections (PT, PDT, PSB, PCdoB, PS, PV, and PL) gathered only 219 seats. Therefore, Lula da Silva decided to enlarge the governing coalition to include two centre-right parties, the PTB with 26 seats and the PP with 49 seats (Arestis, Paula, and Ferrari-Filho, 2007). As a result, the governing coalition held 294 seats and thus a majority in the Chamber of Deputies. The ideological distance between the nine parties in the governing coalition was significant, with six left parties (PT, PDT, PSB, PCdoB, PPS, and PV) and three centreright parties (PL, PTB, and PP). From the very beginning, however, Lula faced resistance from his own party to his desire to give cabinet posts to centre-right parties. Accordingly, the distribution of ministries was unbalanced in favour of the PT, with 16

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out of the 29 ministries. In contrast, the largest party in the coalition, the centre-right PP, was excluded from the cabinet and the other two conservative parties received only one cabinet post each. One of the government’s main political problems was how to find a balance between the demands of the leftist factions within the PT and the demands of two centre-right coalition parties, the PTB and the PL (Couto and Baia, 2006). The central question is whether divisions within the PT and the different parties in the governing coalition also had an impact on the trade policy followed by the new president. Lula da Silva’s trade policy The main aim of the foreign policy of Lula da Silva was to take a more offensive and proactive position in foreign policy and in trade negotiations. This meant that Brazil, instead of simply blocking negotiations, needed to came up with alternative proposals. In his inaugural speech at the Chamber of Deputies in January 2003, Lula da Silva underlined that sovereignty and the pursuit of national interests would be the main driving force behind Brazilian foreign policy. Regional and multilateral trade agreements should first of all promote economic and social development. In the WTO negotiations, Brazil’s main objective would be to eliminate agricultural subsidies and improve market access for Brazilian producers and to maintain Brazil’s status as a developing country (Jornal da Câmara, 2 January 2003). One of the first steps to put this active diplomacy into practice was the creation of the G-20 (Almeida, 2007). The origins of the G-20 go back to the signature of the Brasilia Declaration issued by Brazil, South Africa, and India in June 2003. These three countries wanted to strengthen their bargaining position at the international level on issues of mutual interest. On trade issues, they wanted to reverse protectionist policies and tradedistorting practices, and have the concerns of developing countries better taken into account (Department of Foreign Affairs Republic of South Africa, 2003). Workers’ Party position on trade liberalization The Workers’ Party considers the present ‘liberal’ international trade system undemocratic because it has increased global inequality. In line with the labour union CUT, the PT supports family-based agriculture with a focus on the domestic market (Partido dos Trabalhadores, 2004). This position of the PT is in many ways compatible with Lula da Silva’s foreign economic policy. Lula da Silva also underlined that trade liberalization should first of all eradicate poverty and decrease inequality. But in order to integrate the position of the centre-right parties in the governing coalition he also emphasized that in the Doha round, Brazil wanted to increase agricultural exports. This position is, however, incompatible with the official position of the PT on trade policy.

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The PT is a large coalition of different political and social movements ranging from the far-left to the centre-left and is divided between proponents of a neo-liberal monetary policy and a state-led market economy. There are altogether four different factions within the PT. The first faction, the most visible, is the faction composed of grassroot movements and labour unions. This faction supports family farmers with a focus on the domestic market, aims to eradicate poverty, opposes increasing agricultural exports, and even rejects the participation of Brazil in the FTAA negotiations. Second, the most important faction within the PT is made up of adherents to the economics of national populism. These members remain nostalgic for the protectionist import-substitution model. A third Marxist-oriented faction is still an important group within the party. Whereas reformed Marxists joined centre parties such as the PMDB and PSDB, most old Marxists who joined the PT still consider that the hegemony of imperialist interests in developing countries can only be reversed by opposing the hegemony of the US. The minister of foreign affairs, Celso Amorim, is positioned between the Marxist and national populist views of the PT. Finally, there is a fourth pragmatic faction within Lula’s administration represented by the minister of economy, Antonio Palocci. This faction was supported by the vice-president’s party, the centre-right Liberal Party. This party combines socially conservative populist views and supports an increase of agricultural exports (Albuquerque, 2007a). The diverging political-economic views of these factions make it difficult for the PT to find a single position on trade policy. Parliamentary discussion on the Brazilian negotiating position One week before the Cancun meeting, in a public hearing at the Committee of External Affairs and Defence, Celso Amorim informed the deputies of the content of the Brazilian negotiating position. He reiterated that Brazil would only accept discussions on the NAMA and Singapore issues if the US and the EU removed their agricultural export subsidies. He also announced that Brazil had built a new coalition, the G-20, with the aim of totally eliminating agricultural subsidies. Deputies from the main opposition party, the centre-party PSDB, expected that building such a coalition would strengthen Brazil’s negotiating position. In their view, Brazil should have prioritized the total elimination of tariff barriers for central Brazilian products, such as steel or orange juice, which face high tariffs when entering the international market (Jornal da Câmara, 5 September 2003). In addition, there was an informal discussion on the Brazilian position in the WTO negotiations. A bipartisan committee was built of three deputies from the governing coalition (PT, PCdoB, and PL) and two from the two major opposition parties (PSDB and PFL). Jamil Murad (PCdoB) claimed that the vice-president of the International Monetary Fund, Anne Krueger, and the USTR, Robert Zoellick, had personally met each member of the G-20

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and tried to persuade them to leave the coalition. Some deputies from the PT emphasized that Brazil should not cede to the pressure by the US (Jornal da Câmara, 12 September 2003). Following the Cancun meeting, the Brazilian deputies from the governing coalition parties that had accompanied the Brazilian delegation to the Cancun ministerial meeting supported the government’s position of giving priority to agricultural trade liberalization (Jornal da Câmara, 12 September 2003). But the governing coalition was divided concerning the government’s bargaining strategy of building a coalition with countries whose interests were very different from those of Brazil. Divisions within the governing coalition on the G-20 António Palocci, the minister of finance, Roberto Rodrigues, the minister of agriculture, and Luiz Fernando Furlan, the minister of development, industry, and foreign trade criticized the minister of foreign affairs, Celso Amorim, for building a coalition with China and India. These countries had taken defensive positions on agricultural subsidies and very restrictive positions on NAMA (Almeida, 2007). Whereas Brazil aimed for extensive liberalization in the agricultural sector and selective liberalization for industrial goods and services, China had continually demanded extensive market liberalization for the industrial sector and protectionism in agriculture. The same is true for India, which asked for broad market liberalization in the services sector, selective liberalization in the industry sector, and protectionism in agriculture (Viola, 2005). These divergences were more accentuated because Rodrigues and Furlan were not affiliated to a party and are classical representatives of the business sector, whereas Amorim is a diplomat and belongs to the left faction of the Workers’ Party. Rodrigues had been the president of the leading Brazilian agribusiness association, whereas Furlan had been president of Brazil’s largest food processing company and president of the Brazilian federation of chicken meat producers. Unsurprisingly, both ministers favoured an increased internationalization of Brazilian agribusiness companies (Folha Online, 28 June 2006). Australia Shift towards bilateral trade agreements At the beginning of 2003, the Australian coalition government had issued a white paper, ‘Advancing the National Interest’, that listed Australia’s priorities on foreign and trade policy (Australian Department of Foreign Affairs and Trade, 2003). In practice, this white paper clearly shifted Australia’s trade policy towards bilateralism. Accordingly, in March 2003, the Australian government started negotiations with the US on an FTA, which was for the Howard government an excellent opportunity to vindicate its bilateral

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trade policy with a major achievement (Krever, 2006). The Liberal-National government expected that the FTA would open up US markets to Australian agricultural producers and thus appease the rural electorate of the Liberal and National parties (Canberra Times, 14 September 2003). After the US had imposed restrictions on the importing of Australian and New Zealand lamb in 1999, the government was under pressure from organized agricultural interests to increase agricultural market access. Wine exporters were also concerned with the rise of tariffs that had occurred as a result of the negotiation of a US–Chile FTA, which had given Chilean wine preferential access to the US market (Krever, 2006). Major Australian wine producers and other large business sectors engaged actively in securing access to the US market by setting up a US business lobby group, the American–Australian Free Trade Agreement Coalition, which would finance the lobbying campaign within the US. In Australia, a similar lobbying group, the Australia–United States Free Trade Agreement Business Group, was created soon after. The latter was financed by 29 different companies and representative groups, including a number of agricultural interest groups, such as the wine producer Southcorp, the Australian Meat Council, and the Australian Dairy Corporation (Krever, 2006). Another major issue was to increase market access for sugar producers. According to a senior Liberal senator, there were six key electoral seats in Queensland, where sugar plays a central role (Krever, 2006). The president of the NFF declared that farmers would only support an FTA if it delivered completely free access to US agricultural markets within five years (Weekly Times, 29 October 2003). At the same time, the NFF reiterated that WTO negotiations remained its highest priority and urged the Australian government to increase pressure to achieve a multilateral trade agreement (The Australian, 22 October 2003). In 2002, the US was Australia’s third largest trading partner. Agricultural trade liberalization represented the greatest potential for significant Australian export benefits, especially for the beef, dairy, and sugar sectors. For example, beef was Australia’s single largest export to the US, making up over a third of total agricultural exports. Each of these three sectors was subject to restrictive tariff-rate quotas with considerable in-quota and overquota tariffs (Krever, 2006).3 The Labor Party criticized the government for focusing upon bilateral trade agreements, arguing that they would weaken Australia’s leadership role in the Cairns Group (Canberra Times, 13 February 2003). Free trade agreement with the US One of the greatest obstacles to an FTA was the opposition from US farmer groups towards greater market access for Australian competitors (Krever, 2006). In November 2003, a powerful coalition of US farm groups, including the NCA, NFU and the US sugar sector, sent a letter to Robert Zoellick urging

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him to abandon the FTA talks and to focus instead on the WTO negotiations, arguing that the FTA would not bring any benefits to their industries (The Weekend Australian, 16 November 2003). As a result of this pressure, the US excluded the sugar sector from the FTA. The agreement would only minimally increase market access for beef and dairy products, with a long phase-in period. According to some newspapers, Australian negotiators even advised the government to withdraw from negotiations (Krever, 2006). The FTA between the US and Australia foresees the removal of US tariffs on over 97 per cent of manufactured goods, with the exception of textiles and clothing. The remainder would be gradually removed over varying lengths of time ranging from four to 18 years. Australian agricultural commodities would be guaranteed access to the US market, but over a longer period of time and subject to tariff-rate quotas. For the beef sector, tariffrate quotas will be gradually increased over the course of 18 years, with above-quota tariffs gradually decreasing (Krever, 2006).4 Tariff-rate quotas were increased for the dairy sector, for the first time giving Australia the opportunity to export products such as cheese, butter, milk, and ice cream to the US (Capling, 2005). So why did the Australian government sign a trade agreement that did not seem at first sight to bring major gains to each of the important agricultural sectors? Capling (2005) points out that for Howard a ‘bad deal was better than no deal at all’. Howard expected that the FTA with the US would result in longterm benefits to some sectors of the Australian economy, such as manufacturing, services, and investment. In contrast, Krever (2006) emphasizes that for Howard an FTA with the US was an ‘historic’ agreement and a ‘once in life-time deal’. The government moved from the original rationale, better market access for Australian agricultural commodities, to a new view of the deal as an integral part of Australia’s strategic relationship with the US. In the wake of the 9/11 attacks in 2001 and the invasion of Iraq in 2003, the government linked the FTA to security concerns and presented the agreement as a major achievement in the reinforcement of the alliance with the US. After the signature of the FTA, the Australian parliament still had to ratify it by passing the domestic legislation. The Liberal-National government, however, only had 35 seats out of the total 76 Senate seats, and was reliant on the support of the Labor Party for a successful ratification of the FTA. The other alternative would have been to rely on the Australian Democrats and Greens, with eight and two seats respectively, but they opposed the agreement (Parliament of Australia, 2008). The Labor Party was divided on the FTA. While a majority of the ALP members considered that the party could not afford to take the blame for wrecking a trade agreement with the US, a minority from the left faction of the ALP and from labour unions opposed the agreement. In the end, with a federal election due before the end of the year, the Labor faction in the Senate decided to support the agreement. The FTA with the US entered into force on 1 January 2005 (Krever, 2006).

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Farmers’ organizations position on the free trade agreement The reaction from farmers’ organizations on the FTA was mixed. The NFF criticized the safeguard mechanisms for the beef sector because they implied that even after 18 years Australian beef exports will remain subject to US trade barriers (Capling, 2005). In line with the official position of the NFF, the dairy and the beef sectors were disappointed with the minimal gains they had obtained (Krever, 2006), but they supported the ratification of the FTA (The Australian, 11 February 2004). The sugar sector was the main loser from the agreement. Even though the government had maintained at the beginning of negotiations that the sugar sector would be part of the FTA, in the end due to the US opposition this sector was excluded from the agreement. The Australian Cane Growers Council (ACGC) claimed that as an effect of the government’s failure to provide new market access, 1500 of the 6500 cane growers would have to leave the sector. In the state of Queensland, a key state for the National Party, there were several constituencies in which a large number of persons were employed directly in the sugar industry sector (Krever, 2006). The government reacted to the backlash from the sugar sector by introducing a compensation package to sugar farmers (Capling, 2005).

Conclusion Six months before the Cancun ministerial meeting, the chairperson of the Committee on Agriculture, Stuart Harbinson, prepared a first draft text, the ‘Harbinson text’, which attempted to find a middle ground between the negotiating positions of the major players. He suggested using a ‘banded approach’ that would categorize products according to the levels of starting tariffs, the elimination of export subsidies over a ten-year period, and the reduction of amber and blue box support by 50 per cent over five years, with the option of transferring blue box support to the amber box. But delegations overwhelmingly rejected this proposal. As a result, WTO members were unable to meet the first deadline set by the Doha declaration of 31 March 2003, in which states were supposed to circulate their first draft proposals. At this middle stage of negotiations, concessions are considered to be a sign of weakness and can elicit tough behaviour from the other bargaining parties. A month prior to the Cancun conference, the US and the EU released a joint proposal on agriculture. This proposal suggested retaining blue box subsidies, the application of a blended formula for tariff rates separating countries into three groups, the elimination of only export subsidies for only those products of particular interest for developing countries, and the exclusion of net agricultural exporting countries, such as Brazil, from the benefits of SDT for developing countries. This joint proposal, however, did not include any percentages for tariffs or domestic support reductions.

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Even though the EU–US joint proposal was intended to move the negotiations forward, it in fact provided the crucial impetus for the formation of a new coalition of developing countries, the G-20, under the leadership of Brazil. This group of countries presented a counter-proposal demanding a significant reduction in subsidies, the elimination of the blue box, a cap or reduction on the green box subsidies for developed countries, and the expansion of SDT to all developing countries. More importantly, the G-20 wanted to link agricultural trade liberalization to issues of economic and social development. This demand was in line with the PT, the party of the newly elected Brazilian president Lula da Silva. In addition, a new group of four African countries highly dependent on cotton, the C-4, was created. The C-4 asked for the total elimination of domestic support and export subsidies for cotton. The US, however, refused to make concessions on this issue because with the recently enacted 2002 farm bill the US had just increased domestic support in this sector. During the ministerial meeting, the Council chairperson, Luis Ernesto Derbex, circulated a draft ministerial text with the aim of reconciling the different positions. On agriculture, the Derbex text integrated the EU–US joint proposal and the G-20 proposal without including any percentages for tariff or subsidy reductions. The EU, the US, the Cairns Group, and the G-20 rejected this proposal. On cotton issues, the text also appeared to be very vague. The Singapore issues constituted another point of disagreement. The ACP countries underlined that they would only agree on the inclusion of the Singapore issues if industrialized countries made further concessions on SDT and on the cotton issues. Even though delegations had not yet discussed the agricultural issues in more detail, Derbex decided to end the meeting earlier because he considered that with blockage on the Singapore issues and on agriculture, it was impossible to reach agreement. In order to explain why the EU, the US, Australia, and Brazil did not move from their demands at this stage, one has to go back to the domestic level. In the US, Congress was against making concessions on cotton issues because of the new support instruments it had made available through the 2002 farm bill. Moreover, Congress urged the US administration to retaliate against those countries that were part of the G-20 coalition. In addition, the AFBF and other major farmer groups opposed the G-20 demand of giving net agricultural exporting countries the right to designate themselves as developing countries. By contrast, the EU, as a result of the 2003 CAP reform that had decoupled direct payments from production, was able to shift support schemes that had previously fallen under the blue box to the green box support category. France and Ireland asked for a gradual reduction of export subsidies and only for those products relevant for developing countries. The Commission’s negotiating mandate was modified to integrate these demands, so that there

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was now a reference to a gradual phasing out rather than the abolition of export subsidies. In Brazil, Lula da Silva took a more offensive position in multilateral trade negotiations by creating the G-20 and by presenting an alternative proposal to the EU–US joint paper. One of the main aims of Brazil’s trade policy was to increase agricultural exports in order to promote economic development and eradicate poverty. At the domestic level, the governing coalition of Lula da Silva was ideologically diffuse with six left parties and three centre-right parties. In addition, within the president’s party, the PT, there are four different factions concerning economic policy. Together, opposition parties and the parties in the governing coalition broadly supported Brazil’s offensive position in the Cancun meeting, but they also criticized the government’s strategy of building a coalition with countries with completely different interests from those of Brazil, such as China and India. With the emergence of the G-20, the Cairns Group was weakened because nine of its members had moved to the G-20. At the same time, Australia was not really engaged in the negotiations at the multilateral level because it was negotiating an FTA with the US. Australia expected that an FTA with the US would increase market access for agricultural commodities, especially for the sugar, beef, and the dairy sectors. In the end, the FTA between the US and Australia increased market access for the beef and dairy sectors over a long period of time and subject to tariff-rate quotas, but it provided no change in market access for the sugar sector. In this way, Australia was one of the first actors to negotiate an FTA with one of its major trading partners. In case of a failure of multilateral trade negotiations, it would have a good BATNA.

10 Hong Kong Ministerial Conference 2005

International-level negotiations US and EU initiatives to move negotiations forward Following the Cancun ministerial meeting in September 2003, little of substance occurred until the USTR Robert Zoellick sent a letter to all WTO members in January 2004 calling for the resumption of negotiations. On agriculture, Zoellick agreed to include cotton, to establish a date to completely eliminate export subsidies, including the abolition of its export credits, and trade distorting subsidies (World Trade Organization, 2004a). In the next meeting of the Committee on Agriculture, delegations were unable to agree on the appropriate formula for tariff reductions. Whereas Australia and Brazil proposed the cutting of the highest custom duties by the greatest margin (banded formula), the EU, the US, Canada, and the G-10 preferred to have tariffs cut by a simple average with a minimum reduction per product (blended formula) to allow them to protect their sensitive agricultural products (ICTSD Weekly Trade News Digest, 22 April 2004). On the fringes of an OECD ministerial meeting in May 2004, Pascal Lamy and Franz Fischler sent a letter to their WTO counterparts outlining the three areas in which the EU could make concessions: elimination of all export subsidies in parallel with all other forms of export support; greater flexibility on the Singapore issues by limiting negotiating to the least controversial issue of trade facilitation (European Union, 2004). In exchange, the EU requested that the green box support be kept free of restrictions (European Commission, 2005). Following the initiative of the two European commissioners, in June 2004 the G-20 presented a new proposal on market access. The G-20 wanted to use the banded formula for tariff reductions, but would accept lower customs duties for most sensitive products (such as rice in Japan or sugar in the EU), on condition that these countries would accept minimum import quotas for these products. The proposal of the G-20 distinguished between developed, developing countries, and LDCs. It foresaw the complete 173

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opening of the markets of developed countries. Developing countries would reduce their customs duties less and over a longer period of time, while LDCs would have completely free access to developed countries markets and would be exempted from any obligation to lower customs tariffs (Agence Europe, 2 June 2004). After this general positioning of major players, the chair of the WTO General Council prepared a first compromise draft text of the July 2004 framework (the Groser text). Even though the Groser text integrated some of the G-20 demands such as deeper cuts for higher tariffs, it also allowed the EU to exclude its sensitive products from any significant reduction and the US to keep its present domestic support system through the use of a new blue box. Whereas the G-20 and the Cairns Group criticized the Groser text as biased towards agricultural protectionist countries, the EU and the US asked India and Brazil to open up their market even further to industrial products and services (Agence Europe, 29 July 2004). After several meetings among the FIPs (US, EU, Australia, Brazil, and India), on 31 July 2004 trade ministers agreed on the July 2004 framework text (World Trade Organization, 2004b). The July 2004 framework for agriculture In the July 2004 framework agreement, WTO members approved a package of agreements that included an outline to be used to complete the negotiations in five areas: agriculture, NAMA, development issues, trade facilitation, and services (World Trade Organization, 2004c). On agriculture, the agreement included the commitment to eliminate all forms of export subsidies ‘by a credible end date’ and to progressively reduce tariff rates and amber box support. The G-20 proposal asking for deeper cuts in higher tariffs was integrated into the agreement. But the types of tariff bands and their reduction remained to be negotiated (see Table 10.1). In order to integrate the US demand to include countercyclical payments, a new category of blue box support was created. Even though the EU demand for green box measures to remain unlimited and free of reduction commitments was also included in the July framework, at the same time the criteria for green box support would be revised, as requested by the G-20 and the Cairns Group. The July 2004 framework remained, however, extremely vague on market access issues. It only provided for ‘substantial improvement in market access for all products’ and stipulated that ‘substantial overall tariff reductions [would] be achieved as a final result from negotiations’. The agreement also guaranteed SDT for developing countries giving them longer implementation periods (World Trade Organization, 2004c), as well as a commitment to negotiate a ‘cotton initiative’, but without providing details. In order to integrate a demand from the EU and the G-10, a number of ‘sensitive products’ were to be excluded from further market access. This list

Hong Kong Ministerial Conference 2005 Table 10.1

175

The July 2004 framework on agriculture

Principal features of the July 2004 framework on agriculture Domestic support

Market access

Export competition

Special and differential treatment

20% reduction to trade distorting levels;

Substantial improvement in market access based on a combination of tariff quota commitments and tariff reductions;

Elimination of export subsidies by an end date to be agreed in parallel with the phasing out of export credits, food aid and to end the monopoly of STEs;

Longer implementation periods and lower reduction coefficients for developing countries for all types of trade-distorting domestic support and from the de minimis reductions;

Amber box: reductions in the de minimis level and caps for specific products (“progressivity principle”); Blue box: limits on direct payments; Creation of a ‘new’ blue box to include direct payments not linked to production; Green box: remains unlimited and free of reduction; revision of the criteria for green box support

Single approach to tariff reduction for developed and developing countries, to be applied by means of the tiered formula that differentiates according to tariff bands (‘banded formula’);

For developing countries export subsidies can be maintained for a longer period to be negotiated

Establishment of a SSM for developing countries; Definition of ‘special products’ for developing countries, based on the criteria of food security and rural developments needs

Exclusion of a number of ‘sensitive products’ from further market access; the list of ‘sensitive products’ still has to be drawn

Source: Author’s compilation based on information from the World Trade Organization (2004b).

of ‘sensitive products’ had still to be drawn up in the forthcoming negotiations. Finally, the July 2004 framework integrated a demand from the G-20 allowing developing countries to designate an ‘appropriate number’ of special products based on the criteria of food security, livelihood security, and rural development. The July 2004 framework also laid out a time schedule for the negotiations. WTO members had to reach agreement on most of the issues before August 2005 and come to an agreement on a draft text before the

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Hong Kong ministerial conference in December 2005, where trade ministers should then find a compromise on the outstanding issues. Informal meetings and impasse in negotiations After WTO members had agreed on the July 2004 package agreement, due to the US presidential elections, the appointment of a new European Commission in November 2004 and the nomination of the new USTR in March 2005 there was no progress in the negotiations until July 2005, when the G-20 circulated a new proposal on market access. The basic idea of this proposal was to divide developed and developing countries’ tariff lines into different sets of tariff bands according to the level of duties currently levied, with each band subject to different percentage reductions. For developed countries there would be five different bands. Within each band the tariffs would be subject to linear cuts of progressively higher percentages for each band. On the other hand, for developing countries tariffs would be classified into four different bands (G-20, 2005b). The central issue for the US and the EU was to make subsidy and tariff reductions conditional upon improved market access for their exports of services and industrial goods for the markets of economic emerging countries, such as Brazil and India (ICTSD Weekly Trade News Digest, 20 July 2005). Since the latter did not move from their positions, negotiations remained deadlocked until the US circulated a new proposal in October 2005. Presentation of new detailed negotiating proposals The US called for a complete elimination of all agricultural export subsidies over a fifteen-year period. In an initial period of five years, domestic support and tariffs would be significantly reduced with an elimination of export subsidies by 2010. This period would be followed by a five-year pause. In the final five-year phase all remaining export subsidies would be totally eliminated (by 2015) (Office of the United States Trade Representative, 2005). Regarding domestic support, the US agreed to cut its amber box support by 60 per cent, if the EU and Japan also reduced their amber boxes by 83 per cent. The US would reduce its blue box support by 50 per cent, on the condition that it could keep the green box and establish a new peace clause to protect domestic support against WTO litigation. The new USTR, Robert Portman, however, pointed out that the US offer of reducing domestic support was conditional on other countries reciprocating with ‘meaningful market access’ (see Table 10.2). On the trickiest and most complex market access issues, the US tabled a formula that established four identical bands for developing and developed countries: below 20 per cent, 20–40 per cent, 40–60 per cent, and above 60 per cent. Developed countries’ tariffs should be capped at 75 per cent and the number of sensitive products limited (Office of the United States Trade Representative, 2005).

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The European Commission offered to cut amber box support by 70 per cent, up from an earlier offer of 65 per cent, conditional on analogous reductions by the US and Japan. On the blue box support, the EU asked for a 65 per cent reduction aiming to limit the US countercyclical payments (ICTSD Weekly Trade News Digest, 12 October 2005). On market access, the EU proposal foresaw four tariff bands with higher cuts for higher tariffs. It accepted a linear cut in some bands, the highest bands with tariffs over 90 per cent would be reduced by at least 50 per cent with an exception for sensitive products. Finally, the EU reiterated its offer to end all export subsidies so long as others did the same, with an end date and a phasing out timetable to be agreed at Hong Kong (Agence Europe, 11 October 2005). Whereas the EU asked for a fall in customs duties between 20 and 50 per cent, the US demanded cuts between 55 and 90 per cent (see Table 10.2). The US promptly rejected the EU proposal because it considered the reduction of customs duties on domestic support to be too low (Agence Europe, 14 October 2005). At the European level, however, under French leadership, thirteen member states openly criticized the Commission’s bargaining strategy as offering too many concessions, whereas the US was not moving on export credit Table 10.2

US

Summary of the negotiating positions at the Hong Kong meeting Export competition

Domestic support

Market access

Elimination of all agricultural export subsidies over a fifteen-year period; Elimination of export subsidies by 2010; Elimination of trade-distorting practices of STEs

Reduction of the amber box domestic support by 60% (US) and by 83% (EU and Japan) in the first five years; reduction of the overall levels of trade-distorting support by 75% (EU and Japan) and by 53% (US); Blue box: cut of 50%; de minimis cut to 2.5% of value of production; Keep the green box criteria without caps; Establishment of a new peace clause to protect domestic support against WTO litigation

Progressive tariff reductions over five years; Reduction of the highest tariffs by 90%; reductions in other tariffs in a range of 55%–90%; Maximum tariff cap of 75%; Limit sensitive products to 1% of tariff lines; Expand tariff rate quotas (larger quotas with lower tariffs) SDT for developing countries, but cap maximum developing country agricultural tariff at 100% (continued )

178 Table 10.2

Continued Export competition

Domestic support

Market access

G-20

Elimination of all forms of export subsidies over a five-year period, but in favour of keeping emergency humanitarian aid

Cut the bound for overall trade distorting domestic support in three bands: >$60 billion, 80%; $10–$60 billion, 75%; and $0–$10 billion, 70%; Cut the amber box ceiling support in three bands: >$25 billion, 80%; $15–$25 billion, 70%; and $0–$15 billion, 60 %; Reduction of the de minimis exemption allowances to meet the cut in the overall bound

EU

Elimination of all agriculture subsidies by 2015 together with export credits, food aid, and STEs monopolies

Cairns Group

Elimination of export subsidies within a three-year term (six years for developing countries) with an initial reduction of 50%

Reduction of amber box support in three bands: 70% (EU), 60% (US), and 50% rest of the world. Reduction of the de minimis exemptions ceiling by 80% of the framework’s proposed 5% cap; Blue box support reduction by 65%; Keep the green box support without limits Elimination of the amber box for developed countries that exceed their de minimis support of 5% of agricultural production; Introduction of overall caps on green box spending (5% of annual agricultural production)

Reduction of tariffs by 45%–75% (developed countries) and by 25%–40% (developing countries); Cap maximum agricultural tariff at 100% (developed countries) and 150% (developing countries); Limit the number of sensitive products; Maintain SSM for developing countries; and abolish SSM for developed countries; exempt LDCs from reduction commitments Reduction of the highest tariffs by 60%; cut other tariffs in a range of 35%–60%; average cut in agricultural tariffs 46%; Cap the maximum agricultural tariff for developed countries at 100% with the exception of sensitive products; Creation of a new mechanism allowing developing and LDcs to impose an additional duty to protect their agricultural sector from subsidized products

Sources: Own table based on information from Cairns Group, 2002a, b, c; European Commission, 2005; G-20, 2005b; Office of the United States Trade Representative, 2005.

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and food aid (Agra Facts, 18 October 2005). The COPA also criticized the Commission’s negotiating tactic of making one concession after another without getting anything in return (Agence Europe, 12 0ctober 2005). The G-20 was the next to table a new proposal asking for a total elimination of all export subsidies over five years, calling for an average minimum tariff reduction for market access and reducing overall trade distorting domestic support in three bands (see Table 10.2). On tariff rates, the G-20 suggested capping the developed country maximum agricultural tariff at 100 per cent and the developing country maximum tariff at 150 per cent, to limit the number of sensitive products, to maintain the SSM only for developing countries, and to exempt LDCs from reduction commitments (G-20, 2005b). On 28 October, the Commission circulated the new EU negotiating proposal, but made the offer conditional on economic emerging countries’ concessions on industrial market access and services. The Commission proposed the adoption of the progressive ‘Swiss formula’ with a minimum 10 per cent tariff for developed countries without considering cuts for less developed countries. On services, negotiations should be complemented by liberalization in the banking, transport, and communications sectors (Agence Europe, 29 October 2005). Concerning agricultural trade liberalization, on market access, the EU offered a 60 per cent reduction in the EU’s highest tariffs, a range of tariff cuts between 35 per cent and 60 per cent for lower tariffs, and a cut in the average agriculture tariff of 46 per cent. The EU accepted the elimination of all agricultural export subsidies, if in exchange other countries would reform their food aid, export credits, and STEs (Agence Europe, 29 October 2005). On domestic support, the EU proposed cutting its ceiling amount for amber box subsidies by 70 per cent and would accept a 60 per cent cut from the US and 50 per cent cut for the rest of the world. On blue box and green box support, the EU position remained unchanged. On market access issues, the EU classified developed countries’ farm imports into four tiers on the basis of their tariff levels with the lowest band being cut by between 20 and 45 per cent and tariff reductions in the other three would be slashed by between 45 per cent and 60 per cent (European Commission, 2005). In addition, the EU proposed the reduction in the number of sensitive products to eight per cent of tariff lines, which would cover some 170 of the 2,200 EU agricultural products (ICTSD Weekly Trade News Digest, 2 November 2005). Concerning SDT for developing countries, the EU suggested extending preferential treatment without quotas or rights to all developing countries. At the same time, Mandelson criticized the US demand for reducing the highest agricultural tariffs by up to 90 per cent as ‘not credible’ because such a cut would cause considerable job and income losses for European farmers (Agence Europe, 29 October 2005). The US, the G-20, and the Cairns Group promptly rejected the EU proposal as minimal and asked instead for further concessions from the EU

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before proceeding with the negotiations. They considered the EU offer of cutting average tariff rates by 40 per cent as too low and the EU demand to restrict the number of sensitive products to eight per cent of tariff lines as too high. For example, most of Brazil’s agricultural exports consist of only three per cent of EU tariff lines, so that the EU could make all of those tariff lines sensitive under its proposal (Inside US Trade, 4 November 2005). At the same time, the European Commission was under pressure from the French foreign minister, who reiterated that France had still absolutely no proof that what trade commissioner Mandelson was proposing was within his negotiating mandate (Agence Europe, 3 November 2005). Since the negotiating positions were too far apart, WTO members agreed to postpone negotiations on specific formulae for reducing tariffs on farm products and industrial goods until 2006. Hong Kong ministerial conference 13–18 December 2005 At the beginning of the Hong Kong meeting, Peter Mandelson reiterated that the offer put forward by the EU on 28 October had not been reciprocated by any equivalent offer from the other major trading nations and that the EU would not table a new agricultural offer until the G-20 had presented an improved offer on market access for manufactured goods and services (Agence Europe, 15 December 2005). By contrast, the US, Brazil, and Australia considered that the EU’s latest offer on market access was too low and that they would simply wait for new offers from the EU (Agence Europe, 13 December 2005). The Indian trade minister Kamal Nath even accused the European commissioners of coming to Hong Kong with empty hands because they had no new offer on export subsidies and market access (Agence Europe, 15 December 2005). The Hong Kong ministerial conference took place within this tense atmosphere. Already at the beginning of the meeting, WTO members decided to postpone negotiations on the most contentious issues of reducing domestic support subsidies and tariff rates. They simply agreed on a new deadline of 30 April 2006 to present new draft proposals on specific numbers on these two issues. Therefore, the negotiations focused merely on agreeing on a phase-out date for all forms of export subsidies (World Trade Organization, 2005a). In the following days, Pascal Lamy, who was now the WTO secretarygeneral, tried to move WTO members towards an agreement on a ‘development package’. On behalf of the G-90 countries, the Zambian trade minister, Dipak Patel, asked for ‘duty-free, quota-free’ market access to developed and to emerging countries, without exemption for countries or products. Since the EU had already given almost 97 per cent market access to exports from LDCs under its ‘Everything But Arms’ initiative, now the main issue was to have access to the US market. But the US asked for the exclusion of textiles (processed cotton), sugar and leather and Japan asked for an exception for rice (Agence Europe, 16 December 2005).

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Switzerland, Brazil, and India also supported this request of market access without customs duties and without quotas for LDCs putting the US under pressure to concede. Robert Portman sought to demonstrate US generosity towards LDCs, by announcing that it would double its contribution to the ‘aid to trade’ package as an integral part of the ‘development package’. The US would offer duty-free access to cotton for the C-4 African producer countries that had threatened to block any agreement. However, he did not even mention the subsidies that the US pays to its cotton producers and which penalize the C-4 countries the most. As a result these countries rejected the US proposal (Agence Europe, 16 December 2005). The EU and the G-10 were also accused by the other WTO members of blocking negotiations on setting a date for scrapping export subsidies. A joint coalition made up of the US, the Cairns Group, G-20, G-33, and G-90 called for a total elimination of export subsidies by 2010. The EU was reticent about accepting the date of 2010 until strict parallelism had been established between its export subsidies, food aid, export credits, and STEs. The EU instead suggested 2015 as a definitive date for removing export subsidies. The USTR agreed to negotiate on export credits, but not on food aid, which he considered vital for helping the poorest countries suffering from famine. Brazil and India tried to put pressure on the EU by declaring that if the EU agreed on the elimination of export subsidies by 2010, it would show that the EU was willing to move the negotiations forward (Agence Europe, 16 December 2005). In the end, WTO members agreed on a compromise formula for ending all forms of export subsidies by 2013, phased in from 2010, in parallel with other equivalent export subsidy measures and on a package of measures to help LDCs. The US and Japan agreed on giving LDCs duty-free, quota-free access from 2008 with the exception of rice, sugar, leather, and textile products. Non-emergency food aid, export credit programmes, and STEs were to be reduced by April 2006. The agreement includes the establishment of a ‘safe box’ for bona fide food aid to provide for emergency humanitarian aid (World Trade Organization, 2005b). WTO members also adopted a ‘development package’ allowing developing countries to designate special products on the basis of food security and rural development. The number and the specific designation of special products, however, remained to be determined. In addition, developing countries would be allowed to use an SSM to protect farmers from a surge in imports or a collapse in import prices (World Trade Organization, 2005b). The agreement on cotton was only a partial success. Even though the final text guaranteed that the US would remove export subsidies on cotton and give market access without customs duties or quotas to the C-4 countries by 2008 or earlier, the text did not include any changes concerning the gradual removal of internal support for cotton by 2010 (Agence Europe, 20 December 2005). The two other more controversial issues of domestic subsidies and market access were scarcely discussed because the negotiating positions were too far

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apart. On domestic support, WTO members merely agreed upon the classification of the subsidy levels into three tiers and tariffs into four tiers for the purposes of reduction (World Trade Organization, 2005b). Regarding market access issues, WTO members only agreed that there would be larger cuts for higher tariff levels, but the size of tariff cuts had still to be defined. In the area of NAMA, WTO members agreed on the use of the Swiss formula for tariff reductions that brings down all tariffs horizontally to a maximum ceiling (World Trade Organization, 2005b). WTO members still have to agree, however, on the specific numbers and the implementation period. Regarding services, the final declaration allows for ‘plurilateral negotiations’, which means that negotiations take place between the two countries most interested in a change and that any agreement is then generalized to all WTO members (World Trade Organization, 2005b). Settlement of new deadlines At the Hong Kong meeting, WTO members also agreed on new deadlines with the aim of concluding the negotiations by the end of 2006. A first deadline was set for 30 April 2006. By this date it was envisaged that members should agree on specific numbers and formulae for tariff reductions on domestic support and market access for agriculture and industrial products. A second deadline was set for 31 July 2006 for submitting comprehensive draft schedules of commitments based on these numbers and formulae agreed at the end of April 2006. On 31 October 2006, WTO members should have agreed on a draft schedule for trade liberalization in the services sector. Thus, according to the timeframe outlined in 2005, by the end of 2006, the negotiations should have been completed (World Trade Organization, 2005b). By setting a deadline, negotiators are placed under greater time pressure to conclude negotiations. Without a deadline, there is no pressure to bring negotiations to an end. In this phase of negotiations, a softer approach (making concessions) is needed in order to bring the negotiations to a successful end.

Domestic institutions United States Signature of the Central America Free Trade Agreement On 30 June 2005, the US Senate had just approved the Dominican RepublicCentral America Free Trade Agreement (DR-CAFTA) by 54 votes to 45. The DR-CAFTA expanded existing preferential duty-access to US markets for Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic and it also eliminated tariffs on most US exports to these countries. Republicans had a majority of seats in the House (229–435) and in the Senate a narrow majority (51–48). Since the presidency was also in the

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hands of the Republicans, there were no institutional or partisan veto players. Nevertheless, support in Congress for trade agreements was low and the US administration had to rely on Democrats to have a majority to pass the DR-CAFTA agreement because it was not certain that all Republicans would vote in favour. Even though the DR-CAFTA was opposed from labour unions as well as textile and sugar producers, the Senate supported it only after the US administration promised to limit sugar imports through 2007 by paying DR-CAFTA signatory countries not to ship sugar to the US or even by buying the sugar and making it into ethanol (Financial Times, 30 June 2005). On 28 July, the House of Representatives passed the DR-CAFTA by a narrow margin of 217–15 and in August 2005 president George W. Bush signed it into law (White House, 2005). Although in economic terms the DR-CAFTA would have a negligible impact on the US,1 labour unions and the Democrats opposed the agreement because they considered that the DR-CAFTA would encourage US companies to shift more jobs to those countries and it offered little additional protection to low-wage workers in Central America. Nevertheless, 15 Democrats bucked party leaders and voted in favour of the agreement (Inside US Trade, 12 August 2005). By contrast, business interest groups, such as the National Association of Manufacturers, the Chamber of Commerce and the AFBF supported the agreement. Republican representatives were, however, divided over the DRCAFTA, 27 Republicans even rejected it. The most significant opposition among Republicans came from textile-producing states in the South, sugarproducing states including Louisiana and Idaho, and old-line manufacturing states such as Ohio and Pennsylvania. The House speaker, J. Dennis Hastert (R-Illinois), convinced Hayes, a Republican representative from a district in North Carolina that had lost thousands of textile jobs in the last four years, to switch from ‘no’ to ‘yes’. In exchange he promised to introduce measures to restrict imports of Chinese textiles. The vote of a second Republican representative, Mark Foley from Florida, whose district includes some of the biggest sugar producers in the US, was also crucial to obtaining a majority for the bill. In order to persuade him to support the agreement, Republican leaders threatened to punish the sugar industry by reducing subsidies in the next farm bill if they managed to defeat the trade agreement. Although Mark Foley opposed the DR-CAFTA because it would allow higher sugar imports, in the end he voted in favour of it (New York Times, 29 July 2005). Congressional discussions on the US negotiating position From September 2005 onwards, there were several congressional discussions regarding the US negotiating position. The chairpersons of the two agriculture congressional committees urged Robert Portman to resist EU demands to further reduce domestic support subsidies. After a meeting between the USTR and the Senate and House members on trade, Senate Agriculture

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Committee chair Saxby Chambliss and House Agriculture Committee chair Bob Goodlatte criticized the US negotiating proposal on domestic support and underlined that the US concessions had to be contingent on the expansion of market access (Inside US Trade, 9 September 2005). After the EU had tabled its negotiating proposal, Chambliss sent a letter to the USTR asking him not to concede on domestic support. Moreover, he demanded that any WTO agreement should proceed as a single undertaking, the new blue box had to accommodate the US countercyclical payments, a long period of implementation with a minimum of 10 years, as well as greater certainty and predictability regarding WTO litigation so that US farm programmes were not subject to the WTO dispute settlement mechanism (Inside US Trade, 14 October 2005). The USTR signalled that he would not withdraw his country’s proposal on domestic support before the Hong Kong meeting, but declared that the US should do so, if the EU did not come forward with a more significant offer to reduce agricultural tariffs on market access. Bob Godlatte agreed with the administration’s decision not to withdraw the domestic support subsidies proposal by now, while several House Agriculture Committee Democrats criticized the US administration for offering too much on domestic support before it was clear what the EU would do on market access (Inside US Trade, 4 November 2005). Portman pointed out that the only way the US would get other benefits in the agriculture negotiations, including gains in market access, the elimination of export subsidies and protection from future WTO litigation, would be to include domestic subsidy reductions in the US negotiating proposal. Withdrawing the US offer would lead to a crisis in the negotiations because developing countries were disappointed with the EU offer on agricultural market access and they would reject a demand to make concessions on industrial products and services if the US signalled it would change its proposal (Inside US Trade, 4 November 2005). Positions of farmer groups on the US negotiating position Major farmer groups were divided on the US offer on domestic support. The AFBF supported the US offer on domestic support reductions, under the condition that a Doha agreement would include significant market access gains. By contrast, the dairy and sugar sectors, which would be the most affected by a change in domestic support, rejected the US proposal. Bob Stallman, the president of the AFBF, declared that a 50 per cent reduction in trade distorting amber box subsidies would be the outer limit of what US farmers could accept. The July 2004 commitment on reducing total allowable trade distorting support by 20 per cent in the first year of implementing the Doha round would lead to a reduction of the sum of allowable amber box and de minimis support, in addition to the blue box support. For the US this would amount to a total of about $49 billion. Since the US generally spends at present less than $19 billion annually on trade distorting

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support, a 20 per cent reduction from the total allowable limit under a new WTO agreement would not reduce actual US agricultural spending (Inside US Trade, 7 October 2005). This is why the AFBF and the US administration had agreed to reduce 20 per cent of the total amber box subsidies. The main organization representing the soybean sector, the ASA, opposed an unbalanced agreement that would require substantial reductions in US amber box domestic support, but would not result in substantial market access gains to developing country markets. The ASA criticized the US negotiating proposal for not demanding that emerging economies should be subjected to the same rules on domestic support and export competition as the US (Inside US Trade, 4 November 2005). Since the ASA supports mainly Republicans with over 65 per cent of ASA campaign contributions going to Republican candidates, a Republican US administration and a Republican-dominated Congress have to take their demands more seriously into account than a Democratic Congress would do. The American Sugar Alliance and the key organization of the dairy sector, the NMPF, opposed the US proposal on domestic support reduction and an agreement without better market access for sugar and dairy products. The sugar and dairy programmes currently account for between $5 and $6 billion of the US ceiling on allowable trade distorting support covered by the amber box. This ceiling would be reduced to $7.6 billion by the US proposal and the US would need to change some marketing loan payments for certain crops under that ceiling. The US proposal to limit sensitive products to one per cent of tariff lines, to expand tariff-rate quotas and lower above quota tariffs on these products would bring 750,000 tons of sugar into the US market (Inside US Trade, 4 November 2005). The sugar industry is one of the few commodity sectors, in which Democrats have higher campaign contributions than Republicans 55 per cent to 45 per cent from 1997 to 2006. Sugar producer interests want to keep high domestic support for the sugar industry and to protect their sector from competition from abroad through an adequate safety net for the US sugar farmers (American Sugar Alliance, 2005). The US administration had made concessions on the sugar sector because the sugar industry supports more Democrat than Republican candidates. Thus, a change in the status quo would have fewer negative repercussions for campaign contributions than in other agricultural commodities, whose PACs support predominantly Republican candidates. By contrast, the US dairy sector mainly supports Republican candidates. Moreover, in this commodity group there is a strong competition between Democrats and Republican representatives for campaign contributions. The total amount of PACs contributions to Republicans has increased steadily from 57 per cent in 1998 to 66 per cent in 2006 (Center for Responsive Politics, 2007a). Therefore, a Republican-dominated Congress could not simply ignore the demands of the dairy sector.

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The NMPF asked for a ‘balanced’ outcome by requesting the rapid elimination of all export subsidies in order to expand US dairy exports and the adoption of the Swiss formula for reducing tariff rates. On domestic support, however, the NMPF had a more defensive position asking for a reduction in EU amber box subsidies to the US level of $19 billion, while the US should be able to keep its amber box support (National Milk Producers Federation, 2000). The divisions within agricultural interest groups on trade liberalization and also the pressure put on the US administration by the congressional Agricultural Committees explain why the US refused to make concessions on domestic support reductions until negotiations had moved forward on market access issues. European Union Member states’ reaction to the Lamy-Fischler initiative In May 2004, Lamy and Fischler sent a letter to the other WTO members, in which they listed the issues on which the EU would make concessions. The Lamy-Fischler initiative was criticized by several member states, including Belgium, France, Hungary, Ireland, and Italy. These countries considered that the European Commission had not only chosen the wrong moment to present a new EU offer, but that it also lacked the mandate to negotiate a date for eliminating export subsidies. The most virulent reaction came from the French agriculture minister, Hervé Gaymard, who accused the Commission of having overstepped its negotiating mandate. He regarded the Commission’s initiative as a tactical error because it signalled a degree of flexibility, before the other trading partners had made any indication that they might be prepared to change positions (Agence Europe, 11 May 2004). The French FNSEA also criticized the Lamy-Fischler initiative and underlined that it would not allow agriculture to be ‘the bargaining chip’ in the Doha round (Agence Europe, 8 May 2004). By contrast, Denmark, Finland, Germany, the Netherlands, Sweden, and the UK supported the Lamy-Fischler initiative (Agence Europe, 8 May 2004). Germany, which is the largest European exporter of industry products, was particularly concerned with the opening up of markets for industrial products in emerging countries and was thus willing to make concessions on agricultural issues. Nomination of a new European Commission In July 2004, member states had just nominated a new European Commission and in October the European Parliament (EP) hearings of the new commissioners took place. Peter Mandelson obtained the trade portfolio and Mariann Fischer Boel agriculture. Mandelson described himself as a British economic liberalist. His main priorities were to complete the Doha round, to conclude economic partnership agreements with the ACP countries, to reinforce cooperation with the US, to complete the negotiations with MERCOSUR, and to

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consolidate the strategic partnership with China (Agence Europe, 5 October 2004). Mandelson was broadly supported by members of the EP. By contrast, their reaction to the nomination of the Danish agriculture commissioner Fischer Boel was less enthusiastic. Some deputies from the Socialist Group had opposed her nomination because she advocated for the intensive model of agricultural production, which had little concern for small farmers. Fischer Boel was a member of the Danish Liberal Party and had been Danish agriculture minister from 2001 to 2004, before that she had chaired the Danish Parliament’s Committee on Food, Agriculture and Fisheries (1994–8) and the Trade and Industry Committee (1998–9). During the hearings, Fischer Boel emphasized that she supported the current CAP spending and the strengthening of the rural development pillar and that she would work for Europe and not for a national agenda (Agence Europe, 8 October 2004). The nomination of these two commissioners from countries with a more liberal trade position than the two previous ones, Pascal Lamy from France and Franz Fischler from Austria, led to several conflicts between the Council and the Commission before and during the Hong Kong ministerial meeting. Conflictual Council-Commission relationship After the presentation and discussion of the Commission’s 11 October 2005 proposal to accept a 65 per cent reduction in domestic support, France demanded that a special meeting of EU foreign ministers be convened on 18 October because it considered that Mandelson had overstepped his negotiating mandate (Agence Europe, 13 0ctober 2005). President Chirac even sent a letter to the Commission’s president, José Manuel Barroso, in which he criticized Mandelson’s negotiating tactics. The central issue to be discussed in the convened special Council meeting was whether a majority of member states supported the Commission’s proposal. France – backed by Cyprus, Greece, Hungary, Ireland, Italy, Lithuania, Poland, Portugal, and Spain – proposed the creation of a new advisory committee to monitor the Commission. Peter Mandelson asserted that all of the concessions made or announced to date by the Commission fell within the Council’s mandate and were within the CAP reform (Agence Europe, 15 October 2005). At the same time, Mandelson underlined that it would be impossible to negotiate at the WTO level if every nuance of the European position needed first to be discussed in the Council. This would communicate in advance the EU’s position and would thereby weaken the Commission’s bargaining power (Agence Europe, 18 October 2005). At the end of the extraordinary meeting, a majority of member states reiterated their support for the Commission’s negotiating strategy. The Council recalled that the 2003 CAP reform was the EU’s contribution to agricultural issues in the Doha round and that it represented the limits of the Commission’s negotiating mandate. In order to increase transparency and information flows, now that the most intense phase of negotiations had

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begun, the Commission and the 133 Committee representatives would meet before the negotiations to examine the Commission’s offer of reducing customs duties to ensure that the Commission remained within the confines of its mandate. But the French demand of getting a priori control over any new moves and of establishing an advisory committee to control the Commission was rejected by Denmark, Estonia, Finland, Germany, Malta, the Netherlands, Sweden, and the UK. For Mandelson the result of this meeting confirmed that the mandate belongs to the Council, but the negotiating tactics belong to the Commission (Agence Europe, 19 October 2005). Following this détente in the tumultuous relations of the previous few days between France and the Commission, three days later the Commission presented a new agricultural offer that was discussed on 7 November at the General Affairs Council. Shortly after the presentation of this new offer at the international level, member states met with the Commission at the 133 Committee level. France called for greater clarity on the number of sensitive products and on the timetable for the removal of export refunds. In addition, France considered the special safeguard clauses to be insufficient and too vague. The Commission was now under close scrutiny from the more protectionist member states, especially France, which warned the Commission not to make any new offers on agriculture, until the G-20 had made an improved offer on market access for industrial products and services and the US a better offer on domestic support (Agence Europe, 8 November 2005). After the Commission presented this new negotiating proposal, the COPA also warned the Commission not to make concessions on export subsidies without first obtaining concessions from the US on food aid (Agence Europe, 19 October 2005). The COPA pointed out that agriculture was a unique sector which could not be treated in the same way as all other sectors because Europe must be able to guarantee its own sovereignty and food security. On market access, the COPA was against further concessions because it feared that they could jeopardize the 2003 CAP reform (Agence Europe, 20 October 2005). Brazil Enlargement of the governing coalition In March 2004, Lula da Silva enlarged his governing coalition to include the centre-party PMDB, which held 71 seats in the Chamber of Deputies and 24 in the Senate. This brought the governing coalition a comfortable majority of 319 seats in the Chamber and 52 in the Senate. As a result there were no institutional veto players, but a highly heterogeneous governmental coalition with five left-leaning-parties (PT, PSB, PCdoB, PPS, and PV), one centre party (the PMDB), and three centre-right parties (PP, PTB, and PL). The distribution of cabinet portfolios was disproportional and generated discontent, especially among the centre-right parties. Although the PT controlled only 29 per cent of the coalition’s seats, it took over 60 per cent of

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the ministries. In contrast, the three other major parties in the governing coalition (PMDB, PL, and PTB) that held almost 50 per cent of the seats were only awarded 12 per cent of the portfolios (Amorim Neto, 2006). Centre and centre-right parties found themselves with little power to influence cabinet appointments. This discontent among the centre-right governing parties partially explains the emergence of corruption scandals. Economic policy and corruption scandals During the first three years of Lula’s administration the Brazilian economy had performed quite well with high economic growth and low inflation. This economic policy, however, disappointed labour unions and social movements, which are both traditional supporters of the PT, because economic growth had not led to a significant reduction in the high levels of unemployment. At the same time, business interests together with the centre and centre-right parties in the governing coalition criticized the finance minister Antonio Palocci for maintaining high levels of interest rates. The agribusiness sector was concerned by the value of the Brazilian currency and its impact on agricultural exports. Moreover, in the second half of 2005, many countries had cancelled imports of Brazilian meat due to the resurgence of a new epidemic of foot-and-mouth disease. The agribusiness sector accused the government of being responsible for the epidemic because it had reduced the budget for specific sanitary measures (Couto and Baia, 2006). During this period, Lula da Silva was unable to control moderates and radicals within his party. When it came to the election of the candidate chosen by the administration to the presidency of the Chamber of Deputies, Luiz Eduardo Greenhalgh, some factions of the PT together with a substantial part of centre-right conservative parties rejected his nomination (Couto and Baia, 2006). Shortly afterwards three candidates put their names forward, one from the government, an independent candidate from the PT, and one from the parliamentary opposition. In a second-round runoff, Severino Cavalcanti (PP), a traditional, patronage-like leader of the backbenchers, was elected president of the Chamber of Deputies (Samuels, 2006). The internal problems of the government became even more marked in May 2005 with the news of a corruption scandal in the Postal Service. A third-rank postal-service employee was filmed receiving a bribe of about $1,300 from an undercover businessman on behalf of Roberto Jefferson, the chair of the centre-right PTB, one of the coalition parties. Jefferson reacted to these accusations by declaring that the PT treasurer had paid monthly cash allowances of $13,000 (the so-called mensalão) to deputies of the centre-right parties PL and PP in return for their support on several bills and that the PT had paid deputies to ‘switch’ into parties of the government coalition. The PT’s treasurer admitted that illegal payments had been made. However, he maintained that the government had not bribed its way to a majority, but

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was rather providing under the table campaign finance to its supporters to cover expenses from the 2004 municipal campaigns. Altogether the scandal involved 20 deputies from different parties: nine of them were absolved and five resigned, among them Severino Cavalcanti, who was inculpated with extracting money from the owner of a restaurant in the chamber (Couto and Baia, 2006). These bribery scandals not only damaged the reputation that the PT had built up over the last two decades as a party engaged in combating clientelism and corruption, but they also threw the PT into an internal crisis. This crisis continued through the second semester of 2005. When it came to the Hong Kong ministerial meeting, Lula’s presidency held a weak internal position (Couto and Baia, 2006). Given the magnitude of these corruption scandals, the discussion of the government’s trade policy played only a secondary role. Before the Hong Kong meeting, Celso Amorim emphasized that multilateral trade negotiations remained Brazil’s main priority, at the expense of an EU-MERCOSUR trade agreement (Inside US Trade, 30 September 2005). In order to demonstrate that Brazil was not dependent on an agreement at the international level, on 7 December 2005 a preferential trade agreement between the MERCOSUR and India was approved by the Joint Parliamentary Committee of the MERCOSUR (Jornal da Câmara, 2 December 2005). This was a further step in strengthening bilateral trade agreements. Australia Reaction of farmer groups to the Hong Kong meeting In March 2005, the NFF launched a campaign headlined by the slogan ‘Farmers Support Free Trade? Damn Right We Do!’ with the aim of securing trade liberalization through the elimination of export subsidies, substantial reductions in domestic support, and substantial improvements in market access (National Farmers’ Federation, 2005). Following the end of the Hong Kong ministerial meeting, the NFF supported the commitment to an end-date for export subsidies, but it was disappointed with the lack of progress on market access and domestic support issues. The cattle sector was particularly disappointed with the outcome of the agreement because it was especially interested in increasing its export quota to the EU (The Australian, 3 August 2004).2 At the end of May 2005, Australia launched negotiations with China on free trade. In November 2005, the Australian and the Chinese delegations started the negotiations at working group level on a wide range of trade issues, including agriculture and quarantine rules, industrial products and government procurement, trade in services, investment and electronic commerce, intellectual property and competition policy (Australian Department of Foreign Affairs and Trade, 2008a).

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Before and during the Hong Kong ministerial meeting Australia had turned its attention to a bilateral trade agreement with one of its more important trading partners, similar to the way in which it had negotiated the FTA with the US in 2004.

Conclusion Although two months before the Hong Kong ministerial meeting the EU presented a new offer which included a 60 per cent reduction in the EU’s highest tariffs and a 70 per cent amber box support reduction, the US, the Cairns Group, and the G-20 considered this new offer insufficient and rejected it unanimously. Even before the Hong Kong meeting WTO members admitted that their negotiating positions were too far apart to agree on specific formulae for reducing tariffs on agricultural and industrial products. Thus negotiations focused simply on a phase out date for all forms of export subsidies. On export subsidies, the US, the Cairns Group, G-20, G-33, and G-90 all called for a total elimination of export subsidies by 2010, while the EU and the G-10 proposed 2015 instead. At the end of the Hong Kong ministerial meeting, WTO members agreed on the elimination of all forms of agricultural export subsidies by the end of 2013, phased from 2010 on, in a progressive and parallel way to market access and domestic support reduction. Non-emergency food aid, export credit programmes and the practices of exporting STEs were to be reduced by April 2006. On cotton, the US simply agreed to remove export subsidies in 2006 and give market access without customs duties or quotas to the C-4 countries by 2008, but there was no reference to the removal of internal support in this sector. Domestic institutions and the lack of time pressure explain why WTO member states only conceded on phasing out export subsidies and the negotiations remained deadlocked on market access and domestic support. The US was under pressure from Congress not to concede on domestic support until the EU had made an improved offer on market access. During the negotiations at the international level, the USTR took congressional demands into account by not conceding on domestic support reduction in the amber box and by asking for the creation of a new peace clause to protect domestic support against WTO litigation. On the other hand, major farmer and commodity organizations were divided over the US offer on domestic support reductions. While the AFBF supported the US concessions on domestic support, on condition that the agreement would include significant market access, the dairy and the sugar sector, the sectors most affected by a change of the status quo, rejected the US proposal on domestic support without better market access. At the same time, the US was not under time pressure to concede because it had just negotiated several bilateral trade agreements, of which the

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DR-CAFTA was the most important. After the conclusion and ratification of DR-CAFTA, the USTR could again shift its attention to the slow-moving negotiations of the Doha round. This strategy of negotiating bilateral and regional trade agreements at the same time gave the US a good BATNA and also allowed it to negotiate from a position of strength at the WTO level. There was in this way no time pressure to agree on an outcome at the WTO level that did not bring better market access to US farmers. At the EU level, before the Hong Kong meeting, there were several situations of conflict between the more protectionist member states and the Commission. France convened an extraordinary meeting because it considered that the Commission had gone beyond its negotiating mandate. Mandelson reassured member states that the Commission would attempt to reach a balanced agreement on all the Doha round issues, but he considered that all of the concessions made or announced to date fell within the Council’s negotiating mandate. In Brazil, when it came to the Hong Kong ministerial conference, Lula da Silva was internally weakened due to several corruption scandals that led to the resignation of twenty deputies from different governing parties. Given the magnitude of the corruption scandals, the government’s trade policy played a secondary role. In order to demonstrate that Brazil was not dependent on a WTO agreement, a few days before the Hong Kong meeting, MERCOSUR signed an FTA with India. In Australia, the negotiating position of the Liberal-National government remained unchanged. The NFF was partially satisfied with the agreement on the elimination of export subsidies, but disappointed by the inability of WTO members to agree on market access issues. In the meantime, Australia was negotiating an FTA with China, one of its major trading partners. Australia wanted to have a good BATNA with bilateral trade arrangements, in case the WTO negotiations did not move forward the following year. In order to bring negotiations successfully to an end in 2006, WTO members agreed upon three interim deadlines. By 30 April 2006, they should have agreed on numbers for reductions on domestic support and on a formula for tariff reductions on market access for agricultural and industrial products. By 31 July 2006, they were expected to submit draft proposals and by 31 October 2006, they should have agreed on a draft schedule for trade liberalization in the services sector. As a result of these three deadlines, it was envisaged that negotiations would be concluded by the end of 2006. The settlement of deadlines is important because it puts negotiators under time pressure. However, if a deadline is not linked to any costs, it is arbitrary. Then negotiating parties can simply postpone agreement by not moving from their demands. The problem with delaying an agreement in the case of multilateral trade negotiations is that bargaining parties can simply opt for negotiating bilateral and regional trade agreements. The US had already

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negotiated bilateral trade agreements with the Dominican Republic and Central American countries. The same is true for Australia which had started negotiations with China on an FTA. Brazil had also just negotiated an FTA with India. Thus, in case of failure of the WTO negotiations these countries would have good BATNA. The problem with the proliferation of regional and bilateral trade arrangements is, however, that they weaken the time pressure for an agreement at the multilateral level.

11 Geneva Informal Meeting 2006

International-level negotiations New deadlines and the shadow of transatlantic trade disputes On the sidelines of the World Economic Forum in Davos, in January 2006 trade ministers repeated their intention to conclude the negotiations by the end of the year and to stick to the timetable agreed at Hong Kong. The first stage envisaged the submission by all WTO members of detailed proposals for trade liberalization on agriculture and manufactured goods by 30 April 2006. In the following stage, countries would submit their lists of ‘sensitive’ products, which would then be exempted from reductions in customs duties. Third, it was planned that preparatory meetings should take place at the end of March, mid-May, and the end of June to prepare for the two key meetings in April and July (Agence Europe, 31 January 2006). The negotiations were, however, overshadowed by several transatlantic trade disputes. In February 2006, the WTO panel interim report considered that there was no scientific justification for the safeguard measures used by some European countries to protect themselves from GMOs imports (Agence Europe, 9 February 2006). Moreover, a verdict from the WTO dispute settlement system confirmed that the US had not taken the measures necessary to comply with a previous judgment on Foreign Sales Corporation, which allowed US companies to exclude some of their trade-related profits from taxation, considered illegal by the WTO in 2000. The WTO authorized the EU to impose additional customs duties against the US. In May 2004, the US Congress had passed a new bill, the ‘American Jobs Creation Act’, which was also incompatible with the WTO ruling of 2000 (Agence Europe, 14 February 2006). It was in this tense atmosphere between the two major trading powers that from February until March 2006 several informal meetings between the FIPs and Japan took place, in which delegations did little more than restate their well-known positions. WTO director-general Pascal Lamy identified a basic ‘triangle’ of issues that needed to be agreed between key players in order to resolve the stalemate: the US would have to agree on deeper cuts 194

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in domestic farm subsidies; the EU would have to lower agricultural tariffs further; and Brazil and India would have to reduce their tariffs for industrial products (ICTSD Weekly Trade News Digest, 15 March 2006). On the eve of an informal meeting in March of the FIPs, under French leadership 12 EU member states emphasized that the EU’s October 2005 proposal had ‘exhausted all room for manoeuvre’ on market access and domestic support (Agra Facts, 14 March 2006). They urged the Commission to rebalance negotiations towards effective access to the industrial products and services markets of large emerging countries (Agence Europe, 18 March 2006). Before the 30 April deadline, the negotiations at the WTO’s Agricultural Committee level remained stalled as a result of three stumbling blocks. First, Brazil, India, Mexico, and South Africa asked the US to reduce its agricultural domestic support subsidies. However, the US did not move from its previous offer. Second, the G-20 and the US called on the EU to lower its agricultural tariffs on market access (Agence Europe, 20 April 2006). The EU refused to make further concessions on market access until Brazil and India agreed to reduce their tariffs on imports of industrial goods and the US presented a new offer on domestic support (Agra Facts, 14 March 2006). Finally, the EU and the US demanded further reductions in tariffs on imports of industrial goods from Brazil and India (Agence Europe, 20 April 2006) before offering further concessions on agricultural market access and on amber and blue box support. But Brazil refused to make concessions on industrial products, until the EU had made a better offer on further tariff reductions for market access and the US had reduced its amber box support. In addition, the negotiations took place under the shadow of the announcement on 18 April that Robert Portman would leave his position as USTR and would be substituted by deputy USTR Susan Schwab. This was interpreted by the other delegations as a signal that the US administration no longer believed in the successful conclusion of the Doha round (The Economist, 20 April 2006). Susan Schwab confirmed this speculation by declaring that beyond the Doha round negotiations the US would pursue bilateral and regional trade agreements on an equal footing (Paggi et al., 2005). The chair of the House Ways and Means Committee, Bill Thomas (R-California), even suggested breaking off multilateral negotiations in favour of bilateral trade agreements, which he considered to be more advantageous to the US (Agence Europe, 20 April 2006). After a ‘green-room’ meeting with 24 ambassadors, Pascal Lamy decided to cancel a meeting at the ministerial level scheduled for May and to adjourn it until the beginning of July because of deep divisions among delegations on domestic support and market access for agricultural commodities as well as the lowering of tariffs for manufactured goods in emerging countries. He proposed instead that, in the meantime, from May on WTO members

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should initiate six weeks of intensive negotiations without any formal deadlines (ICTSD Weekly Trade News Digest, 26 April 2006). Six weeks of intensive negotiations without any breakthrough At the EU–Latin America Summit in May 2006, for the first time Peter Mandelson, the EU trade commissioner, declared that he could improve the EU’s offer by increasing the average reduction in EU customs duties on imports of agricultural products from 39 per cent (the offer of 28 October 2005) to nearly 50 per cent (G-20 countries were demanding a reduction of 54 per cent). This improved offer was, however, conditional upon concessions from the US on the reduction of domestic support subsidies as well as on the reduction on customs duties on industrial products from the G-20 emerging nations, especially from Brazil, South Africa, China, India, and Mexico (Agence Europe, 23 May 2006). The USTR, Susan Schwab, however, considered that the new EU offer on customs duties was still too low (Agence Europe, 30 May 2006). The US adopted a radical stance by asking the EU to open its market further. At the same time, the US did not come up with any new proposal on the reduction of domestic support subsidies. In order to put some time pressure on delegations to move from their negotiating positions, Pascal Lamy also set a deadline at the end of June for reaching agreement on numbers and formulae for tariff and subsidy reductions on agricultural and industrial tariff reductions (Agra Facts, 2 June 2006). Although WTO members continued to discuss reform of the green box criteria, negotiating positions were still far apart on what kind of grants could fall under the category of decoupled income support. While the EU and the US opposed extensive changes to the green box (ICTSD Weekly Trade News Digest, 6 June 2006), the G-20 and the Cairns Group wanted to have these subsidies tightened to avoid the possibility that the US and the EU could use them to update the eligibility criteria (such as income and production level) of domestic support (G-20, 2006) and in this way to exempt them from reductions. Regarding market access issues, the US proposed tariff reductions for developed countries of between 55 and 90 per cent, the EU kept its position of more modest cuts of 20–60 per cent and the G-20 called for cuts of between 45 and 75 per cent. The chair of the agriculture committee, Crawford Falconer, suggested taking the G-20 proposal as a basis for an eventual compromise in order to reconcile the extreme positions of the US and the EU. But the EU, the G-10, and the US rejected it (Agence Europe, 16 June 2006). The latter considered the G-20 proposal inadequate because the difference between the cuts foreseen for developed countries (75 per cent) in contrast to those for the developing countries (36 per cent) was too vast. Susan Schwab emphasized that the US would rather prefer to have negotiations breakdown than to finish with ‘little’ additional market access for US farm exports (Agra Facts, 14 June 2006).

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The US also asked for the negotiation of a new peace clause that would exempt most kinds of farm subsidies from legal challenge in the WTO (US Department of Agriculture, 2006b). Since the expiration of the peace clause at the end of 2003, several countries had successfully used WTO dispute procedures to force changes in US subsidy programmes. Brazil had filed a case in the WTO against the US, alleging that the US cotton programme violated the AoA by stimulating larger production and exports of cotton than would have been the case in the absence of those subsidies. Unsurprisingly, this demand of the US to create a new peace clause was opposed by Brazil and Australia (ICTSD Weekly Trade News Digest, 21 June 2006). This proposal of the US was in line with the demands put forward by the Senate Agriculture Committee chair, Saxby Chambliss, who had asked for the inclusion of a new peace clause in multilateral trade agreements to prevent further WTO challenges to domestic policy rules. At the EU–US summit in Vienna, US president George W. Bush declared that the US was willing to move if there were improved offers on better market access for industrial products from India and Brazil and on agriculture from the EU. By contrast, the EU and India stated that all other WTO members were waiting for the US to move. The US administration was under congressional pressure not to present a new offer until the EU had guaranteed better market access for agricultural products and Brazil and India had further reduced their tariffs for industrial products. At the US domestic level, the chair of the House Agriculture Committee, Robert Goodlatte, declared that there was ‘absolutely no support’ in Congress for further US concessions (Agra Facts, 16 June 2006). In an informal June meeting, the EU was the only negotiating party that made small concessions. The EU offered a 75 per cent reduction in its amber box subsidies (compared with 70 per cent in October 2005), to cap blue box subsidies at 2.5 per cent (in October the European offer was 5 per cent), to accept alterations to the green box, and to reduce customs duties by 54 per cent, as proposed by the G-20. Finally, the EU accepted the reduction in the number of sensitive products to 4 or 5 per cent of tariff lines (in October the EU had offered 8 per cent). At the same time, the European Commission openly admitted that this offer would go beyond its negotiating mandate (Agence Europe, 16 June 2006). The Commission was able to make further concessions because member states were divided on whether the Commission had already gone beyond its negotiating mandate. A large number of countries that supported the Commission included Belgium, Denmark, Estonia, Finland, Germany, Lithuania, Luxembourg, the Netherlands, Slovakia, Sweden, and the UK. They encouraged the Commission to make further concessions in agriculture in order to obtain concessions on industrial products and services. By contrast, a group of opponents of further concessions on agriculture included Austria, France, Greece, Ireland, Italy, Poland, Portugal, and Spain.

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They wanted the Commission to stick with the offer made in October 2005 and opposed this new offer (Agence Europe, 30 June 2006). This last-offer bargaining strategy of the EU gave it an advantage in the negotiations. This offer left the other actors with the responsibility of either accepting the last offer or being responsible for the breakdown of negotiations. But the US and Brazil still considered the EU offer to be insufficient to move negotiations forward and did not present any new offer. In this way, the EU was the actor making the most concessions at the international level, while the US and the G-20 stuck to their negotiating positions. The Falconer draft text on hundreds of outstanding issues In June 2006, Crawford Falconer circulated a new 74-page draft text that pointed to hundreds of unresolved differences between WTO members. The draft text placed different options within some 760 pairs of square brackets (outstanding issues), each of them indicating a segment of text or a numerical figure on which members disagreed. In a press conference, Falconer declared that he did not expect ministers to work through the draft text bracket-by-bracket, but that they would probably have to focus on the key political issues that were crucial to unlocking the stalemate (ICTSD Weekly Trade News Digest, 28 June 2006). The Falconer text left out comments previously made on a 54 per cent average cut in tariffs as a good basis for agreement. On market access, the text again outlined the four bands for tariff reductions, but left in square brackets not only the figures for defining the bands but also the levels of reduction. The same is true for sensitive products, where Falconer indicated that these would be limited ‘to 1–15 per cent of [dutiable] tariff lines’. On export competition, there were fewer square brackets than in other areas, but the number of outstanding issues showed how little progress had been made since the Hong Kong ministerial meeting. With regard to domestic support, the draft foresaw reductions between 70 and 83 per cent in the highest band (EU) and 60 and 70 per cent in the middle band (US and Japan) (World Trade Organization Special Session of the Committee on Agriculture, 2006). The new peace clause requested by the US was, however, not mentioned in the paper. This draft text was no more than a summary of negotiating positions with some comments from the chair on areas where a possible compromise could be sought. From 29 June to 3 July 2006, 50 trade ministers representing the main trading powers and the main negotiating groups met to try to hammer out a compromise agreement. Even though the EU, the US, and Brazil declared they were prepared to make concessions, they did not come with any specific figures. The USTR indicated that the US could agree to reduce domestic support (going beyond a reduction of 53 per cent of the maximum allowed ceiling) and moderate its demands on market access (improving on an average reduction of agricultural customs duties of 65 per cent). The Brazilian

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foreign minister declared that he would accept a reduction of customs tariffs on industrial products (currently standing at 50 per cent on average). The European trade commissioner reiterated that the EU would improve its offer on agriculture from October 2005 so that it would be closer to the demands of the G-20 for the average reduction of agricultural customs duties, on condition that there was a general movement by the US on domestic support and the emerging countries on industrial products and services (Agence Europe, 29 June 2006). The European agriculture commissioner added that the US offer on internal support was too low and asked for real subsidies reductions (Agence Europe, 30 June 2006). Rejection of the ‘20-20-20’ formula and breakdown of negotiations On 28 June, Pascal Lamy sketched out a possible ‘20-20-20’ compromise formula for the triangle of key issues. The US would have to set a $20 billion ceiling on agricultural support, Brazil and India would set a maximum tariff on imports of industrial products of 20 per cent, and the EU would need to accept the G-20 proposal on agricultural tariff reductions (ICTSD Weekly Trade News Digest, 28 June 2006). Lamy tried to put delegations under time pressure by emphasizing that market access for agricultural and industrial products had to be agreed on, otherwise delegations would simply run out of time to conclude the round (World Trade Organization, 2006a). Following agreement between WTO members, negotiations are not yet over because the details of the agreement remain to be worked out. In the case of the WTO, it can take about six months to translate the specific formulae on tariff reductions into thousands of product-specific liberalization commitments (ICTSD Weekly Trade News Digest, 28 June 2006). The ‘20-20-20’ compromise formula was, however, rejected by a majority of delegations. The Brazilian and Japanese ministers considered the $20 billion ceiling for US domestic subsidies to be too low and unrealistic given that the US had not yet made a concrete proposal on this issue. The EU regarded Lamy’s proposal on market access for manufactured products to be insufficient because it would not provide additional market access for emerging countries (Agence Europe, 29 June 2006). The US was not willing to move from its negotiating position presented in October 2005 owing to pressure from Congress and interest groups. A few days before the presentation of the ‘20-20-20’ compromise formula, 57 out of the 100 members of the US Senate signed a letter urging the USTR not to concede without obtaining better market access for US farmers. Major commodity groups – such as the soybean and the cotton sectors – met Susan Schwab to reiterate that they wanted better market access and opposed additional amber box cuts (Delta Farm Press, 30 June 2006). The EU was also under pressure from the COPA not to make further concessions on market access. The president of COPA, accompanied by

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a delegation of farmers’ organizations from Belgium, France, Ireland, and Poland, met with Peter Mandelson to underline that they opposed the conditional offer made by the Commission of cutting custom tariffs by 54 per cent. They estimated that such cuts on customs tariffs would lead to the loss of over a million jobs in the agricultural sector (Agence Europe, 21 July 2006). In Brazil, the trade union CUT opposed tariff reductions for developing countries in the industrial sector without higher reductions from developed countries in the agricultural sector (Confederação Única dos Trabalhadores, 2007). Given the upcoming legislative and presidential elections in October 2006, the Brazilian government was not willing to make concessions on reductions on the industrial sector since trade unions closely linked with the president’s party, the PT, opposed them. Australia had weak bargaining leverage because it had unilaterally reduced tariffs over the past two decades to an average tariff of 3.9 per cent. As a result, Australia has among the lowest tariff rates in the world (The Australian, 12 December 2005). In contrast to Brazil, it could not ask for further agricultural tariff reductions in exchange for further tariff reductions for industrial products. At the beginning of July, Lamy initiated informal bilateral meetings with the FIPs and Japan in order to try to find their true ‘red lines’. He considered that these major players were still waiting for each other to move first and that they had not yet ‘put their numbers on the table’ (ICTSD Weekly Trade News Digest, 3 July 2006). In mid-July, at the G-8 Summit in St Petersburg, there was an informal meeting with the heads of state and government of the G-8 and five emerging countries (Brazil, India, China, Mexico, and South Africa). Lamy reported that the negotiating positions of the major players were not insurmountable since the differences were in the order of a few percentage points. The central problem was rather that countries were asking for too much in return for concessions. At the end of the meeting, they mandated Lamy to intensively consult with delegations to try to find a compromise on agriculture and industrial tariff issues (ICTSD Weekly Trade News Digest, 19 July 2006). In the next informal meeting in July, the delegations of the EU, US, Australia, Brazil, India, and Japan did not move from their intransigent stances. Lamy considered that negotiating positions were too far apart and decided to suspend talks indefinitely, so that countries would have a ‘timeout’ to examine available options and to review their positions (World Trade Organization, 2006b). Reaction of major players to the temporary suspension of negotiations The suspension of the negotiations was followed by an intense blame game. Peter Mandelson blamed US intransigence on domestic support as

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the reason for the breakdown, while Susan Schwab countered that the EU had conceded too little on market access ‘to make any such movement possible’. In turn, Brazil and India were disappointed that the US did not come up with any new proposals. Celso Amorim underlined that the trade round could only be concluded if the US agreed on reducing their internal subsidies (ICTSD Weekly Trade News Digest, 19 July 2006). By contrast, Susan Schwab blamed the other countries for not opening up their markets, accusing them of causing the collapse of negotiations (Agence Europe, 25 July 2006). She blamed the EU for having failed to propose significant improvements on agricultural market access (ICTSD Weekly Trade News Digest, 26 July 2006). At the same time, she also admitted that the US had not made any new offer with new numbers (US Department of Agriculture, 2006a). Mandelson continued this blame game by countering that the EU had offered to go from its original proposal of a 39 per cent average reduction in tariffs to 54 per cent. The US had not presented a new offer on the reduction of domestic support, while at the same time demanding excessive market openings from the EU. This was also the position of the COPA, which underlined the contrast between the flexibility of the EU in the negotiations and the inflexibility of the US in shielding trade-distorting domestic support (Agra Facts, 26 July 2006). Lamy compared the suspension of negotiations to a ‘time-out’ in a basketball game, calling on WTO members to come back onto the pitch after having changed positions and tactics (Agra Facts, 26 July 2006). The momentum in trade negotiations had moved away from the WTO towards bilateral FTAs. Major players’ best alternatives to a negotiated agreement After the collapse of negotiations, major players declared that they would move towards bilateral trade agreements. The US had the best BATNA because it had already negotiated several bilateral FTAs and was now negotiating new ones with Asian countries (South Korea, Vietnam, Malaysia, and Thailand) and Latin American countries (Bolivia, Columbia, Peru, and Panama) (Inside US Trade, 25 August 2006). Australia had, since 2004, a bilateral FTA with the US and had initiated bilateral trade negotiations with China in April 2005. Brazil also turned its attention towards regional trade agreements within the MERCOSUR and bilateral trade agreements with India, South Africa, and China. After the suspension of negotiations, the EU changed its trade strategy by focusing on bilateral and regional trade agreements. The European Commission resumed negotiations with MERCOSUR in September 2006, and in 2007 began bilateral trade negotiations with the ASEAN countries, South Korea, India, China, Russia, Central American, and the Andean countries (Moehler, 2007).

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The simple fact that all major trading nations are negotiating FTAs at present gives them a good BATNA and weakens the time pressure to come to an agreement at the multilateral level. The problem with all these different bilateral FTAs is that they create a ‘spaghetti bowl’ of overlapping trade rules that erode the principle of non-discrimination, raise the transaction costs, and draw negotiating capacity away from the multilateral trade negotiations.

Domestic institutions United States Congressional and farm groups’ opposition to further concessions At the national level, the US administration was under pressure from congressional, major farm, and commodity groups not to concede on domestic support until the EU had presented a new offer on market access. The chairperson of the Senate Agriculture Committee, Saxby Chambliss from Georgia, a state with an important agricultural production in the peanuts, dairy, cattle, and tobacco sectors, suggested that the Bush administration should scale back its offer to reduce agriculture subsidies unless other WTO members come close to its proposal to reduce agricultural tariffs by around 66 per cent. He also reiterated that the US offer on reducing domestic support was contingent on other countries providing market access (Delta Farm Press, 9 June 2006). This was also the position of major farm organizations. Under the AFBF leadership, major commodity groups, including the cotton, corn, dairy, rice, soybean, sugar, and wheat sectors,1 in June 2006 sent a letter to the US president advising him to make more concessions on domestic support only in exchange for greater market access for US farmers. They asked the use of the label ‘sensitive products’ be limited for developed countries and ‘special products’ for developing countries given its negative impact on any tariff cut proposals (National Cotton Council of America, 2006). Following a report on Inside US Trade that the Bush administration had decided to lower its demands from the average reductions of around 66 per cent in order to come closer to the G-20’s 54 per cent, the chief democrat on the House Agriculture Committee, Collin Peterson, criticized the reported changes in the US position. The chairperson of the House Agriculture Committee, Robert Goodlatte (R-Virginia), met with the leaders of eleven commodity groups, including representatives from the cotton, rice, and wheat sectors, to reassure them that there was absolutely no support in Congress for further concessions (ICTSD Weekly Trade News Digest, 21 June 2006). Given the upcoming US Congressional elections in November 2006, which were predicted to be very tight in the House and in the Senate, the US administration did not make any concessions on domestic support because the AFBF and the dairy federation NMPF, which supported the electoral campaigns of Republican candidates, opposed it. From August 2006, Congress

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began discussing a new farm bill, which would replace the 2002 farm act and would retain its levels of domestic support. The AFBF and major commodity groups had already called for the extension of the 2002 farm bill if WTO members failed to conclude the Doha round in 2006 (Inside US Trade, 14 July 2006). European Union Divisions within the Council on further concessions In March 2006, the French agriculture minister, Dominique Bussereau, with the support of twelve other states (Cyprus, Finland, Greece, Hungary, Ireland, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovenia, and Spain) circulated a memorandum justifying the CAP and pleading for new domestic support subsidies that would be compatible with the international agricultural trade regime. They proposed the establishment of an insurance scheme allowing farmers to take greater responsibility for the management of climatic and economic risks and to introduce domestic support for the wine, fruit, and vegetable sectors (Agence Europe, 16 March 2006). In the memorandum, they also reiterated that the EU’s offer of 28 October 2005 on market access was conditional upon offers from others. They considered that the Commission had gone to the very edge of its mandate on agricultural market access and on the amber box commitments for domestic support. At the same time, they noted that this EU last offer was not binding for the EU (Agra Facts, 14 March 2006). At the Agriculture Council on 20 March, Austria, Belgium, Finland, and Germany supported this memorandum on the CAP. Only Denmark, Sweden, and the UK opposed it (Agence Europe, 21 March 2006). At the June 2006 Agriculture Council meeting, Fischer Boel, the commissioner for agriculture, reassured member states that the EU would not make a new unilateral offer on agriculture, unless the US reciprocated with a reduction on internal subsidies. But she considered that the EU still had a small margin for manoeuvre on agriculture. Member states were divided, however, on this issue. A majority of states (Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovenia, and Spain) opposed new unilateral concessions from the EU on agriculture without a move from the US on domestic support and from Brazil and India on industry products and services (Agence Europe, 20 June 2006). Within this group, Austria, Cyprus, France, Greece, Ireland, Italy, Lithuania, Malta, Poland, Portugal, and Slovenia opposed the new agricultural offer made by the Commission, which had increased the EU offer from 39 to 54 per cent on the average reduction in agricultural customs duties. Germany now supported this group of countries because the new German agriculture minister, Horst Seehofer, came from the CSU, a party with a strong link to farmers in Bavaria (Agence Europe, 30 May 2006). By contrast, a small number of

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countries (Denmark, Estonia, the Netherlands, Sweden, and the UK) encouraged further movement in order to win concessions on NAMA and services (Agence Europe, 30 June 2006). After the temporary suspension of WTO negotiations, Dominique Bussereau underlined that negotiations had focused too much on agriculture, and within this sector on the reduction in customs duties. He also considered that the EU had made substantial concessions by reforming the CAP in 2003, accepting the removal of export subsidies by the end of 2013, and offering to reduce customs duties. By contrast, he claimed that the US had simply followed their usual negotiating tactic of presenting unrealistic demands, while at the same time increasing their agricultural domestic support. Finally, he also criticized the Commission’s tactic of putting conditional offers on the table at regular intervals, without tangible concessions from other trading partners. Although multilateral negotiations remained the best option, Bussereau considered that ‘no agreement [was] better than a bad agreement’ (Agence Europe, 29 July 2006). Moving towards bilateral and regional trade agreements Following the suspension of negotiations at the multilateral level, France and Germany pleaded for a move towards bilateral FTAs. In October 2006, Mandelson presented a new EU trade strategy ‘A Competitive Europe in a Globalised Economy’, in which the European Commission proposed that bilateral and regional trade agreements be renegotiated. Apart from continuing negotiations with MERCOSUR, the Commission proposed to begin negotiations with South Korea, ASEAN¸ India, China, and Russia (Agence Europe, 5 October 2006). The EU–MERCOSUR trade negotiations, which had been suspended in October 2004, were resumed in September 2006 (Agence Europe, 13 September 2006). At the same time, the European Commission started negotiations with the Central American (Costa Rica, Nicaragua, Guatemala, Belize, and Panama) and Andean countries (Colombia, Peru, Ecuador, and Bolivia) (Moehler, 2007). In December 2006, the European Commission had asked the Council for three separate negotiating mandates for bilateral FTAs between the EU and South Korea, India, and the ASEAN states (Agence Europe, 2 December 2006). Brazil Pressure from interest groups Given the forthcoming legislative and presidential elections later that year, the Brazilian government in June 2006 was more concerned with the elections than with the successful conclusion of the Doha round. Lula da Silva criticized the present international trading system, in which developed countries demanded the elimination of tariffs for industrial products while at the same time they refused to open their agricultural markets to products from developing countries. This position of the Brazilian

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government was in line with the position of the trade union CUT. It pointed out that the present international trade regime reinforced the control of developed countries over industry and technology and made the development of an industrial sector in developing countries impossible. The CUT considered that a further tariff reduction for industrial products would lead to an increase in unemployment in that sector without creating new jobs in other economic sectors. The CUT even sent a letter to the minister of foreign affairs and trade urging them not to make concessions on tariff reductions for industrial products in exchange for better market access for agricultural products (Confederação Única dos Trabalhadores, 2007). By contrast, the business sector, through its leading organization, the CNI, asked for a balanced outcome with better market access for Brazilian products, elimination of trade-distorting subsidies, and special treatment for developing countries. The CNI considered the breakdown of negotiations in July 2006 to be disadvantageous for Brazil because it put the multilateral trading system into question and strengthened bilateral and regional trade agreements (Confederação Nacional da Indústria, 2006). Nevertheless, the CNI also urged the Brazilian government to pursue a diversified trade strategy by focusing on bilateral and regional FTAs to improve market access for the Brazilian industrial sector (Confederação Nacional da Indústria, 2008a). The agribusiness sector represented through the CNA aligned itself with this position of the CNI, but it went one step further by openly criticizing the Brazilian government for not accepting modest cuts in the industrial sector in exchange for market access for agricultural products. In addition, it criticized the government for its inability in the MERCOSUR framework to conclude FTAs with the EU and US (Confederação Nacional da Agricultura, 2006). In 2005, Brazil had built up a trade surplus of $33 billion, thanks to the increase in agricultural exports. This boom had hitherto benefited large landowners and the intensive agricultural production of soya, corn, and sugar cane for export. In such a situation, there was not pressure to concede on tariff reductions in the industrial sector. In view of the strong link between the CUT and the PT, the main issue for the Brazilian government was to avoid a polarization of the electoral campaign. The breakdown of negotiations was not even discussed in parliament, and all parties were already concentrated on the electoral campaign, relegating trade to an issue of secondary importance. Australia Reaction from interest groups and the Labor Party After the suspension of negotiations, the NFF supported the decision of the Australian trade minister not to agree to a weak outcome, which would not deliver significant export gains for Australian farmers (The Australian, 7 August 2006). At the same time, the NFF urged the Australian government to pursue bilateral trade agreements (The Weekly Times, 12 September 2007).

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The reaction of Kevin Rudd, Labor’s spokesman on foreign affairs, was much more critical. He accused the Liberal-National government of having failed in WTO negotiations to play the role Australia had historically taken within the Cairns Group – that of a third force, an honest broker, and a creative middle-power in the overall negotiation process (The Australian, 14 September 2006). Finally, Rudd urged the Australian government to effectively engage in multilateral trade negotiations by presenting proposals capable of bridging the gap between the existing positions of the EU, the US, and the G-20 (The Australian, 20 September 2006). When the new Labor government under the now prime minister, Kevin Rudd, came into power in December 2007, the new trade minister, Simon Crean, stated that Australia would continue to pursue FTAs with its major trading partners, but its primary focus would be on multilateral trade negotiations and on a regional trade agreement with the ASEAN. In line with the policy followed by previous Labor governments, Crean underlined that the new government would diversify Australian exports by encouraging exports of services (The Australian, 6 December 2007).

Addendum: attempts to revive the Doha round after July 2006 Following the breakdown of negotiations, there were no significant developments at the international level until January 2007, when the president of the European Commission, José Manuel Durão Barroso, met with US president George Bush to relaunch the trade round. The EU asked the US to further reduce the ceiling of its annual agriculture domestic subsidies from $23 billion to $15 billion, and in return the EU would further reduce its agricultural customs duties, bringing them closer to the demands of the G-20 proposal, with an average reduction of over 50 per cent (Agence Europe, 9 January 2007). Following the meeting, Peter Mandelson met with French prime minister, Dominique de Villepin, and several other members of his government, including the ministers Philippe Douste-Blazy (foreign affairs), Catherine Lagarde (trade) and Dominique Bussereau (agriculture), to find out whether France would accept the new proposal put forward informally by the Commission. The French government stated that a 39 per cent cut on customs tariffs was the maximum concession it would accept, claiming that no new factor justified a change in the EU’s position (Agence Europe, 13 January 2007). With the French presidential elections coming up at the end of April 2007, France opposed making further concessions on a reduction of customs duties that would have direct consequences for French farmers, a crucial constituency for the UMP, the party of the French president, Jacques Chirac. In the meantime, the Bush administration tabled the US farm bill 2007, which would substantially increase agricultural spending. The EU, Brazil, and India criticized this new bill proposal and asked the US instead to lower

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the ceiling on its trade-distorting support below the $22.5 billion cap. But the US insisted that they would have to agree to accept substantially more agricultural imports before it would make further offers on subsidy reduction (ICTSD Weekly Trade News Digest, 7 February 2007). At the WTO level, from January to July 2007, there were several informal meetings without visible progress. After the expiration of the TPA in June 2007 and with no signs that the mandate would be extended, other countries were rather reluctant to negotiate on trade with the US, fearing that concluded agreements would not be ratified by Congress without any amendments (ICTSD Weekly Trade News Digest, 16 May 2007). From 2007 until 2010, negotiations remained deadlocked because the EU, the US, and India used a circular argument about what was necessary to break out of the impasse in the negotiations. Whereas the EU and India declared that the US needed to substantially lower the ceiling of its tradedistorting farm subsidies beyond its current offer, the US countered that it would not move from its position until the EU, India, and Brazil had agreed to expand access to their agricultural markets (ICTSD Weekly Trade News Digest, 2 May 2007).

Conclusion Although at the Hong Kong ministerial meeting delegations had committed to completing the Doha round by the end of 2006, they could not meet several interim deadlines set to move negotiations forward because the positions of major players remained far apart and all efforts to reach a compromise remained fruitless. Because delegations were unable to meet the 30 April deadline, Pascal Lamy suggested that delegations should start six weeks of intensive negotiations on agricultural and industrial products without any formal deadlines. In June 2006, the EU was the only actor to put forward a new offer and to make small concessions. This new offer from the European Commission, however, went beyond its negotiating mandate and led to opposition from the group of protectionist member states under the leadership of France. But the US and Brazil considered the EU offer to be too low and remained stuck with their negotiating positions. In a final attempt to bring negotiations to a successful end, Lamy presented a ‘20-20-20’ compromise formula that would require the US to further reduce agricultural subsidies, the EU to accept the G-20 proposal on customs duties reductions, and Brazil and India to set a maximum tariff on imports of industrial products. This compromise formula was unanimously rejected by the EU, the US, Australia, Brazil, India, and Japan. At the end of July 2006, Lamy decided to suspend the negotiations because major trade nations maintained high level of demands in the late stage of negotiations, while simultaneously making few concessions. Whereas the US insisted that the EU must come forward with an offer of deeper farm tariff cuts,

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the Commission declared that the EU would only present another offer on agriculture after Brazil and India offered greater access to their industrial goods and services markets. Major players did not move from their positions because they were under the pressure of domestic institutions not to concede. The US was under congressional, AFBF, and major commodity groups’ pressure not to make further concessions on domestic support subsidies until the EU had presented a better offer on market access. Given the upcoming congressional election in November 2006, the USTR did not make concessions on domestic support because the AFBF and the dairy federation NMPF, which support the electoral campaigns of Republican candidates, opposed it. The Commission had made concessions without the support of all member states and had to subsequently withdraw its June 2006 offer because the US, Brazil, and India did not move from their negotiating positions. Also the COPA and farmers’ organizations of the major member states had urged the European trade commissioner not to concede because reductions on customs tariffs of 50 per cent would lead to over a million job losses in the agricultural sector. Finally, in Brazil the legislative and presidential elections in three months’ time and the pressure from the trade union, CUT, which was also the major supporter of the president’s party, explains why the Brazilian government did not make any concessions on industrial products. The CUT opposed tariff reductions in the industrial sector without higher tariff reductions in the agricultural sector. The agribusiness sector also opposed the ‘20-20-20’ compromise formula as being too low to improve market access for Brazilian agricultural products. All negotiating parties took a tough approach by not moving from their opening positions because there was no time pressure to bring negotiations successfully to an end and no support at the domestic level to further concessions.

Conclusion

The aim of this study was to analyse the causes of impasse in international agricultural trade negotiations. In order to explain this puzzle, this study advanced two theoretical claims. First, the rate and scope of concessions at the international level is a function of domestic institutions. Second, the specific outcomes observed in a given multilateral bargaining situation are strongly influenced by the lack of time pressure. WTO negotiations on agricultural trade liberalization from 1999 to 2006 were conducted at the domestic and international levels. At the domestic level, the focus of this study was on the impact of the executive–legislature relation, the number of veto players, as well as the link between the party in government and interest groups on WTO negotiations. At the international level, a temporal perspective was added to the analysis by focusing on the time dimension of negotiations. Time pressure, defined as the closeness to a deadline that might end the negotiation with an agreement or a situation of deadlock, has an impact on the extent of demands and concessions. Choosing the right time to concede is essential because if concessions are made too early in negotiations, they will be rejected and perceived by other bargaining parties as an admission of weakness and elicit tough behaviour in return. By contrast, during the later stages of negotiations and under acute time pressure, actors are expected to concede more easily. Whether or not the four actors had a good BATNA, that is, bilateral and regional FTAs, also had an impact on the scope and rate of concessions.

WTO negotiations so far The Seattle ministerial conference corresponded to the first stage of the negotiation process, which was limited to the general identification of issues to be dealt with in future negotiations. During this stage, government representatives merely signalled their preferences on the various issues to be included in the negotiating agenda. 209

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In this first negotiating stage, major players did not face time constraints. As a result, concession-making, in this case moving from the initial negotiating position on which issues should be settled on the agenda, was less likely to be profitable for negotiators. All the four major players made high initial demands by adopting maximalist bargaining positions, that is to say they asked for more than they expected to obtain and made no concessions. This early phase of negotiations is crucial because it gives bargainers the chance to determine the issues to be included into the negotiation agenda. The Seattle meeting ended without agreement owing to the unwillingness of the US and the EU to move from their initial demands. The US wanted to include workers’ and environmental standards in the negotiating agenda, but developing countries opposed it. The EU, in turn, requested the inclusion of the concept of multifunctionality in negotiations. This demand encountered resistance from developing countries and from Australia. In order to explain the unwillingness of the USTR and the EU to concede on these two issues, one has to shift the focus of analysis to the domestic and European levels, respectively. The US did not make concessions on labour and environmental standards because Democratic representatives and trade unions asked for their inclusion in the negotiating agenda. From 1995 until 2001 divided government, with a Democratic president and a Republican-dominated Congress, had a negative impact on WTO negotiations. Even though there were attempts in 1995, 1997, and 1998 to renew fast track, they all failed because of disagreements between the US administration and Congress on the inclusion of labour and environmental standards in the new fast track bill. In addition, interest groups were divided on further trade liberalization and the adoption of a new fast track bill. While business groups and the AFBF, which are close to the Republican Party, supported a new fast track bill and further trade liberalization, the AFL-CIO and NFU, both close to the Democrats, opposed it unless it included labour and environmental standards. The NFU asked for the inclusion of a safety net for US small farmers and opposed the delegation of trade negotiating powers to the president without a stronger congressional oversight mechanism. At the EU level, member states had adopted general negotiating guidelines that gave the European Commission the power to negotiate at the WTO level on behalf of the EU. These negotiating guidelines included the concept of multifunctionality in agriculture. This explains why, at the Seattle meeting, the European Commission insisted upon the inclusion of this concept in the negotiating agenda. At stage two of the negotiating process at the Doha ministerial meeting in 2001, WTO members agreed on a broad negotiating agenda, the Doha ministerial declaration, which integrated the demands put forward by all major players. On agriculture, the Doha declaration included market access issues, reduction of export subsidies, trade-distorting domestic support,

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as well as non-trade concerns. The Doha ministerial declaration also set a timetable for the conclusion of agricultural negotiations with several deadlines: WTO members were to circulate negotiating proposals with specific formulae and percentages for tariff and domestic support reductions by the end of February 2003; by 31 March 2003 WTO members were to have agreed on how to reduce tariff barriers on market access, export competition, and domestic support; it was finally envisaged that the negotiations would conclude by 1 January 2005. It was important at this stage of negotiations to set intermediate deadlines in order to establish a negotiating structure and to put pressure on actors to find an agreement within the set time period. But WTO members missed these interim deadlines. Only shortly before the Cancun ministerial conference, major players tabled more specific negotiating proposals. Negotiating positions were far apart on the elimination of export subsidies and domestic support. Whereas the US, Australia, and Brazil requested a rapid elimination of export subsidies, the EU asked for the inclusion of export credit and food aid under the category of export subsidies. On domestic support, the US and the Cairns Group demanded the reduction of amber and blue box support over three to five years. By contrast, the EU, together with the G-10, asked for small cuts in amber box support of 55 per cent and to keep the present rules on blue and green box support. Regarding market access, there were also two blocs. Whereas the US and the Cairns Group supported the Swiss formula, which reduces higher tariff rates by a greater amount and sets a maximum final tariff rate, the EU and the G-10 preferred the Uruguay round formula, which cuts tariffs by a simple average with a minimum reduction per product. Following this general positioning of major players, the chairperson of the WTO Agriculture Committee presented a first compromise paper, the Harbinson text, in order to find a middle position among the diverse negotiating proposals. The Harbinson text proposed the elimination of export subsidies over ten years and the use of a ‘banded approach’ that categorized products by the level of starting tariff. But the EU, the US, and the Cairns Group unanimously rejected this proposal. Negotiations remained deadlocked until the presentation of a joint EU–US proposal in August 2003. This proposal suggested restricting the reduction of export subsidies to those products relevant for developing countries, retaining blue box subsidies, and including countercyclical payments as domestic support. But the text made no reference to tariff percentages or domestic support reductions. Hitherto, the US had an offensive position on domestic support, but had now changed its negotiating position owing to the considerable expansion of domestic support contained in the 2002 new farm bill, which had introduced countercyclical payments for cereals and cotton. By contrast, the EU had just reformed the CAP and decoupled direct payments from production. This gave the EU some flexibility on its negotiating position on domestic support. In addition, the EU and the

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US proposed the exclusion of net agricultural exporting countries, such as Brazil, from the benefits of SDT for developing countries. Under Brazilian leadership, developing countries reacted to this EU–US joint proposal by creating a new coalition, the G-20. They requested a significant reduction in subsidies, the elimination of blue box support, limitation of green box subsidies, and the expansion of SDT for all developing countries. In addition, the C-4, a group of four African countries highly dependent on cotton, asked for the total elimination of domestic support and export subsidies for cotton within three years. During the Cancun meeting, positions remained far apart, and the meeting ended abruptly without agreement on any of the issues discussed because further concessions had no support at the national level. In the US, Congress opposed concessions on cotton because the new farm bill had increased domestic support for this commodity. Moreover, major farm groups opposed the G-20 demands of giving agricultural exporting countries, such as Brazil, the right to designate themselves as developing countries. At the EU level, member states were divided on the negotiating proposal put forward by the Commission. Some member states considered the reductions on domestic support and export subsidies to be too high at this stage of negotiations. This was also the position of the COPA, FNSEA, and CPE. France and Ireland, the main losers from a change in the status quo, asked for a gradual reduction of export subsidies and only for those products relevant for developing countries. In Brazil, the newly elected president, Lula da Silva from the Workers’ Party, the PT, took a more offensive position in WTO negotiations by creating the G-20. The main aim of this new coalition was to have the concerns of developing countries better taken into account and to link issues of agricultural trade liberalization with the promotion of economic and social development. This position was closely aligned with the PT and the labour union CUT, the major constituency of the PT. Finally, the Cairns Group was weakened by the emergence of the G-20 because nine of its members had moved to this new coalition. In addition, Australia was already negotiating an FTA with the United States, one of its major trading partners, and was not really engaged in the negotiations at the multilateral level. In October 2005, the US presented a new negotiating proposal that called for the complete elimination of all export subsidies by 2015 and a significant reduction in domestic support and tariff rates. The G-20 asked for a quicker elimination of export subsidies by 2010, and the EU agreed to end its export subsidies as long as all forms of export support were included in a new agreement. On domestic support, the US proposed that it would reduce its amber box support by 60 per cent under the condition that the EU and Japan agreed on higher amber box cuts of 83 per cent as well as in reducing blue box support by 50 per cent. The Commission proposed that the EU

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would reduce the amber box by 70 per cent, if the US and Japan made similar cuts, as well as a 65 per cent reduction in blue box support in order to limit US countercyclical payments. On market access, the EU proposed an average cut of customs duties of between 20 and 50 per cent, while the US called for 50–90 per cent cuts. The G-20 had a middle position, asking for an average minimum tariff reduction of 54 per cent in developed countries and 36 per cent for developing countries. But these proposals put forward by the USTR and by the European Commission were not unanimously supported at the domestic level. At the EU level, thirteen member states publicly criticized the Commission’s negotiating strategy of making concessions while the other negotiating parties had not moved from their demands. France called for an emergency General Affairs Council, in which member states and the Commission agreed that the EU should make a new offer on agriculture, only if Brazil and India would make concessions on market access for industrial products and services. At the end of October, the Commission presented a new proposal that foresaw a 60 per cent reduction in the higher EU customs duties and in other tariffs of between 35 and 60 per cent. On domestic support, the EU offered to reduce amber box support by 70 per cent, if the US would reduce its amber box by 60 per cent. The number of sensitive products would be reduced to 8 per cent of tariff lines. This would still cover 170 of the total 2200 agricultural products. This proposal was rejected by the US, the Cairns Group, and the G-20 because they considered that it would not considerably improve market access. Before the Hong Kong meeting, negotiating positions remained far apart on domestic support and market access. Therefore, WTO members simply postponed negotiations for the following year on these two issues. At the Hong Kong ministerial conference, WTO members agreed on eliminating all forms of export subsidies by the end of 2013. In 2006, WTO members missed several interim deadlines. Bargaining parties allowed the negotiations to grind to a halt because they did not put any new offers on the negotiating table. Whereas the US, Australia, Brazil, and India considered the concessions made by the EU to be insufficient, Brazil and India were not willing to agree to lower tariff barriers for market access for industrial products and services in exchange for concessions in agriculture. As a result, negotiations were temporarily suspended in July 2006.

Summary of results Time pressure and best alternatives to a negotiated agreement As a deadline approaches, negotiating parties are faced with a decision dilemma. First, at least one bargaining party has to make major concessions, which have to be reciprocated by the other bargaining parties. Second, delegations can reject the terms in favour of a stalemate. Third, they may also decide to reconvene negotiations at another time. In the specific case

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of the WTO negotiations, delegations preferred to break negotiations and resume them at a later point in 2007. How can we explain the repeated occurrence of missed deadlines and the failure of time pressure to move delegations from their negotiating positions? Deadlines can be risky because if negotiating parties do not meet a deadline, the bargaining process can break down and deadlines lose their meaning. The central question is, however, whether deadlines are arbitrary. If delaying an agreement is costly, then a deadline is really binding. By contrast, if a deadline is not linked to any costs and negotiating parties have a good BATNA, they will not be willing to concede and will simply wait until the other bargaining parties move from their positions. Delaying a multilateral agreement can, however, lead bargaining parties to negotiate bilateral and regional trade arrangements. This in turn weakens the pressure for agreement at the international level. As a result, if bargaining parties have a good BATNA they will more likely make use of tough bargaining strategies by not moving from their initial demands. This was the case in stage four and five of the negotiation process, when the Commission was the only actor that made small concessions, while the US, Brazil, and Australia did not reciprocate the concessions made by the EU. Before the Hong Kong meeting, the US had negotiated and ratified a regional trade agreement with Central American countries, the DR-CAFTA, and bilateral trade agreements with Australia, Chile, Morocco, and Singapore. Now the US was negotiating other FTAs with Korea, Vietnam, Malaysia, Thailand, Bolivia, Columbia, Peru, and Panama. Since the US had a good BATNA, there was no time pressure for making concessions at the multilateral level. The same is true for Australia, which had negotiated an FTA with the US in 2004. In addition, Australia initiated bilateral trade negotiations with China in April 2005. Thus, these two countries had good BATNAs and did not face time pressure to quickly reach an agreement at the international level. Brazil had also moved towards bilateral trade agreements with India, South Africa, and China. By contrast, the EU only changed its trade strategy towards regional and bilateral trade agreements after the temporary suspension of negotiations in July 2006. This lack of a good BATNA and the heterogeneity of preferences within the Council of Minsters explain why the EU was the actor that made more concessions. In September 2006, the European Commission resumed negotiations with MERCOSUR, and in 2007 began bilateral trade negotiations with the ASEAN countries, South Korea, India, China, Russia, Central American, and Andean countries. Because all major trading nations are at present negotiating bilateral trade agreements, this gives them a good BATNA and in this way weakens time pressure to bring negotiations forward at the international level. The results of the different WTO ministerial meetings provide considerable insight into the effects of time pressure on bargaining outcomes. Empirical support could be found for each of the three hypotheses on the

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role of time pressure on negotiations. The major results can be summarized as follows: 1 The size of concession was not affected by offers of other actors, not even during the late stage of negotiations. When the European Commission made small concessions the US, Brazil, and Australia did not reciprocate. The US and Australia had good BATNAs, so that there was no time pressure for them to concede. Moreover, in the US and in Brazil there was no domestic support for further concessions. The US Congress and major farm groups opposed further concessions on domestic support subsidies reduction until the EU reciprocated on market access. At the Brazilian domestic level, there was pressure from interest groups close to the president’s party, from the CUT, not to concede on tariff reductions for industrial products in exchange for better market access to agricultural products. 2 The BATNA-hypothesis, which suggests that if actors have better alternatives to multilateral trade agreements, they will make use of tough bargaining strategies by not making concessions, was confirmed in the Hong Kong and Geneva meetings by the US, Brazil, and Australia. The EU was the only actor making new concessions because it did not have a good BATNA and member states were divided on the negotiating proposal put forward by the Commission. 3 The hypothesis stating that if actors expect today’s agreement to be relevant for future bargaining interactions, they will choose tougher bargaining strategies than in one-shot games was confirmed in all five ministerial meetings for all actors with the exception of the EU at the Geneva informal meeting (see Table C.1).

Executive–legislative relationship The inability of WTO members to reach agreement on agricultural trade liberalization highlights the extent to which domestic institutions condition international economic relations. The five different ministerial meetings provide empirical evidence on the three hypotheses on domestic institutions captured in Table C.1. The first hypothesis, stating that when the decision-making power is shared between the executive and the legislature, provided that their preferences diverge, cooperation is more difficult to achieve than in political systems with executive dominance in trade policy, was confirmed for the US and the EU. The relationship between the president and Congress and between the Commission and the Council of Ministers was assessed as that of agent and principal. In such a relationship it is expected that an agent (the president, the European Commission) will act on behalf of the principal(s) (Congress, Council of Ministers). Principal–agent problems arise when the agent’s

Table C.1

Summary of results

Domestic level

Hypotheses

Seattle 1999 EU

US

H1 If the decision-making power is shared between the executive and the legislature, provided that their preferences diverge, cooperation is more difficult to achieve than in political systems with executive dominance in trade policy





H2 The larger the number of institutional and partisan veto players, the fewer concessions the executive is likely to make at the international level

–

–

H3 If the party in government has a strong link to specific interest groups, the executive is expected to pursue a trade policy favouring these interest groups when negotiating at the international level



BR

–

Doha 2001 AU

–



EU

US





–

–



BR

–

Cancun 2003 AU

–



EU

US

BR

AU





–

–

–

–







Hong Kong 2005

Geneva 2006

EU

US

EU

US









–

–

–

–

–







BR

AU

BR

AU

–

–

–







Hypotheses

Seattle 1999 EU

US

BR

Doha 2001 AU

EU

US

BR

Cancun 2003 AU

International level

H4 Actors that are under greater time pressure will produce a softer approach to negotiations, involving a lower level of demands and larger concessions

US

BR

AU

EU

US

BR

AU

EU

US

BR

AU





–

–



–

–

–

–

–

–

–







–











Geneva 2006

EU

H5 If actors have a good BATNA, they are under no time pressure to concede and will make use of tough bargaining strategies by not moving from their initial demands H6 If actors expect today’s agreement to be relevant for future bargaining interactions, they will choose tougher bargaining strategies than in one-shot games

Hong Kong 2005

























–









Note: For full statements on the six hypotheses, see Chapter 2. Key for the table: Hypothesis is supported ; not supported –; The ‘silence’ of the empty cells in the table does not indicate missing negative evidence but simply that certain elements of the theoretical framework were irrelevant to the case study. For example, time pressure is irrelevant at the initial negotiating stages because deadlines had not been set yet and time pressure is only expected to play a role at a later stage of negotiations.

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preferences differ from those of the principal and the agent can pursue hidden action. The delegation of authority in trade policy in the US through TPA and in the EU through an informal negotiating mandate for the European Commission illustrates how complex such relationships can become and how they have evolved over time. In the EU and in the US, the central issue was to have a negotiating mandate and a TPA bill that empowered the European Commission and the USTR respectively to bargain at the international level. Both agents have to keep domestic actors (Council of Ministers and Congress) informed on the development of the international negotiations (see Table C.2). What does this study tell us about the relationship between the Council and the Commission in trade policy? Was the agent really able to bypass the control of the principals and to manipulate the negotiating mandate? One major finding is that when there is a conflict situation between the interests of more protectionist member states and the concessions made by the Commission at the international level, the Commission tends to assume a more liberal position, closer to those member states favouring further agricultural trade liberalization. During the negotiations, the agent was closely controlled by member states through the 133 Committee and the SCA. The structure of power delegation (agency slippage) stimulated the agent to adopt a position that was closer to the more liberal member states. The Commission sees itself as having a general view of a trade issue in the overall Community interest. In contrast, member states are more concerned with the effects of a proposal on a specific sector. This is why a particular member state might have the impression that its interests are being overridden. In line with the study of Nicolaïdis (2000) and Conceição-Heldt (2010), this study confirms that the heterogeneity of principals’ preferences increases the Commission’s bargaining power at the international level. If the degree of interest alignment between principals and agents is low, the Commission risks conflict with the more protectionist states, which feel that they are less well represented by their agent. By the same token, if the degree of interest alignment among member states is low, the Commission has more discretion at the international level. Before the Hong Kong and the Geneva informal meetings, the Commission made concessions on agricultural issues because member states were divided on whether the Commission had gone beyond its negotiating mandate. The results of this study demonstrate how the interinstitutional dynamics of power delegation affect multilateral trade negotiations. At the beginning of the negotiations, the agent’s negotiating guidelines were stated in such a vague way that it was hard to decide whether any violation of the negotiating mandate has occurred unless a member state complained. Before and after the Hong Kong ministerial meeting, a large proportion of the Commission’s time was spent in coordinating and bargaining with the member states.

219 Table C.2

Types of institutional power in international trade negotiations

Types of US institutional power

EU

Brazil

Australia

Agendasetting

Congress President

European Commission

President: Ministry of External Relations

Prime Minister: Ministry of External Relations

Negotiating mandate

Congress (trade bill delegates power to the president)

Council of Ministers: Council of General Affairs and External Relations, Council of Agriculture

Power to conduct negotiations

USTR

European Commission (trade and agriculture commissioners)

Oversight mechanisms

Congressional Oversight Group; Ways and Means Committee; Senate Finance Committee; House of Representatives and Senate Agriculture Committees

133-Committee SCA

–

–

Ratification or veto power

Congress: Senate and House of Representatives, simple majority

Council of General Affairs and External Relations (qualified majority or unanimity)

Absolute majority of the total members of the Chamber of Deputies and Senate present at the session (50% plus one of the entire assembly)

Congress: House of Representatives and Senate, simple majority

–

Ministry of External Relations

–

Ministry of Foreign Affairs Ministry of Economy, Trade and Industry

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In contrast to the literature that assesses the Council–Commission relationship as cooperative (Kerremans, 2004a) or as conflict-ridden (Young, 2006), this study demonstrates that the Council–Commission relationship on trade policy is more complex and nuanced than is commonly recognized. It has different dynamics depending on the negotiating stage. In the initial stage, when defining the negotiating mandate of the Commission, the relationship is cooperative. At the Seattle and Doha meetings, member states and the European Commission widely agreed on the issues to be included in negotiations, and the two commissioners in charge of trade and agriculture echoed the position of member states. They argued that the EU would only agree to negotiate on further agricultural trade liberalization on domestic support, export subsidies, and market access, if non-trade concerns were also part of the negotiating agenda. Conflict between the Commission and the Council only occurred in the later stage of negotiations (Hong Kong and Geneva informal meetings), when the Commission began to make concessions at the international level. Davis (2003) hypothesized that France’s ability to hinder agricultural liberalization is more likely when it holds the presidency of the Council. This conjecture does not hold. During the present round of trade negotiations France played a central role as an opponent of trade liberalization not because it held the Council presidency, but because it was able to build a coalition with other member states that also opposed further agricultural trade liberalization. Moreover, French domestic institutions shaped the negotiating position of the French executive at the European level. From 1997 to June 2002, the executive was divided between the right and the left. Jacques Chirac from the RPR/UMP controlled the presidency and the French Socialists built a governing coalition with the Communist Party and the Greens, so that they had the majority of seats in the National Assembly. This first period falls under the first trade round negotiations, the Seattle meeting in 1999 and the Doha meeting in 2001. During the negotiations on the 1999 CAP reform, Jean Clavany, the French agriculture minister, from the Socialist Party, supported a CAP with less emphasis on productivity and was primarily concerned with obtaining more financial support for small farmers, the maintenance of rural employment and the preservation of the countryside. This position was in line with the demands of the Confédération Paysanne closely linked to the Socialist Party. French parties respond to different constituencies and thus have different preferences on agricultural issues. The PS supports the demands of the Confédération Paysanne, and the RPR/UMP, the FNSEA. From June 2002 to 2006, the executive was united again with the party of President Jacques Chirac, the UMP, having an absolute majority of seats at the National Assembly. The Cancun meeting in 2003, the Hong Kong meeting in 2005, and the July informal meeting in 2006 occurred during this second period. The French government’s position was closely aligned

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with the FNSEA position that supports gradual trade liberalization under the condition of including non-trade concerns in a new trade agreement. In the French political system, as long as the UMP has a majority of seats in the National Assembly and the president also comes from the UMP, France opposes and vetoes agricultural trade liberalization, if there are no major gains in other economic sectors. What is the contribution of this study to the literature on the US trade politics? In contrast to the thesis of Lohmann and O’Halloran (1994), that under divided government Congress has strengthened institutional constraints on the president’s trade authority and under unified government institutional constraints were loosened, this study demonstrates that under unified government the new TPA bill strengthened the oversight mechanisms. Republicans had a thin majority in Congress, and since the president was not certain that all the Republican representatives would vote in favour of the new trade bill in order to gather a majority behind the new bill, George W. Bush accepted the demands of some Democratic representatives to include labour and environmental standards and to strengthen congressional oversight mechanisms by creating a new congressional oversight committee. The establishment of this new bipartisan committee shows that Congress was only willing to delegate fast track authority to the executive branch if it was granted a significant congressional supervision role before and throughout the negotiations. Before initiating trade negotiations, the president must notify Congress of the specific negotiating objectives for any ongoing negotiations. Moreover, the president is required to notify Congress of the negotiating objectives in any new negotiations 90 days before initiating such negotiations. During the negotiations the USTR must consult closely with the Ways and Means, Senate Finance Committee, House and Senate Agriculture Committees, and the COG (see Table C.2). These stricter consultation requirements enhanced the institutional oversight provisions of Congress over the executive branch, so that the administration has the authority to negotiate trade agreements, but in a strict corset of rules involving a vast array of players from Congress. Moreover, if the president does not meet the prescribed requirements as set out in the trade bill, Congress can withdraw negotiating authority. Before the Geneva informal meeting, the Senate and House Agriculture Committees and major agricultural interests groups opposed further concessions on domestic support. They asked instead for the creation of a new peace clause to protect domestic support subsidies against WTO litigation. The USTR took these demands into account by not conceding on amber box support reduction. In contrast to the thesis of Destler (2005) and Goldstein (1988), that by transferring trade authority to the president Congress has abdicated from its control over trade policy, this study demonstrates that Congress closely scrutinizes the USTR at the international level and defines the rules (negotiating objectives) for negotiating trade agreements. Delegation of trade authority

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from Congress to the president does not give the USTR a blank cheque to negotiate trade agreements. On the contrary, the USTR on behalf of the president must consult frequently with several congressional committees. This study confirms the thesis of Milner and Rosendorff (1997) that divided government impedes trade agreements. Under the Clinton presidency (1993–2001), there were several failed attempts to renew fast track. Divided government and opposition from the AFL-CIO close to the Democratic Party explain why the USTR was unable to make concessions on the negotiating agenda at the Seattle meeting. The several attempts to renew fast track negotiating authority failed owing to divergences between the Democratic president and the Republican-dominated Congress on the inclusion of labour and environmental standards in a new fast track bill. Under the George W. Bush presidency (2001–7), Republicans had a thin nine-seat majority in the House of Representatives. In the Senate from 2001 to 2003, Democrats had one seat more than Republicans. Before and during the Doha meeting, Congress was discussing new farm and trade bills. The US administration needed the support of at least some Democrats because it was not sure that all Republican representatives would vote in favour of the new TPA bill. In order to gather the support of some Democrats, the new TPA bill included labour and environmental standards in its negotiating objectives, strengthened congressional oversight mechanisms and included a new trade adjustment assistance programme. At stage four and five of the negotiation process, the USTR was unable to make concessions because Congress and farm groups at the national level opposed it. In contrast to the thesis of Shoch (2001), that Democrats are generally in favour of protectionist and fair trade policies and Republicans support free trade, this study shows that Republicans only support free trade agreements if these do not have a negative impact on their constituencies. For example, some Republican representatives from textile-producing states in the South or sugar-producing states opposed the DR-CAFTA because of its impact on the economic sectors of their states. In the end, they were persuaded through pork barrel politics to support the agreement. The negotiating positions of the US and of the EU at the international level mirrored the executive–legislative bargaining at the national and European levels. In particular, institutional arrangements (trade promotion authority and negotiating mandates) affect the way government representatives behave at the international level. International trade negotiations were strongly constrained by domestic institutions. Before the final breakdown of negotiations in July 2006, the USTR did not move from her last offer made in October 2005 because of opposition from Congress and major agricultural interest groups. Congress urged the USTR to make no further concessions until the EU moved on market access. But EU member states refused to make further concessions on agriculture if these were not reciprocated by offers on industrial products and services by Brazil and India.

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223

In the five different ministerial meetings, divided government proved to be a negative factor for trade cooperation in the case of the US. As the policy preferences of the executive and legislative diverged, the USTR was unable to make concessions at the international level because Congress and major farmer groups opposed further concessions on domestic support. In the case of the EU, division within the Council of Ministers on the EU negotiating position increased the bargaining power of the European Commission. At a late stage of negotiations, from the Hong Kong ministerial meeting onwards, the European Commission started making concessions, though it did not have the support of all member states. For Brazil and Australia, countries with an executive supremacy in trade policy, at first, power-sharing mechanisms are not so complex. In both countries legislative powers play an important role in the formulation of trade policy only ex post at the ratification stage (see Table C.2). This explains why there was a weak involvement of the legislature in the earlier stages of trade policy formulation and during the negotiations. One would expect the legislature to threaten not to ratify an international trade agreement if not kept closely informed about the government’s negotiating position. In the Brazilian case, empirical evidence contradicts this expectation. The legislature was predominantly passive and its role was restricted to accepting the priorities of the executive in trade policy. In contrast to the US and the EU, in Brazil there is no institutional arrangement delegating authority from the legislative to the executive branches since trade policy falls under the competence of the executive. Congress only plays a role when it comes to the ratification of multilateral trade agreements. The executive plays the central role in the initiation, negotiation, and conclusion of agreements. Congress’s role was largely confined to a forum for discussion. Consultations between the executive and the legislature, and the parliamentary delegation that officially accompanies the Brazilian government, represent two indirect ways of exerting parliamentary influence on the outcomes of multilateral trade negotiations. This can be considered an informal ex ante control, but the legislature has no political control over the executive and the legislature is dependent upon the good will of the executive for the information it receives, since the constitution does not stipulate that it should do so. The same is true for Australia. Since the executive has exclusive competence over foreign and trade policy issues, the role of the legislature is limited to discussing the government’s policy. In Australia, there were several attempts to strengthen the oversight function of parliament through the creation of the JSCOT. But in practice, when it came to the signature of the FTA with the US, the House of Representatives and the Senate played a secondary role. The WTO negotiations from 1999 to 2006 fall under the Liberal-National government. In the Australian Westminster political system, the government

224 Negotiating Trade Liberalization at the WTO

has a majority of seats in the House of Representatives. Even though elections for both houses of parliament took place in all three years, only half of the Senate seats are renewed every three years. From 1996 to 2004, the Liberal and the National parties together did not have a majority of seats in the Senate. As a result, when it came to the ratification of the FTA with the US in 2004, the Liberal-National government needed the support of Labor senators for the ratification of the treaty. Number of veto players This qualitative study does not find empirical evidence for the thesis of Mansfield, Milner, and Pevehouse (2007), O’Reilly (2005), and Henisz and Mansfield (2006), that the number of veto players has a negative impact on a country’s trade policy. Although Brazil and the EU were the two political systems with the most veto players, the number of veto players did not have a negative impact on an actor’s concessions at the international level. In fact, as has been shown in this study, the EU case proves the opposite. The EU has 27 veto players, but if they are divided on a policy issue, this increases the Commission’s discretion at the international level because it can always argue that some member states back its position. Even in the case of Brazil, the number of veto players did not play a crucial role. Under the Cardoso presidency, the governing coalition was made up of five partisan veto players. Nevertheless, the ideological distance between the two centre parties (PSDB and PMDB) and three centre-right parties (PFL, PTB, and PPB) was small since the negotiating position of the Brazilian government – asking for better market access, reduction of domestic support, and elimination of export subsidies – was unanimously supported by all governing coalition parties. The Cancun, Hong Kong, and Geneva meetings fall under the presidency of Lula da Silva. The governing coalition from 2003 to 2006 was ideologically diffuse, with six left-wing parties (PT, PDT, PSB, PCdoB, PPS, and PV) and three centre-right parties (PL, PTB, and PP). But the high number of partisan veto players was not as central as the divisions within the president’s party (the PT) on trade policy. The PT supports a family-based agriculture and has a greater focus on the domestic market than on the enhancement of agricultural exports. There are four different factions within the PT. The far-left faction composed of the CUT supports small farmers and opposes increasing agricultural exports. A second faction defends the protectionist import-substitution model with a focus on the diversification of the industrial sector and protection of national industry against competition from abroad. A third Marxist-oriented faction considers that economic policies reflect the interests of the dominant capitalist class. Finally, a more pragmatic view supports neo-liberal policies and the increase of agricultural exports. The Lula da Silva government had to find an equilibrium between the official position of his party, which asked for a more equitable international trade

Conclusion

225

system, and the centre-right coalition parties that pushed for an increase in Brazil’s agricultural exports. Link between parties and interest groups Different parties respond to different interest groups, so that the government that is in power should have an impact on a nation’s trade policy. The hypothesis on government and interest groups – suggesting that if the party in government has a strong link to specific interest groups, the executive is expected to pursue a trade policy favouring these interest groups at the international level – was confirmed throughout all the case studies for the US and Australia. For Brazil, this hypothesis was confirmed under the Lula da Silva presidency because his party is closely linked to the trade union CUT. By contrast, the EU was the only actor less influenced by interest groups. Even though the COPA urged the Commission not to make further concessions on agricultural issues, the latter was more concerned with the demands of member states than with agricultural interest groups’ opposition. In contrast to elected governments, European commissioners and officials from the DGs trade and agriculture do not face concern with re-election issues. As Dür (2008) underlines, this makes them less receptive to interest group demands since they are not dependent on support from interest groups for a re-election campaign. In this way, the pressure interest groups can put on the Commission is weak when compared with governments at the national level. Business interest groups, such as Business Europe, were more concerned with industrial market access and services. By contrast agricultural interest groups were divided on trade liberalization. The COPA and the FNSEA supported gradual trade liberalization if non-trade concerns were included and did not go beyond the CAP reforms. By contrast, the Confédération Paysanne opposed WTO negotiations and the export-oriented and intensive industrial agriculture model. It requested instead a focus on a sustainable model of agriculture that took the interests of small farmers, the internal market, and food quality into account. The demands voiced by the CPE and Confédération Paysanne corresponded to the position adopted by the French agriculture minister from the Socialist Party, when negotiating the 1999 CAP reform. Although the EU multilevel political system provides interest groups with several channels of access, agricultural interest groups are more successful at the national than at the European level. The case of France shows that centre parties RPR/UMP, close to the FNSEA, and the PS, close to the Confédération Paysanne, adopted the position of these farmer groups when negotiating CAP reforms and defining the EU negotiating position. The interinstitutional dynamics between the Commission and the Council were central for the position adopted by the EU at the international level and not the position of agricultural interest groups. Even though the

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COPA opposed reductions on export subsidies, the Commission made concessions on these issues by accepting the elimination of export subsidies by 2013 at the Hong Kong ministerial meeting as bargaining leverage to move negotiations forward on other issues. At the Geneva informal meeting, the Commission did not make further concessions on agricultural issues because a majority of member states opposed further EU unilateral concessions on agriculture without concessions from the US on domestic support and from Brazil and India on industry products and services. In the US and Australia, interest groups were more successful in influencing the positions adopted by their governments than in the EU because they can express their support for a candidate in exchange for policies that favour their interests. During the different stages of the negotiating process, the Australian Liberal-National government held formal and informal consultations with major interest groups. The Liberal Party is closely linked to business groups and the National Party/Nationals, which emerged from farmers’ organizations and still is at present a core constituency of the Nationals. From 1996 on, the Liberal-National government pursued a trade policy of strengthening agricultural trade exports to take the demands of the NFF into account. For the NFF, the central issue in the present round of trade negotiations was to increase market access for Australian agricultural products, to eliminate EU export subsidies, and to obtain reductions in the EU and US trade-distorting domestic support. This position of the Australian government mirrored the demands of the NFF. The latter also took an active stance by initiating a campaign within the Cairns Group on trade liberalization in order to move the negotiations forward and was supported in this initiative by the Australian government. In addition, members of the NFF accompanied the Australian official delegation to the different WTO ministerial meetings. These findings on the Australian case bring the research forward by specifically demonstrating how the link between specific interest groups and the parties in government shapes Australia’s bargaining position at the international level. In contrast to the thesis of Capling (2005) and Flitton (2003), that until 1996 there was a bipartisan agreement on multilateralism, this study shows that Labor and Liberal-National governments have different approaches to trade policy. Labor governments focused rather on multilateralism, whereas Liberal-National governments shifted trade policy towards bilateralism. During the WTO negotiations, from 2001 on, the Liberal-National government started negotiating a bilateral trade agreement, shifting its attention away from multilateral trade negotiations and not providing leadership within the Cairns Group. For the US, the link between political parties and interest groups was assessed through the campaign contributions of interest groups to Democratic and Republican congressional representatives in the period 1996–2006. US trade policy is influenced by business groups, labour unions,

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and farmers’ organizations. While business groups support Republican candidates, labour unions contribute overwhelmingly to Democrats. At the Seattle ministerial meeting, the USTR asked for the inclusion of labour and environmental standards on the negotiating agenda, a demand put forward by Democratic representatives and opposed by Republicans, which held a majority in Congress. The AFL-CIO had asked for the inclusion of these provisions in the new trade round, and since Democratic representatives received their main campaign contributions from trade unions, they aligned themselves with these demands. In addition, the AFL-CIO had threatened to withdraw electoral campaign funds from the forthcoming presidential campaign for Al Gore. In the agricultural sector, there are two main farmers’ organizations, the AFBF and the NFU. The AFBF is closer to Republicans, represents large-scale farmers, supports free trade, but wants at the same time to keep domestic support subsidies. By contrast, the NFU, which is closer to the Democratic Party and to labour unions, represents small farmers and asks for a safety net for US small farmers in case of further trade liberalization. In addition, there is a vast array of commodity groups (corn, soybeans, wheat, cattle, dairy, sugar, cotton, tobacco, rice, and peanuts), which predominantly support Republican candidates. Democratic representatives only receive more campaign funds in the sugar sector, but this is a sector in which there is strong partisan competition. From 1997 to 2006, the sugar sector supported Democratic more than Republican representatives, by a factor of 55–45 per cent. The wheat, dairy, sugar, tobacco, rice, and peanuts sectors have been the major beneficiaries of farm bill programmes and therefore oppose any reduction of subsidies. Only the two export-oriented producer groups, the soybean (ASA) and cattle producers (NCA), support agricultural trade liberalization because they expect to increase their exports. Destler (2005) and O’Halloran (1994) point out that the delegation of trade authority is an important institutional instrument for limiting the protection of specific industries that would under normal legislature conditions lobby Congress to vote for an exception for their products. This conjecture does not hold for the TPA bill. Agricultural interest groups that would be the main losers from a change in the status quo mobilized and lobbied Congress before it passed the TPA bill. As a result, the 2002 TPA bill excluded importsensitive, cyclical, and perishable products from trade liberalization. Before and during the Hong Kong ministerial conference and the Geneva informal meeting, major farmer and commodity groups were divided on the US offer of a 50 per cent amber box support reduction. The AFBF and the ASA supported amber box support reduction only if there was better market access. In addition, the ASA asked for better market access for emerging economies markets and also criticized the US administration for not subjecting emerging economies, such as Brazil, to the same rules on domestic support and export competition as developed countries. By contrast, the

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dairy and the sugar sectors, the most affected by a change of the status quo on domestic support, rejected the proposal from the USTR. Since campaign contributions of the AFBF, the ASA, and the NMPF go predominantly to Republican candidates, a Republican president and a Republican-dominated Congress had to take the demands of these interest groups into account, otherwise they would risk losing campaign contributions for forthcoming elections. Before the Geneva informal meeting, Congress, the AFBF, and all the major commodity groups (cotton, corn, dairy, rice, soybean, sugar, and wheat) urged the USTR in June 2006 not to concede on domestic support until the EU had presented a new offer on market access. Given the upcoming US Congressional elections in November 2006, which were predicted to be very tight, the US administration did not make any concessions on domestic support reductions because the AFBF and major commodity groups that supported the electoral campaigns of Republican candidates opposed it. The demands voiced by Congress and by the AFBF and the ASA corresponded exactly to the position adopted by the US administration. By contrast, in Brazil, the link between interest groups and parties in government is not always clear. Close ties between parties and interest groups are stronger between labour unions and left-wing parties. Although the business sector is mainly represented by centre and centre-right parties, it prefers to support several parties and single candidates in order not to get too close to a single party. Brazilian parties are weakly institutionalized and organized, so that lobbying takes place at the level of individual senators or deputies. Also the practice of unrecorded votes in Congress makes Brazilian deputies among the least accountable worldwide. As a result, business groups prefer to lobby the executive directly. Under the Cardoso presidency, the agricultural confederation CNA and the CEB supported the government’s strategy of increasing agricultural exports, while trade unions opposed it. Trade unions are closely linked to left-wing parties; they oppose an increase in agricultural exports and plead instead for a focus on the internal market to eradicate poverty and hunger. At the Seattle meeting, all three major trade unions opposed further trade liberalization for its negative impact on workers’ salaries and the employment rate. The CUT aligned itself with the AFL-CIO, pleading for the inclusion of labour and environmental standards in the negotiating agenda. Nevertheless, the Cardoso government could simply ignore the demands of the CUT because it is the main constituency of the PT. Extensive agricultural trade liberalization and keeping the status quo on industrial products and services were the preferred policies of the Cardoso and Lula da Silva presidencies. Under the Lula da Silva presidency, before the Geneva informal meeting, there was pressure from the CUT on the government not to concede on tariff reductions for industrial products in exchange for better market access to agricultural products. The CUT considered that

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concessions in the industrial sector would increase unemployment without creating new jobs in other economic sectors. Even though the CNA urged the Brazilian government to accept modest cuts in the industrial sector in exchange for market access for agricultural products, given the upcoming presidential and legislative elections in autumn 2006, the Lula government was more concerned about getting support from its crucial constituencies, such as the CUT, and opted not to concede on reducing tariff rates for industrial products.

Limitations of the study and avenues for further research These research findings may still be countered by the perennial question facing research: what is the significance of this study? Given that there is a considerable literature, which has been devoted to the question of why multilateral trade negotiations end in deadlock, the question must be asked whether this study is merely a footnote to this debate. This study brought the research forward in this area by focusing on four aspects. First, it examined systematically how domestic institutions shape international trade negotiations. Second, it examined the impact of time pressure on actors’ bargaining outcomes. Third, it added a comparative perspective to the research on multilateral trade negotiations by including not only the two most important trading powers (the EU and the US), but also by extending the analysis to Brazil and Australia. Fourth, this internationalcomparative political study linked Comparative Politics to International Relations by using hypotheses from Comparative Politics, International Relations, and Negotiation Analysis. This study, however, does not sufficiently explore the complexity of the institutional design at the international level. Despite the importance granted to international organizations, the WTO was treated as almost entirely passive rather than an active agent. Further studies are needed that take a closer look at decision-making in different international organizations, for example by applying the principal–agent approach to explain why agency losses occur and some international organizations act as agents of principals, why in some situations they act as autonomous actors and how it has an impact on outcomes within different organizations. To compare decision-making processes and their different dynamics, for example in the EU and WTO, represents an interesting and challenging direction for future research. More empirical research in this vein needs to take place to move forward scholarly debates about the impact of decision-making processes within different international organizations. This book shows how the inability of trade ministers to agree on trade liberalization is closely linked to domestic constraints and bargaining dynamics at the international level. Since the win-set (the range of agreements made at the international level that can be ratified at the domestic level) is small,

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major players have little room for manoeuvre. Moreover, negotiating trade liberalization has different bargaining dynamics and negotiating stages. In a situation where major players make use of tough bargaining strategies in the first negotiating phase and then stick with their initial demands during the main negotiating phase, this is because they have better alternatives to a negotiated agreement. Under these circumstances, there is no time pressure to concede at the multilateral level and negotiations remain deadlocked. One way of possibly moving negotiations forward in the near future would be to link issues together. This would require the EU and the US to offer major concessions on the reduction of tariff rates in agricultural issues. However, there would also have to be some concessions from emerging economies on the reduction of the highest industrial tariffs.

Notes Introduction 1. This selection rule goes back to Mill’s method of difference in inductive research, which suggests studying two most similar cases with different outcomes. The variation in outcomes is then explained by the differences that have been discovered. Also from the standpoint of King, Keohane, and Verba (1994), this way of selecting cases is a grave error. They maintain that hypotheses have to be developed in a deductive way, before the case selection or the empirical analysis. 2. There are many valuable insights in the bargaining literature on how to divide the distinct negotiating phases. Walton and McKersie (1965) distinguish between three different phases in a negotiation process: phase one of identification of the problem; phase two of discovery and exploration of alternative solutions; phase three of discovering the best solution and agreeing to it. Similarly, Williams (1983) differentiates between four distinct negotiating stages: stage one (orientation and positioning of the players); stage two (argumentation); stage three (emergence and crisis); stage four (agreement or final breakdown). More recently, Hoekman and Kostecki (2001) distinguish between three negotiating phases: pre-negotiation, main negotiation, and the post-negotiation phase. 3. The Cairns Group was built under the Australian leadership in 1986 at a meeting in Cairns.

1 Framework for Analysis of Negotiations 1. Individual-level or first-image theories explain international relations through the personal characteristics of individual statesmen. Domestic-level explanations, ‘the second image’ in Waltz’s words, focus on the internal organization of states. Finally, international-level explanations (‘the third image’) look at a nation-state’s position in the international system (Waltz, 1959). 2. I will come back to this literature in more detail in Part II, Chapter 3, ‘US Trade Politics’. 3. I am of course conscious that Australia does not correspond fully to a Westminster government system. Australia is majoritarian on the executive-parties dimension, but consensual on the federal-unitary dimension. Since the focus here is on the way power is concentrated or divided in the executive, it is not relevant whether Australia is in all dimensions a majoritarian democracy. 4. Kaiser (1998) goes one step further and distinguishes between four different types of veto points: consociational, delegatory, expert, and legislatory veto points. Consociational veto points refer to proportional electoral systems or dual executives. Delegatory veto points refer to the spatial or functional transfer of political authority to regions or to the EU. Expert veto points refer to non-democratic modes of decision-making, such as judicial review or central banks. Finally, legislatory veto points refer to the protection of minority rights in the constitution, to bicameralism, to obligatory referendums or to the alternation of parties in government. 231

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5. Putnam (1988) distinguishes further between voluntary and involuntary defection. While a voluntary defection takes place when a rational egoist actor in the absence of enforceable contracts breaks his word, as in a classic prisoner’s dilemma situation, involuntary defection takes place when a government reneges because of failed ratification. 6. Lax and Sebenius (1986) use the expressions claiming and creating value for the same concepts. 7. Raiffa, Richardson, and Metcalfe (2002) list several important characteristics of negotiations: disputes or deals; number of parties involved; monolithic parties; one-shot versus repetitive games; linkage effects; number of issues; use of threats; time constraints or time-related costs; binding contracts; public or private negotiations; group norms; mediator intervention. Sebenius (1992) also points out that a negotiation analytic approach has to consider the following elements: interests of parties involved, alternatives to a negotiated agreement; creating and claiming value; and efforts to change the game itself. 8. For two exceptions, see Watkins (1998) and Hug (2005). 9. By contrast, Pruitt and Latané Drews (1969) define time pressure as the perception by the bargaining parties that independent of whether an agreement is reached or not the negotiation is about to be terminated. 10. There are, of course, other ways of assessing actors’ bargaining power. According to Clark, Duchesne, and Meunier (2000) the structural determinants of bargaining power in international trade negotiations are linked to market and security issues. For Hirschman (1945) the size of one’s market and one’s dependency on the economy of the other bargaining parties determine the negotiating strength. Moravcsik (1993) underlines that interstate bargaining power in the EU depends on the following three determinants: unilateral policy alternatives; alternative coalitions; and the potential for compromise and linkage. 11. For a discussion, see Raiffa (1982).

2 Multilateral Agricultural Trade Regime 1. Some authors (Croome, 1995; Jackson, 1990; Winham, 1998) even argue that the WTO was an unintended by-product of the Uruguay round negotiations. For example, Jackson (1990) claims that the idea of the creation of a multilateral trade organization came from Canada. By contrast, Croome (1995) underlines the central role played by the European Community. 2. For a general overview of the negotiations on the Bretton Woods system, see Wilkinson (2000). 3. Since the WTO text includes the text of GATT, the latter continues to exist as a substantive agreement. 4. Whereas a tariff (or customs duty) is a tax that a government imposes on products as they cross the national border, NTBs is a catch-all phrase that includes any barriers to international trade other than tariffs. 5. Preeg (1995) and Croome (1995) provide a general overview of the GATT. Wilkinson (2005) gives a brief historical overview of the different trade negotiation rounds. Hoekman and Kostecki (2001) give an overview of the functioning of the WTO as an international system. 6. Whenever referring to the EU after the Treaty on the European Union came into force in 1993, the term EU will be used and for the period before this, the term European Community (EC).

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7. In 1979, the GATT regime introduced a notion of a three-tier categorization between developed, developing, and LDCs. These three groups of countries are committed to different rights and commitments in the implementation of agreements (Pangestu, 2000). 8. The designation of LDCs goes back to a UNO list of 48 LDCs, of which 29 are at present WTO members. The criteria are based on various factors, such as income per capita, augmented physical quality index (education, nutrition, and health measurements), economic diversification index, and a population size of less than 75 million (Pangestu, 2000). 9. Eight WTO members currently use export subsidies (the EU, Israel, Mexico, Norway, Switzerland, Turkey, the United States, and Venezuela). The EU alone accounts for 90 per cent of the value of export subsidies, followed by Switzerland with 5.3 per cent, and Norway and the US each account for 1.4 per cent. Over the past decade, the use of export subsidies has decreased significantly from $7.5 billion in 1995 to less than $3 billion in 2001 (Food and Agriculture Organization, 2005).

3 US Trade Politics 1. Part III Chapters 8 and 9 will deal in more detail with these issues. 2. In the US, all kinds of organizations are allowed to create voluntary PACs to raise funds from members with the aim of electing candidates for federal elections (Biersack and Herrnson, 1999). There are two types of PACS: ‘connected’ and ‘non-connected’. Whereas ‘connected’ PACS are linked to specific corporations (e.g., Microsoft) or labour unions (e.g., the AFL-CIO), ‘non-connected’ PACs are made up of individuals or groups of US citizens not connected to a political party. The National Rifle Association (gun owner rights) is one of the best-known ‘non-connected’ PACs. 3. The reality is, however, more complex than this oversimplified assumption. I am aware that there is a strong competition between Democratic and Republican representatives to gain campaign support from the business sector. 4. There are, of course, other formal and informal lobbying methods, such as testifying before congressional committees, making office visits, or sending letters to members of Congress. 5. However, only few unions within the AFL-CIO are politically active. These include powerful unions such as the United Auto Workers, United Steelworkers of America, Communication Workers of America, International Association of Machinists and Aerospace Workers, Service Employees International Union, and the United Food and Commercial Workers (Dark, 1999). 6. The other two farmer organizations, the National Farmers’ Organization and the National Grange have gradually lost members and importance so that their position on free trade and on their PACs to federal elections will not be taken into consideration (Carter, 1994). 7. Even though the focus is on the major commodity producer groups in the United States, this list is not exhaustive. I take into consideration only major commodity producer groups according to their level of importance measured using the number of members they have, the number of states and industries they represent, and the important campaign contributions to federal elections they make. 8. The sugar industry in the United States falls into two categories: sugarcane and sugarbeet. Whereas sugarcane is grown primarily in four states – Florida, Hawaii,

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Texas, and Louisiana – the sugar beet farmers are concentrated in Minnesota, the Dakotas, and other Midwestern states.

4 EU Trade Politics 1. For an exception, see Keeler (1996). 2. See Elsig (2002) and Meunier (2005) for a description and analysis of the EU trade policy from the Treaty of Rome until 2003. 3. To be sure, some other authors (Epstein and O’Halloran, 1999; Kerremans, 2004b; Meunier and Nicolaïdis, 1999; Nicolaïdis, 2000) have established useful distinctions between different control mechanisms available to the principals. Epstein and O’Halloran (1999) distinguished between ex ante and ex post control mechanisms. Kerremans (2004a), in turn, differentiates between three control devices: ex ante control mechanisms (negotiating directives), at locum (during the negotiations), and ex post control mechanisms (at the ratification stage). Meunier and Nicolaïdis (1999) distinguish four different stages: the design of the negotiating mandate; the representation of the parties during the negotiations; the ratification of the agreement; and the implementation and enforcement of the agreement. Nicolaïdis (2000) distinguishes between three different stages: flexibility (authorization stage); autonomy (representation stage); and authority (ratification stage). 4. Information based on an interview with a Council official. 5. Interviews with officials from the DGs Trade and Agriculture. 6. Each member state was accorded a number of votes according to the size of its population as follows: Germany, France, Italy and Great Britain 29 votes each; Spain and Poland 27; Netherlands 13; Belgium, Czech Republic, Greece, Hungary and Portugal 12; Austria and Sweden 10; Denmark, Ireland, Lithuania, Slovakia and Finland 7; Cyprus, Estonia, Latvia, Luxembourg and Slovenia 4; and Malta 3 votes. 7. The French agricultural sector can be divided into two types of products: agricultural commodities highly subsidized by the CAP (wheat and milk products) and processed products sold on world markets without export subsidies (Delorme, 2004). France remains the leading producer of soft wheat in the EU with a share of 40 per cent of the total harvest. Another important sector of French agriculture is livestock farming (dairy and beef production) (Hennis, 2005). Processed products with a high value added (such as quality wines, cognac, cheese, and foie gras) account for about 40 per cent of agro-food exports. 8. The main reason for the UK being in fourth place has to do with the British rebate, which was negotiated by the British Prime Minister Margaret Thatcher in the Fontainebleau agreement. At that time, the main reason for the rebate was that about 80 per cent of the EC budget was spent in the CAP, which benefits the UK less than other countries as it has a relatively small farming sector as a proportion of the GDP. Without the rebate, the UK would pay significantly more than other member states to the EU budget. 9. Moyer and Josling (2002) define the policy position of member states on agricultural trade liberalization by focusing on the following three factors: trade balance, farm size, and contributions to the EU budget. This distinction between EU net budget contributors is problematic because there are countries such as Germany that are net contributors to the EU budget and nevertheless have a nuanced position on agricultural trade liberalization and on CAP reform. Also the farm

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size within a country is not the really important issue but rather the agricultural output of a member state in the EU total agricultural production and the total amount of direct payments countries receive from the CAP. 10. Until November 2002 this party was called the Rally for the Republic, the Rassemblement pour la République (RPR).

5 Brazilian Trade Politics 1. Much has been written about the role played by business in the 1964 military coup. Scholars disagree, however, on the impact of the mobilization of the business sector on the 1964 coup. Whereas Grohmann (2003) argues that the coup was a result of the gridlock between executive and legislature, Dreifuss (1981) claims that the military coup of 1964 was a creation of business. 2. Some scholars consider this document as crucial in supporting the gradual transition to a democratic government, but they diverge on why exactly the business sector decided to join the opposition camp and to push for change. Haggard and Kaufman (1995) argue that motivations were primarily economic. This argument, however, does not really hold because even though growth had slowed down to 3 per cent in 1977, growth in the industrial sector averaged around 7 per cent during the 1970s. A more plausible interpretation is given by Remmer (1993) and Payne (1994). Both underline that political opposition from business was related to an absence of business influence over government policies. 3. There are, however, some agricultural sectors with higher support levels, such as wheat with 16 per cent and rice with 17 per cent. Although these commodities receive minimal border protection, producers are compensated for having to compete with other MERCOSUR countries (OECD, 2005). 4. In contrast, a simple majority refers to 50 per cent plus one of a quorum. 5. Amorim Neto, Cox, and McCubbins (2003) and Nicolau (2000) distinguish between seven major parties that together held about 85 per cent of the seats in the different legislatures from 1988 to 1998. Mainwaring (1997) comes up with a list of 15 different parties and Meneguello (1998) for the period 1984–97 has a list of 14 parties. 6. I will come back to this issue in more detail in Part III, Chapter 9. 7. The minimum percentage a party needs to win a seat is the electoral quotient in any state (i.e., the number of votes divided by the number of seats). For example, if there are 25 seats in a state, a party or an alliance of parties needs four per cent of the votes to attain a seat. Since there is no national threshold, a party can obtain a seat with an extremely low percentage of the national vote. Furthermore, the 26 states and the federal district constitute the electoral districts for both chambers, whereby each state is guaranteed at least eight deputies (Mainwaring, 1997).

6 Australian Trade Politics 1. The Country Party changed its name several times: in 1975, it was renamed the National Country Party; in 1982, the National Party of Australia; since 2003, it has been called the Nationals. 2. According to Leigh (2002), the Textiles, Clothing and Footwear Union of Australia was able to put pressure on the government to reduce the tariffs over a longer period because it convinced the government that the electoral backlash that would flow from the proposed cuts would be too great.

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3. The term ‘middle-power’ comes from Keohane, who defines it as ‘a state whose states leaders consider that it cannot act alone effectively but may be able to have a systematic impact in a small group or through an international institution’ (Keohane, 1969, p. 296). 4. The Australian Democrats are a central-left party that advocate their independence from business, unions, or environmental interest groups. They see themselves as the people’s watchdog in the Senate. 5. The One Nation Party is a populist party that considers itself to be ‘the voice of the people’, intends to preserve Australian sovereignty, and is against trade liberalization (One Nation Party, 2008). 6. Commodity Councils are composed of major farm organizations, such as the Australian Dairy Farmers’ Federation, the Australian Cane Growers’ Council, or the Australian Cotton Foundation. The state farm organizations include the Western Australian Farmers’ Federation, the Victorian Farmers’ Federation, etc. (Trebeck, 1990). The NFF deals with all issues that affect more than one state and more than one commodity (Halpin, 2005). 7. Japan accounts for 19 per cent of total Australian exports and the APEC is Australia’s largest regional export market, accounting for 72 per cent of total merchandise exports (Australian Department of Foreign Affairs and Trade, 2007b).

7 Seattle Ministerial Conference 1999 1. According to Marconini (2005), one underlying criterion for the selection of participating groups has been their level of representation within a certain economic sector. 2. Statement by the official from the NFF at the Joint Standing Committee on Foreign Affairs (2002).

8 Doha Ministerial Conference 2001 1. The idea behind this was to create a multilateral register for geographical indications of wines and spirits. The negotiations on this issue had already started in 1997. Scotch (whisky), Tequila (spirit), Bordeaux (wines), Roquefort (cheese), Havana (tobacco), Tokay (wines), Antiqua (coffee), Bukhara (carpets), Basmati (rice), Ceylon (tea), Parma (ham), and Porto (wine) are prime examples of geographical indications with high-value commercial denominations. 2. Sugar is highly subsidized in the EU. The EU gives special preference to bananas imported from former colonies of member states. Lemons are particularly important for EU Mediterranean countries. 3. The 1994 US law covering the entry of the US into the WTO requires that every five years the White House send a report to Congress evaluating WTO membership. Following that report, members of Congress can introduce legislation opposing WTO membership. In March 2000, Ron Paul (R-Texas) issued a resolution proposing that the US should withdraw from the WTO because the Uruguay round Agreement had transferred authority from Congress to the WTO without Congressional agreement (Paul, 2000). This resolution was, however, overwhelmingly rejected by 363 votes to 56 (US House of Representatives, 2000).

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9 Cancun Ministerial Conference 2003 1. The G-20 was initially made up of sixteen members: Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Ecuador, Guatemala, India, Mexico, Paraguay, Peru, the Philippines, South Africa, and Thailand. They were then joined by Cuba, Egypt, El Salvador, Pakistan, and Venezuela. After its creation, four new countries (Indonesia, Nigeria, Tanzania, and Zimbabwe) joined and six (Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, and Peru) left the G-20. Even though initially the G-20 was called G-21, now its official name is G-20 in reference to the day this new group was originally formed (Jank and Queiroz, 2005). In this study, I will use the term G-20. 2. For example, the EU has PTAs with ACP countries. But because these preferences are not available to all developing countries nor restricted to LDCs, they violate WTO rules and are granted under waivers by other WTO members (Panagariya, 2002a). 3. The tariff-rate quota for beef was 378,214 tonnes, for dairy products there was a quota of 7000 tonnes for cheese, 7000 tonnes for butter, 5500 tonnes for skim milk powder, and 6100 tonnes for butter oil. The quota for sugar was of 87,408 tonnes (Krever, 2006). 4. The beef quota will begin with an increase of 20,000 tonnes in the third year and will end with a total increase of 70,000 tonnes in the 18th year. The increased market access for Australian beef is by no means guaranteed. From the 19th year of the agreement on, a price-based safeguard allows for an additional tariff to be applied to beef, if the price of beef in the US falls 6.5 per cent below the average price of beef in the last two years (Krever, 2006).

10 Hong Kong Ministerial Conference 2005 1. About 80 per cent of the exports from those countries to the US were already dutyfree, and the total volumes are insignificant: American exports to the six countries are about equal to the annual global exports of New Jersey (about $17 billion a year) (Inside US Trade, 12 August 2005). 2. Presently, Australia exports 7000 tonnes of the beef quota to the EU (The Australian, 3 August 2004).

11 Geneva Informal Meeting 2006 1. The letter was supported among others by the AFBF, ASA, American Sugar Alliance, NAWG, NCGA, National Barley Growers Association, NCC, NMPF, and the USA Rice Federation (National Cotton Council of America, 2006).

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Agency news and newspapers Agency news Agence Europe Several issues from February 1997 to January 2007 Agra Facts Several issues from June 2003 to September 2007 Delta Farm Press 6 June 2001 9 June 2006 ICTSD, Weekly Trade News Digest Several issues from February 2001 to May 2007 Inside US Trade Several issues from September 2003 to August 2006

Newspapers Canberra Times 6 November 2000 14 September 2003 13 February 2003 Financial Times, 30 June 2005 Folha Online, 28 June 2006 Jornal da Câmara Several issues from December 1999 to December 2005

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Le Figaro, 23 January 2003 Le Monde, 2 April 1999 and 27 June 2003 The Australian Several issues from June 1997 to December 2007 The Economist Several issues from November 1999 to April 2006 New York Times, 29 July 2005 The Weekend Australian 13 January 1996 16 November 2003 Weekly Times Several issues from May 1999 to September 2007

Index Absolute gains (see also relative gains), 18 Acute time pressure (see also time pressure), 30, 32, 35, 209 Advisory Committee for Trade Policy and Negotiations (ACTPN), 60, 61 African, Caribbean and Pacific Countries (ACP), 9, 10, 157, 158, 186 Agenda-setting power, 7, 23, 76, 81, 219 Agency losses, 80, 229 Agency costs, 80 Agency shirking, 80 Agency slippage, 80, 218 Agency slack, 55 Agents, 55, 74, 80, 81, 82, 85, 92, 215, 218, 229 Agenda 2000 agreement, 161 Aggregate measure of support (AMS), 44 Agreement, 1, 3, 4, 5, 12, 13, 17, 18, 20, 21, 22, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 39,40, 41, 45, 46, 53, 58, 59, 60, 77, 82, 99, 102, 125, 126, 129, 131, 132, 137, 139, 143, 147, 155, 171, 174, 175, 180, 181, 182, 185, 190, 191, 192, 193, 196, 198, 199, 202, 204, 209, 210, 211, 212, 214, 215, 217, 229, 230, 231, 232 Agreement on agriculture (AoA), 36, 42, 43, 44, 45, 46, 47, 141, 164, 197 Market access of the, 42–43, 46 Export subsidies of the, 43, 46 Domestic support of the, 44, 45, 46 Agribusiness sector, 10, 61, 63–67, 98, 106, 107, 133, 134, 138, 167, 189, 205, 208, 229 Agriculture (see also agricultural trade liberalization), 9, 10, 11, 12, 34, 36, 37, 38, 40, 41, 42, 45, 46, 56, 60, 61, 64, 69, 76, 77, 81, 82, 83, 84, 85, 86, 87, 88, 89, 92, 93, 98, 106, 109, 110, 111, 112, 114, 115, 116, 120, 126, 127, 130, 131, 132, 134, 137, 138, 141, 142, 147, 148, 165, 167, 170, 174, 175, 178, 190, 224, 225

Direct payments in (see also agricultural subsidies), 8, 11, 39, 41, 42, 44, 46, 68, 69, 152, 159, 175 Domestic support subsidies in, 39, 40, 42, 44–45, 46, 68, 69, 70, 83, 91, 112, 130, 143, 144–145, 150, 152, 153, 154, 155, 156, 159, 162, 164, 170, 171, 175, 177–178, 179, 180, 181, 183, 184, 185, 186, 195, 196, 197, 199, 201, 203, 206, 207, 208, 210, 212, 215, 221, 227 Export subsidies in, 1, 5, 9, 10, 11, 13, 36, 37, 38, 39, 40, 41, 42, 43, 46, 66, 91, 92, 126, 127, 129, 131, 134, 136, 138, 139, 140, 141, 142, 143, 146, 149–150, 151, 152, 153, 154–155, 156, 157, 158, 159, 160, 161, 162, 164, 170, 171, 172, 173, 174, 175, 176, 177–178, 179, 180, 181, 184, 186, 188, 190, 191, 192, 204, 210, 211, 212, 213, 220, 224, 226, 233, 234 Market access in, 1, 5, 9, 10, 36, 39, 41, 42–43, 46, 55, 56, 87, 96, 107, 110, 112, 115, 121, 126, 127, 131, 132, 134, 136, 138, 140, 141, 142, 146, 149, 150, 152, 153, 154–156, 157, 163, 165, 168, 169, 170, 172, 173, 174, 175, 176, 177–178, 179, 180, 181, 182, 184, 185, 186, 188, 190, 191, 192, 195, 196, 197, 198, 199, 201, 202, 203, 205, 208, 210, 211, 213, 215, 220, 222, 224, 225, 226, 227, 228, 229 Multifunctionality in, 9, 126, 127, 131, 132, 134, 137, 138, 210 Agricultural adjustment act, 68 Agricultural commodities (see also agricultural products), 45, 46, 47, 83, 84, 86, 93, 95, 98, 107, 110, 115, 120, 134, 136, 145, 146, 157, 169, 172, 185, 195

263

264

Index

Agricultural exports, 10, 38, 39, 42, 45, 66, 67, 68, 106, 111, 113, 120, 121, 127, 134, 138, 149, 156, 157, 160, 165, 166, 168, 170, 171, 172, 180, 189, 205, 212, 224, 225, 228 Agricultural Policy Advisory Committee, 61 Agricultural production, 8, 83, 90, 98, 106, 107, 130, 132, 152, 154, 178, 187, 202 Agricultural products (see also agricultural commodities), 8, 9, 10, 39, 43, 44, 47, 64, 68, 90, 91, 95, 106, 107, 110, 120, 121, 125, 132, 134, 139, 141, 145, 146, 150, 152, 173, 179, 196, 197, 205, 208, 213, 215, 226, 228, 229 Agricultural trade liberalization, 10, 34, 36, 37, 38, 40, 42, 45, 46, 126, 127, 131, 137, 140, 142, 146, 155, 157, 159, 163, 167, 170, 171, 173, 174, 175, 179, 182, 184, 186, 188, 194, 196, 197, 199, 200, 202, 203, 204, 206, 208, 210, 213, 222, 226 Amber box support, 44, 45, 68, 153, 154, 155, 174, 176, 177, 178, 186, 191, 195, 211, 212, 213, 221, 227 American Farm Bureau Federation (AFBF), 56, 64, 65, 66, 72, 129, 137, 147, 160, 171, 183, 184, 185, 191, 202, 203, 208, 210, 227, 228 American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), 56, 61, 64, 126, 128, 129, 135, 147, 210, 222, 227, 228 American Soybean Association (ASA), 61, 66, 185, 227, 228 American Sugar Alliance, 185 Association of Brazilian Exporters (AEB), 102 Association of Southeast Asian Nations (ASEAN), 140, 141, 149, 201, 204, 206, 214 Australia, 2, 5, 6, 7, 8, 9, 10, 11, 12, 24, 25, 39, 98, 106, 109–124, 126, 131, 135–136, 137, 138, 139, 140, 143, 148, 149, 150, 151, 152, 154, 155, 156, 158, 167–170, 171, 172, 173, 174, 180, 190–191, 192, 193, 197, 200, 201, 205–206, 210,

211, 212, 213, 214, 215, 219, 223, 225, 226, 229 Business groups in, 113, 115, 116, 117, 118, 120, 136, 149, 151, 226 Decision-making process in, 116–117 Executive-legislative relations in, 116–117, 223–224 Farmer groups in, 117 Interest groups in, 117–118, 135, 205 Labor governments in, 111–114 Labor unions in, 117 Liberal-Country governments in, 110–111 Liberal-National governments in, 112–113, 114–115 Link between parties and interest groups in, 116, 148–149, 226 Sugar sector in, 10, 110, 120, 136, 138, 168, 169, 170, 172 Trade politics in, 110–116 Veto players in, 7, 118–119 Wheat sector in, 10, 110, 111, 120, 156 Australia-US free trade agreement, 168–170, 172, 191, 201, 214, 224 Australian Chamber of Commerce and Industry (ACCI), 115, 118 Australian House of Representatives, 109, 115, 116, 17, 119, 223, 224 Australian Labor Party (ALP), 111, 112, 113, 114, 115, 117, 118, 120, 149, 151, 168, 169, 205 Australian negotiating position (see also Australian negotiating proposal), 109, 126, 127, 139, 140, 149, 154, 178, 192, 211, 223 Australian negotiating proposal (see also Australian negotiating position), 149, 152, 154, 178, 212 Australian Senate, 7, 109, 115, 116, 117, 119, 169, 219, 223 Bargaining (see also negotiations), 1, 3, 4, 21, 25, 28, 29, 30, 32, 33, 34, 76, 164, 217, 218, 222 Bargaining chip, 132, 186 Bargaining dynamics, 229, 230 Bargaining interactions, 34, 35, 215, 217 Bargaining leverage, 164, 200, 226

Index Bargaining outcomes (see also negotiation outcomes), 1, 4, 8, 30, 214, 229 Bargaining parties,1, 3, 4, 29, 30, 31, 32, 33, 34, 125, 170, 192, 209, 213, 214 Bargaining positions (see also negotiating proposals), 17, 18, 34, 40, 60, 165, 226 Bargaining power, 17, 18, 33, 73, 78, 187, 218, 223 Bargaining process (see also negotiation process), 3, 11, 12, 30, 31, 33, 214 Bargaining situation, 28, 29, 30, 31, 209 Bargaining stage (see also negotiating stage), 32 Bargaining strategies, 1, 4, 18, 30, 33, 34, 35, 163, 167, 177, 198, 214, 215, 217, 230 Best alternative to a negotiated agreement (BATNA), 4, 31, 33–34, 172, 192, 193, 201–202, 209, 214, 215, 217 Bilateral trade agreements (see also trade agreements), 33, 110, 126, 160, 167–168, 190, 191, 193, 195, 201, 205, 214, 226 Blair House agreement, 41–42, 75, 132 Blue box support, 42, 44–45, 46, 139, 140, 141, 152, 153, 154, 155, 156, 159, 163, 164, 170, 171, 174, 175, 176, 177, 178, 179, 184, 197, 211, 212, 213 Brazil, 2, 5, 6, 7, 8, 9, 10, 12, 25, 39, 94–108, 127, 133–135, 136, 137, 138, 139, 148, 150, 151, 154, 156, 158, 160, 164–167, 170, 171, 172, 173, 174, 176, 180, 181, 188–190, 192, 193, 195, 196, 197, 198, 199, 200, 201, 203, 204–205, 206, 207, 208, 211, 212, 213, 214, 215, 219, 222, 223, 224, 225, 226, 227, 228, 229 Agribusiness sector in, 106, 107, 133, 134, 138, 167, 189, 205, 208, 229 Agricultural sector in, 106, 107, 134, 167, 180 Business groups in, 96, 97, 98, 102– 103, 106, 108, 133, 134, 167, 189, 205, 228 Decision-making process in, 98–99, 107, 133

265

Executive-legislative relation in, 98–99, 107 Farmer groups in, 102, 134, 189, 204, 205, 228–229 Governing coalitions in, 26, 101, 103, 104, 106, 107, 108, 133, 138, 148, 150, 164–165, 166–167, 172, 188–189, 220, 224 High party fragmentation in, 99–102 Interest groups in, 102–103, 108, 134, 189, 204, 205, 225, 228–229 Link between parties and interest groups, 102–103, 134, 207, 228 Presidential coalitions in, 99, 100, 101, 102, 103, 104, 133, 138 Trade politics in, 95–99, 107–108 Trade unions, 102, 108, 205, 228–229 Veto players in, 7, 8, 10, 95, 101, 103–108, 127, 133, 138, 151, 188, 224–225 Brazilian Business Coalition (CEB), 102, 134, 228 Brazilian Chamber of Deputies, 7, 11, 99, 103, 104, 105, 107, 133, 148, 164, 165, 188, 189, 219 Brazilian Congress (see also Brazilian Chamber of Deputies and Brazilian Senate), 11, 94, 95, 98, 99, 100, 101, 103, 104, 105, 107, 134, 148, 219, 223, 228 Brazilian Communist Party (PCdoB), 99, 101, 104, 105, 106, 107, 164, 166, 188, 224 Brazilian Labor Party (PTB), 95, 99, 100, 101, 103, 104, 105, 106, 107, 133, 164, 165, 188, 189, 224 Brazilian negotiating position (see also Brazilian negotiating proposal), 95, 103, 108, 133–135, 138, 139, 150, 154, 166–167, 178, 198, 207, 208, 211, 223, 224 Brazilian negotiating proposal (see also Brazilian negotiating position), 154, 178, 212 Brazilian presidential system, 99, 100, 101, 102, 103, 104, 133, 138 Brazilian Social Democratic Movement (PMDB), 99, 100, 101, 103, 104, 105, 107, 133, 148, 166, 188, 189, 224

266

Index

Brazilian Socialist Party (PSB), 99, 101, 104, 105, 106, 107, 134, 188, 224 Brazilian Senate, 7, 11, 99, 101, 103, 104, 105, 107, 164, 188 Bretton Woods, 36 Bush administration, 59, 70, 143, 160, 183, 197, 202, 221, 222 Business Council of Australia (BCA), 113, 149 Business Europe, 87, 93, 132, 225 Business groups, 8, 11, 12, 20, 27, 28, 55, 61, 62, 63, 64, 65, 72, 86, 87, 93, 95, 96, 97, 102, 103, 108, 113, 115, 116, 118, 120, 129, 132, 133, 134, 136, 137, 138, 146, 147, 149, 151, 167, 168, 183, 189, 205, 210, 225, 226, 227, 228 Business Roundtable, 64, 129 Cairns Group, 9, 39, 40, 41, 44, 114, 126, 127, 136, 139, 140, 141, 142, 143, 149, 152, 153, 154, 158, 168, 171, 172, 174, 178, 179, 181, 191, 196, 206, 211, 212, 213, 226 Canada, 8, 9, 39, 106, 110, 112, 128, 139, 143, 173 Cancun ministerial meeting, 1, 4, 5, 12, 13, 143, 150, 152–159, 160, 163, 166, 167, 170–172, 173, 211, 212, 216, 220, 224 Cardoso presidency, 98, 100, 103, 107, 133, 135, 137, 138, 157, 224, 228 Case studies, 2, 4–5, 225 China, 9, 106, 115, 120, 149, 167, 172, 187, 190, 192, 193, 196, 200, 201, 204, 214 Clinton administration, 41, 53, 59, 70, 128, 137, 222 Coalitions, 9, 10, 17, 20, 23, 24, 26, 83, 84, 94, 99, 100, 101, 102, 103, 115, 129, 133, 166, 167, 220 Coalition groups, 9, 10, 156, 160, 167, 171, 181, 212 Committee of Professional Agricultural Organizations (COPA), 86, 87, 89, 93, 132, 137, 161, 163, 179, 188, 199, 201, 208, 212, 225, 226 Common Agricultural Policy (CAP), 11, 40, 41, 42, 83, 84, 86, 87, 88, 46,

90–92, 130–132, 156, 161–164, 187, 188, 203, 204, 211, 220, 225 1999 reform of the, 130–132, 137, 147, 150, 220, 225 2003 reform of the, 161–164, 171, 187, 188, 204, 211 Direct payments of the, 8, 11, 39, 41, 42, 44, 46, 83, 84, 92, 131, 161–163, 171, 211 Common market organization, 91 Committee of Permanent Representatives (COREPER), 76 Community preference principle, 91, 130, 163 Concessions, 3–4, 21, 26, 28, 29–33, 34, 35, 37, 40, 42, 54, 55, 56, 75, 81, 82, 111, 125, 127, 132, 136, 137, 143, 144, 145, 161, 163, 170, 171, 173, 177, 179, 182, 184, 185, 186, 187, 188, 191, 192, 195, 196, 197, 198, 199, 200, 202, 203, 204, 205, 206, 207, 208, 209, 210, 212, 213, 214, 215, 216, 217, 218, 220, 221, 222, 223, 224, 225, 226, 228, 229, 230 Concession rate, 29–33, 34, 35 Confederation of Australian Industry (CAI), 113 Confederation of Workers (CUT), 97, 100, 102, 134, 138, 156, 157, 164, 165, 200, 205, 208, 212, 215, 224, 225, 228, 229 Congressional Oversight Group (COG), 146, 147, 150, 221 Consensus democracies (see also majoritarian democracies), 24, 25, 26, 115 Constraints (see also domestic constraints), 6, 17, 21, 22, 23, 28, 46, 52, 59, 110, 127, 138, 210, 221, 229 Cotton-Four (C-4), 9, 10, 157, 158, 171, 181, 191, 212 Council of Agriculture, 76, 77, 87, 91, 147, 219, 131, 203 Council of Ministers, 7, 25, 75, 76, 78, 79, 83, 86, 148, 215, 218, 219, 223 Custom tariffs, 43, 174, 199, 200, 206, 208

Index Deadline effect, 32 Deadlines, 3, 5, 31, 32, 35, 59, 142, 143, 150, 155, 170, 180, 182, 192, 194, 195, 196, 207, 209, 211, 213, 214, 217 Democratic Labor Party (PDT), 99, 101, 104, 104, 106, 107, 164, 224 Department of Foreign Affairs and Trade (DFAT), 109, 116, 135 DG Agriculture, 77, 86 Distributive bargaining, 28–29 Divided government, 2, 21, 22, 51, 52, 53, 88, 128–129, 137, 210, 221, 222, 223 Doha agenda, 142 Doha declaration, 5, 142, 143, 149, 150, 170, 210, 211 Doha development round (see also Doha round), 142 Doha ministerial meeting, 1, 4, 5, 12, 13, 139–143, 148, 149–151, 155, 210, 216, 220, 222 Doha round, 5, 12, 13, 109, 143, 165, 184, 186, 187, 192, 195, 203, 204, 206, 207 Domestic constraints, 6, 21, 28, 127, 138, 229 Domestic determinants of foreign policy, 18, 21, 109 Domestic institutions, 1, 2, 3, 4, 6–8, 10, 12, 18, 19, 21, 22–28, 34, 35, 93, 128–135, 137, 143–148, 159–170, 182–190, 191, 202–205, 208, 209, 215–218, 220, 222, 229 Domestic level, 2, 8, 17, 18, 19, 23, 28, 74, 87, 109, 110, 171, 172, 172, 197, 208, 209, 210, 213, 215, 229 Domestic level explanations (see also international level explanations), 17, 19–22 Domestic politics (see also domestic institutions), 1, 17, 18, 19, 20, 21 Domestic support (see also domestic support subsidies in agriculture), 1, 5, 9, 10, 11, 12, 36, 37, 38, 39, 40, 41, 42, 43, 44–46, 64, 66, 67, 83, 92, 113, 126, 127, 130, 131, 134, 136, 138, 139, 140, 141, 142, 147, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 163, 170, 171, 174, 175–178, 179, 180, 182,

267

183, 184, 185, 186, 187, 188, 190, 191, 192, 195, 196, 198, 199, 200, 201, 202, 203, 204, 208, 210, 211, 212, 213, 215, 220, 221, 223, 226, 227, 228 Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), 160, 182, 183, 192, 214, 222 Due restraint provision (see also peace clause), 44 Dunkel draft, 41, 42 Early stage of negotiations (see also stages of negotiations and late stage of negotiations), 3, 32, 136 Elapsed time, 30–33, 34 European Commission, 6, 7, 12, 25, 42, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 85–86, 92, 93, 130, 131, 132, 140, 147, 148, 150, 160, 161, 162, 163, 171, 176, 177, 179, 180, 186, 187, 192, 195, 197, 198, 200, 201, 203, 204, 206, 207, 208, 210, 212, 213, 214, 215, 218, 219, 220, 223, 224, 226 Negotiating mandate of the, 180, 186, 187, 192, 197, 204, 207, 218, 219, 220, 222 European Court of Justice (ECJ), 78, 79 European Farmers’ Confederation (CPE), 86, 87, 89, 93, 132, 137, 161, 163, 212, 225 European Parliament (EP), 76, 186, 187 European Union (EU), 2, 5, 6, 7, 8, 9, 10, 11, 12, 22, 24, 25, 28, 42, 44, 46, 73–93, 106, 126, 127, 130–133, 137, 139, 140, 141, 142, 143, 147–148, 149, 150, 153, 154, 155, 156, 157, 158, 159, 160–164, 166, 170, 171, 172, 173, 174, 176, 177, 178, 179, 180, 181, 183, 184, 186–188, 190, 191, 192, 195, 196, 197, 198, 199, 200, 201, 202, 203–204, 205, 206, 207, 208, 210, 211, 212, 213, 214, 215, 216, 218, 219, 220, 222, 223, 224, 225, 226, 228, 229, 230 Agriculture in the, 83 Agricultural subsidies in the, 90–91 Business sector in the, 86, 87, 93, 132, 133, 225

268

Index

European Union (EU) – continued Control mechanisms in the, 79–83, 92 Control mechanisms at locum in the, 81, 92 Council-Commission relationship in the, 131–132, 147–148, 187–188, 203–204, 220 Decision-making process in the, 75–77 Delegation of power in the, 79–83 Farmer groups in the, 86, 132–133, 163 Interest groups in the, 86, 132–133, 163 Trade politics in the, 78–79 Member states in the, 8, 12, 41, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83–84, 85, 91, 92, 93, 130, 131, 132, 137, 148, 150, 158, 160, 161, 162, 163, 177, 186, 187, 188, 191, 192, 195, 197, 203, 207, 208, 210, 212, 213, 215, 218, 220, 222, 223, 224, 225, 226 Veto players in the, 7, 8, 80, 83, 224 EU-US joint proposal, 155–156, 158, 159, 160, 161, 171, 211, 212 EU negotiating position (see also EU negotiating proposal), 82, 87, 90, 93, 127, 133, 137, 139, 140, 147, 148, 153, 154, 162, 164, 178, 186, 207, 211, 220, 222, 223, 225 EU negotiating proposal (see also EU negotiating position), 80, 140, 153, 154, 177, 178, 179, 188, 212 Executives-parties dimension, 24–25, 115 Export enhancement program, 38, 69 Exporters of agricultural products (see also importers of agricultural products), 8, 9, 10, 83, 106, 136 Ex ante congressional oversight procedures, 60–62, 70 Ex ante control mechanisms, 80–81, 137, 148, 223 Ex post control mechanisms, 60, 62, 80, 82–83, 92, 223 Executive-legislative relations, 24–25, 35, 52, 94, 102, 215, 222 Export subsidies, 1, 5, 9, 10, 11, 13, 36, 37, 38, 39, 40, 41, 42, 43, 45, 46, 66, 69, 83, 91, 92, 126, 127, 129, 131, 134, 136, 138, 139, 140, 141, 142, 143, 146, 149, 150, 151, 152,

153, 160, 172, 179, 191, 220,

154, 161, 173, 180, 192, 224,

155, 162, 174, 181, 204, 226

156, 164, 175, 184, 210,

157, 166, 176, 186, 211,

158, 170, 177, 188, 212,

159, 171, 178, 190, 213,

Falconer draft text, 196, 198–199 Farm bill, 10, 46, 66, 68, 69, 143, 144, 145, 150, 152, 156, 159, 171, 183, 203, 203, 206, 211, 212, 227 Farm groups (see also farm and farmers’ organizations), 90, 136, 160, 168, 202, 212, 215, 222 Farm organizations (see also farm groups and farmers’ organizations), 64, 66, 86, 118, 136, 202 Farmers’ organizations (see also farm groups and farm organizations), 11, 72, 88, 118, 163, 170, 200, 208, 226, 227 Farmers’ Confederation (CP), 87, 88, 89, 130, 220, 225 Fast track bill, 70, 128–129, 137, 144, 210, 222 Fast track procedure, 6, 53, 57, 58, 60, 62, 72 Fast track negotiating authority (see also trade promotion authority), 6, 25, 53, 57–62, 70, 72, 126, 128–129, 137, 143, 147, 148, 210, 221, 222 Federal agriculture improvement and reform act (FAIR), 69, 70 Federal-unitary dimensions, 24, 115 Fire alarm (see also police-patrol), 59, 147, 150 Five interested parties (FIPs), 9, 174, 194, 195, 200 France, 8, 12, 42, 75, 83, 84, 87, 88, 89, 92, 93, 106, 130, 161, 171, 180, 186, 187, 188, 192, 197, 200, 203, 204, 206, 207, 212, 213, 220, 221, 225 Domestic institutions in, 87–89 Structure of the executive in, 87–88 Link between parties and interest groups in, 88–90, 93, 130–131, 220–221 Interest groups in, 88–90 French Socialist Party (PS), 88, 89, 93, 130, 220, 225

Index Free trade agreement (FTA), 58, 59, 149, 158, 160, 167, 168, 169, 170, 172, 182, 191, 192, 193, 201, 202, 204, 205, 206, 209, 212, 214, 222, 223, 224 Free Trade Area of the Americas (FTAA), 148, 151, 160, 166 General Affairs and External Relations Council, 76, 77, 131, 148, 161, 188, 213, 219 General agreement on tariffs and trade (GATT), 36, 37, 38, 41, 43, 45, 70, 78, 96, 110 General Confederation of Agriculture (COGECA), 86, 87, 93, 132, 188 General Confederation of Workers (CGT), 102 General Union of Workers (UGT), 102 Genetically modified organisms (GMOs), 89, 139, 146, 194 Geneva informal meeting, 5, 12, 13, 194–201, 207, 215, 216, 218, 220, 221, 224, 226, 227, 228 Germany, 83, 84, 92, 130, 160, 161, 162, 186, 188, 197, 203, 204 Green box support, 44, 45, 46, 70, 131, 134, 139, 140, 141, 143, 152, 154, 162, 163, 164, 171, 173, 174, 175, 176, 177, 178, 179, 196, 197, 211, 212 Green Party (PV), 99, 101, 104, 105, 106, 107, 164, 188, 224 G-20, 9, 10, 154, 155, 156, 158, 160, 165, 166, 167, 171, 172, 173, 174, 175, 176, 178, 179, 180, 181, 188, 191, 195, 196, 197, 198, 199, 202, 206, 207, 212, 213 G-33, 9, 10, 181, 191 G-90, 9, 10, 180, 181, 191 Harbinson text, 153–155, 170, 211 Hong Kong ministerial meeting, 1, 4, 5, 12, 13, 173–182, 184, 187, 190, 191–193, 194, 198, 207, 213, 214, 215, 216, 218, 220, 223, 226, 227 House Agriculture Committee, 144, 150, 184, 197, 202, 221 House Ways and Means Committee, 56, 57, 60, 145, 195, 219, 221

269

Howard government, 114, 118, 121, 135, 167, 169 Import substitution model (see also protectionist industrialization model), 95, 96, 97, 98, 107, 166, 224 Import tariffs, 11, 41, 91, 92 Importers of agricultural products (see also exporters of agricultural products), 8, 9, 10, 136 India, 9, 10, 110, 140, 158, 165, 167, 172, 174, 176, 180, 181, 190, 192, 193, 196, 197, 199, 200, 201, 203, 204, 206, 207, 208, 213, 214, 222, 226 Industry Federation of São Paulo (FIESP), 102 Industrial products, 36, 56, 84, 95, 112, 120, 157, 174, 182, 184, 186, 188, 190, 191, 192, 195, 196, 197, 199, 200, 204, 205, 207, 208, 213, 215, 222, 228, 229 Institutional arrangements, 7, 21, 23, 51, 53, 57, 60, 222, 223, 219 Institutional power, 7, 23, 219 Integrative bargaining, 28–29 Interest groups, 1, 2, 3, 4, 6, 7, 8, 11, 12, 18, 19, 20, 21, 22, 23, 26, 27–28, 29, 34, 35, 51, 52, 54, 56, 60, 61, 62–67, 72, 74, 78, 86, 87, 88, 90, 93, 94, 95, 102–103, 108, 113, 115, 116, 117–118, 120, 129, 132–133, 134, 135, 137, 147, 160, 161, 168, 183, 186, 199, 204, 205, 209, 210, 215, 216, 222, 225–229 Interests (see also preferences), 10, 19, 20, 23, 24, 27, 39, 58, 74, 78, 80, 81, 85, 96, 115, 132, 135, 148, 165, 167, 172, 218 International level explanations (see also domestic level explanations), 17, 18–19 International level negotiations, 1, 2, 3, 6, 7, 8, 10, 17, 18, 19, 20, 21, 22, 24, 26, 27, 28, 29, 33, 34, 35, 54, 60, 74, 80, 82, 92, 93, 96, 114, 125–127, 131, 132, 133, 139–143, 152–159, 165, 173–182, 188, 190, 191, 194–200, 206, 209, 214, 216, 217, 218, 220, 221, 222, 223, 224, 225, 226, 229

270

Index

International trade cooperation, 22, 36–45 International Trade Organization (ITO), 36, 37, 54, 55, 96 Involuntary defection (see also voluntary defection), 28, 82 Ireland, 83, 92, 130, 161, 162, 171, 186, 187, 197, 200, 203, 212 Japan, 8, 9, 39, 45, 46, 55, 56, 110, 112, 115, 120, 126, 141, 149, 173, 176, 177, 180, 181, 194, 198, 199, 200, 207, 212, 213 Joint Standing Committee on Treaties (JSCOT), 117, 223 July 2004 framework, 5, 174–176, 184, 186 Lamy-Fischler initiative, 186 Late stage of negotiations (see also stages of negotiation and early stage of negotiations), 32, 207, 215, 223 Least developed countries (LDCs), 9, 10, 43, 44, 131, 140, 141, 142, 152, 154, 155, 162, 173, 174, 178, 179, 180, 181 Liberal Party of Australia (LPA), 111, 114, 115, 118, 120, 135, 166, 187, 226 Liberal Front Party (PFL), 99, 100, 101, 103, 104, 105, 106, 107, 133, 148, 166, 224 Link between parties and interest groups, 3, 4, 6, 7, 8, 11, 12, 13, 27–28, 34, 35, 62–67, 72, 88–90, 93, 95, 100, 102–103, 108, 111, 115, 117–118, 120, 130–131, 203, 205, 209, 216, 220–221, 225–229 Lula da Silva presidency, 97, 98, 100, 101, 104, 106, 108, 156, 157, 164, 165, 166, 171, 172, 188, 189, 190, 192, 204, 212, 224, 225, 228, 229 Majoritarian democracies (see also consensus democracies), 24, 25, 26, 115 Market access, 1, 5, 9, 10, 36, 39, 41, 42–43, 46, 55, 56, 87, 96, 107, 110, 112, 115, 121, 126, 127, 131, 132, 134, 136, 138, 140, 141, 142, 146,

149, 150, 152, 153, 154, 155, 156, 157, 163, 165, 168, 169, 170, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 184, 185, 186, 188, 190, 191, 192, 195, 196, 197, 198, 199, 201, 202, 203, 205, 208, 210, 211, 213, 215, 220, 222, 224, 225, 226, 227, 228, 229 Maximalist bargaining strategies (see also bargaining strategies), 125, 126, 136, 210 Mexico, 9, 128, 129, 195, 196, 200 Mild time pressure (see also time pressure), 30, 32 Most-favoured nation (MFN), 54 Multifunctionality principle, 9, 126, 127, 131, 132, 134, 137, 138, 210 Multilateral agricultural trade regime, 12, 36–47, 69 Multilateral trade agreements (see also trade agreements), 4, 33, 35, 56, 59, 62, 165, 168, 197, 215, 223 National Agriculture Confederation (CNA), 102, 134, 138, 205, 228, 229 National Association of Wheat Growers (NAWG), 66 National Cattlemen’s Association (NCA), 66, 168, 227 National Confederation of Family Farmers’ Unions (MODEF), 88, 89 National Corn Growers’ Association (NCGA), 66 National Cotton Council (NCC), 66, 67 National Farmers’ Federation (NFF), 112, 113, 114, 115, 118, 120, 126, 136, 138, 149, 155, 168, 170, 190, 192, 205, 226 National Federation of Farmers’ Unions (FNSEA), 88, 89, 90, 93, 132, 161, 162, 186, 212, 220, 221, 225 National Farmers Union (NFU), 64, 65, 66, 72, 126, 129, 130, 137, 147, 168, 210, 227 National Front (FN), 88 National Industry Confederation (CNI), 95, 102, 105 National Milk Producers Federation (NMPF), 66, 67, 185, 186, 202, 208, 228

Index National Renewal Alliance (ARENA), 96 Nationals, 111, 114, 115, 118, 119, 120, 226 Negotiating mandate power, 7, 24, 219 Negotiating positions (see also bargaining positions), 3, 5, 10, 11, 17, 19, 22, 27, 28, 39, 40, 53, 56, 62, 72, 82, 87, 90, 93, 95, 103, 108, 109, 125, 126, 127, 133, 137, 138, 139–141, 147, 148, 149, 150, 153, 154, 162, 164, 116–167, 170, 177–178, 180, 181, 183–186, 191, 192, 196, 198, 199, 200, 207, 208, 210, 211, 213, 214, 220, 222, 223, 224, 225 Negotiating proposals, 5, 39, 40, 41, 80, 140, 143, 149, 150, 152, 153, 154, 157, 176, 177, 178, 179, 184, 185, 188, 211, 212, 215 Negotiations (see also bargaining), 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 17, 21, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 45, 53, 54, 58, 59, 60, 62, 67, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 85, 86, 87, 89, 92, 93, 94, 95, 96, 98, 102, 103, 109, 110, 112, 116, 117, 118, 119, 120, 139–143, 146, 147, 148, 149, 150, 151, 152–159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173–182, 184, 186, 187, 188, 190, 191, 192, 193, 194–200, 201, 202, 204, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214, 215, 217, 218, 219, 220, 221, 222, 223, 225, 226, 229, 230 Negotiation outcomes (see also bargaining outcomes), 1, 4, 5, 7, 8, 23, 27, 29, 30, 209, 214, 223, 229 Negotiation process (see also bargaining process), 3, 34, 74, 80, 206, 209, 214, 222 Negotiation strategies (see also bargaining strategies), 1, 4, 17, 18, 23, 30, 31, 33, 34, 35, 125, 146, 214, 215, 217, 230 Negotiation stages (see also bargaining stages), 32, 209, 223, 226

271

Negotiating mandate, 6, 7, 24, 25, 26, 42, 54, 77, 79, 80, 81, 92, 131, 148, 160–161, 171, 180, 186, 187, 192, 197, 204, 207, 218, 219, 220, 222 Negotiating parties (see also bargaining parties), 29, 30, 33, 39, 41, 148, 208, 209, 213, 214 Negotiator, 1, 3, 7, 17, 18, 21, 28, 29, 30, 31, 32, 33, 34, 35, 40, 55, 77, 102, 116, 125, 129, 136, 143, 150, 159, 169, 182, 192, 210 Non-agricultural market access (NAMA), 142, 157, 158, 166, 167, 174, 182, 204 Non-governmental organizations (NGOs), 27, 61, 116, 117, 127, 129, 133, 147, 151, 162 Non-tariff barriers (NTBs), 21, 37, 38, 39, 40, 42, 43, 57, 98 North American Free Trade Agreement (NAFTA), 59, 63, 128, 129 Omnibus Trade and Competitiveness Act, 58 One Nation Party, 115, 119, 135, 138 One-shot games (see also repetitive games), 4, 34, 35, 82, 215, 217 Oversight mechanisms, 7, 24, 57, 58, 59, 80, 92, 130, 131, 147, 150, 210, 219, 221, 222 Ottawa agreements, 110 Parliamentary systems, 7, 23 Party of the Brazilian Social Democracy (PSDB), 99, 101, 103, 104, 105, 106, 107, 133, 148, 166, 224 Peace clause (see also due restraint provision), 42, 44, 45, 46, 130, 132, 139, 176, 177, 191, 197, 198, 221 Police-patrol (see also fire alarm), 59, 81 Policy Advisory Committee, 61 Political action committees (PACs), 63–67, 126, 185 Political parties, 3, 6, 7, 8, 12, 20, 23, 25, 26, 27–28, 34, 35, 51, 53, 62–67, 72, 88–90, 93, 94, 95, 96, 99–103, 104, 105, 106, 107, 108, 110, 112, 115, 117–119, 120, 127, 133, 134, 135, 138, 148, 150, 164–165, 166, 167, 168, 172, 188, 189, 190, 192, 205, 220, 224, 225–229

272

Index

Popular Socialist Party (PPS), 99, 101, 104, 105, 106, 107, 164, 188, 224 Power-sharing mechanisms, 3, 6, 7, 12, 23, 24, 26, 82, 94, 219 Preference formation, 19 Preferences (see also interests), 3, 6, 17, 19, 20, 25, 26, 27, 29, 30, 35, 52, 85, 88, 94, 209, 214, 215, 216, 218, 220, 223 Preferential trade agreements (PTAs), 2, 21, 157 Presidential systems, 7, 23, 25 Principal-agent approach, 73, 74, 80, 85, 215, 229 Principals, 55, 74, 80, 85, 215, 218, 229, 234 Progressive Party (PP), 99, 100, 101, 104, 105, 106, 107, 164, 165, 188, 224 Protectionist industrialization model (see also import substitution model), 96 Rally for the Republic (RPR), 88, 220, 225 Ratification process or ratification stage, 7, 8, 17, 21, 24, 36, 53, 55, 74, 76, 79, 80, 82, 92, 109, 116, 117, 169, 170, 192, 219, 223, 224 Reciprocal Trade Agreements Act (RTAA), 52, 53, 54, 55 Regional trade agreements, 33, 192, 195, 201, 204, 205, 206, 214 Relative gains (see also absolute gains), 18 Repetitive games (see also one-shot games), 4, 34, 35 Republican Party (PR), 99, 105 Reservation value (see also resistance point), 31, 33 Resistance point (see also reservation value), 33 Ripeness of negotiations, 29, 30 Schelling’s conjecture, 21 Seattle ministerial meeting, 1, 4, 5, 12, 125–127, 128, 132, 133, 134, 135, 136, 137, 138, 148, 150, 209, 210, 216, 220, 220, 222, 227, 228 Senate Agriculture Committee, 158, 183, 184, 197, 202, 219, 221 Senate Finance Committee, 56, 57, 58, 59, 60, 144, 145, 147, 160, 219, 221

Single payment scheme (SPS), 162, 163, 164 Special safeguard mechanism (SSM), 139, 140, 141, 154, 157, 175, 178, 179, 181 Social Labor Democracy (SDC), 102 South Africa, 9, 110, 127, 165, 195, 196, 200, 201, 214 Social Democratic Party (PSD), 95 Society-centred approaches (see also state-centred approaches), 19–22 Special Committee on Agriculture (SCA), 76, 77, 82, 92, 131, 218, 219 Special Committee on Trade (133 Committee), 76, 77, 79, 81–82, 92, 131, 158, 188, 218, 219 Special and differential treatment (SDT), 9, 140, 141, 142, 149, 156, 157, 158, 160, 170, 171, 174, 177, 179, 212 Stages of negotiations, 3, 32, 53, 125, 126, 127, 136, 150, 151, 161, 170, 171, 207, 209, 210, 211, 212, 214, 215, 217, 218, 220, 222, 223, 226, 230 State-centred approaches (see also society-centred approaches), 19–22 State trading enterprises (STEs), 131, 139, 140, 143, 146, 154, 155, 156, 175, 177, 178, 179, 181, 191 Swiss formula (see also Uruguay round formula), 152, 153, 154, 155, 179, 182, 186, 211 Switzerland, 9, 39, 45, 181 System of boxes, 44–45, 46 Tariff barriers (see also tariffs and tariff rates), 34, 37, 57, 107, 129, 135, 148, 155, 166, 211, 213 Tariff rates (see also tariffs and tariff barriers), 10, 11, 22, 34, 37, 41, 43, 45, 46, 47, 53, 56, 57, 78, 92, 96, 98, 107, 110, 112, 113, 120, 126, 127, 129, 131, 135, 136, 138, 139, 146, 148, 152, 153, 154, 155, 156, 157, 166, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 182, 184, 185, 186, 195, 196, 198, 199, 200, 201, 202, 204, 207, 208, 211, 212, 213, 215, 228, 229, 230

Index Tariffs (see also custom tariffs, import barriers, non-tariff barriers, tariff rates, tariff reductions and tariff barriers), 10, 11, 21, 22, 37, 40, 41, 43, 45, 46, 47, 51, 53, 54, 55, 56, 57, 58, 78, 91, 92, 96, 98, 107, 110, 112, 113, 118, 120, 126, 127, 131, 132, 134, 135, 136, 139, 140, 141, 146, 148, 152, 153, 154, 155, 156, 157, 158, 166, 168, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 182, 184, 185, 186, 195, 196, 197, 198, 199, 200, 201, 202, 204, 205, 206, 207, 208, 211, 212, 213, 215, 228, 229, 230 Tariff reductions, 43, 53, 56, 111, 112, 136, 139, 146, 152, 155, 173, 174, 175, 176, 177, 179, 182, 192, 195, 196, 198, 199, 200, 202, 205, 207, 208, 213, 215, 228 Time (see also deadlines), 1, 3, 4, 6, 13, 29–34, 35, 59, 125, 127, 136, 138, 143, 175, 182, 191, 192, 193, 199, 208, 209, 210, 211, 213, 214, 215, 217, 229, 230 Time dimension of negotiations, 3, 4, 29–34, 143, 209 Time pressure, 1, 3, 4, 29, 30–33, 35, 125, 127, 136, 138, 182, 191, 192, 193, 199, 208, 209, 213–215, 217, 229, 230 Timetable of negotiations, 5, 143, 150, 177, 188, 194, 211 Tough bargaining strategies (see also bargaining strategies), 4, 31, 33, 34, 35, 214, 215, 217, 230 Trade agreements, 2, 4, 6, 20, 21, 27, 33, 35, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 62, 72, 78, 79, 80, 83, 92, 94, 107, 109, 110, 116, 117, 129, 142, 144, 146, 147, 148, 149, 160, 165, 167, 168, 169, 170, 182, 183, 190, 191, 192, 193, 195, 197, 201, 204, 205, 206, 214, 215, 221, 222, 223, 226 Trade adjustment assistance (TAA), 55–57, 58, 145, 146 Trade-distorting domestic support (see also domestic support and tradedistorting subsidies), 40, 42, 45, 46,

273

126, 127, 130, 136, 138, 139, 140, 142, 143, 149, 159, 173, 175 Trade-distorting subsidies (see also domestic support and trade-distorting domestic support), 177, 178, 179, 184, 185, 201, 205, 206, 210, 226 Trade expansion act, 55–57 Trade liberalization (see also agricultural trade liberalization), 1, 3, 5, 6, 10, 12, 20, 21, 22, 27, 28, 29, 36, 37, 39, 45, 51, 54, 66, 83, 84, 85, 86, 87, 92, 93, 98, 107, 108, 111, 112, 114, 118, 121, 125–127, 128, 129, 130, 132, 133, 134, 135, 136, 137, 138, 139–143, 148, 149, 150, 157, 164, 165, 167, 168, 171, 179, 182, 186, 190, 192, 194–202, 209, 210, 212, 215, 218, 220, 221, 225, 226, 227, 228, 229, 230 Trade Policy Advisory Council (TPAC), 116, 135 Trade promotion authority act, 59, 143–147, 150, 155, 218, 221, 222, 227 Trade-related aspects of intellectual property rights, 142, 146 Trade and Environment Policy Advisory Committee, 61 Trade unions, 27, 102, 108, 113, 116, 118, 129, 133, 137, 147, 148, 149, 200, 210, 227, 228 Transatlantic trade disputes, 194–196 Two-level games, 1, 2, 17–22 Union for a Popular Movement (UMP), 88, 206, 220, 221, 225 Union for French Democracy (UDF), 88 Unitary actor assumption, 2, 18, 19, 20 United Kingdom (UK), 83, 84, 92, 130, 161, 162, 186, 188, 197, 203, 204 United Nations Conference on Trade and Development (UNCTAD), 96 United States, 2, 5, 6, 7, 8, 9, 10, 11, 12, 17, 18, 22, 25, 36, 38, 39, 40, 41, 42, 44, 45, 46, 51–72, 73, 75, 80, 94, 95, 106, 109, 112, 114, 115, 118, 120, 126, 127, 128–130, 133, 137, 139, 140, 141, 142, 143–147, 148, 149, 150, 152, 153, 154, 155, 156, 157, 158, 159–160, 161, 166, 167, 168, 169, 170, 171, 172, 173, 174,

274

Index

176, 177, 178, 179, 180, 181, 182–186, 188, 191, 192, 194, 195, 196, 197, 198, 199, 200, 201, 202–203, 204, 205, 206, 207, 208, 210, 211, 212, 213, 214, 215, 216, 218, 219, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230 Agribusiness sector in, 62–67 Agriculture in the, 67–70 Agricultural subsidies in the, 67–70, 143–145, 159 Business groups in the, 55, 61, 62–64, 65, 72, 129, 137, 138, 146, 147, 168, 183, 189, 210, 226–228 Congressional oversight procedures in the, 54, 60–62, 70, 133, 219, 221, 222 Campaign contributions in the, 62–67 Commodity producer groups in the, 65–67, 129–130, 147, 159, 184–186, 226–229 Dairy sector in the, 10, 39, 57, 61, 64, 65, 67, 68, 145, 146, 159, 172, 184, 185, 186, 191, 202, 208, 227, 228 Delegation of power in the, 53–62 Executive-legislative relations in the, 53–62 Farm organizations in the, 62–64, 129–130, 147, 159, 184–186, 226–229 Interest groups in the, 62–67, 129, 183 Link between parties and interest groups in the, 62–67, 72, 226–229 Peanut sector in the, 39, 61, 65, 66, 67, 68, 159, 202, 227 Sugar sector in the, 10, 39, 46, 64, 65, 66, 67, 72, 159, 168, 170, 172, 181, 183, 184, 185, 191, 202, 222, 227, 228 Trade politics in the, 51–72, 128–130, 143–147, 182 Veto players in the, 7, 70, 150, 183 Wheat sector in the, 10, 38, 65, 66, 69, 89, 91, 98, 110, 111, 120, 150, 202, 227, 228 United States Trade Representative (USTR), 23, 53, 58, 60, 61, 62, 70, 72, 125, 126, 128, 137, 142, 146, 150, 155, 160, 166, 173, 176, 181, 183, 191, 192, 195, 196, 198, 199,

208, 210, 213, 218, 219, 221, 222, 223, 227, 228 Units of analysis, 2, 6, 8, 12 Uruguay round, 8, 12, 37, 38–45, 59, 70, 73, 75, 78, 82, 89, 109, 114, 132, 140, 153, 154, 211 Uruguay round formula (see also Swiss formula), 140, 153, 154, 211 US administration (see also US presidents), 54, 57, 60, 63, 64, 69, 72, 137, 142, 144, 145, 150, 158, 160, 166, 183, 184, 185, 186, 189, 195, 197, 202, 206, 210, 221, 222, 227, 228 US Congress, 6, 12, 17, 23, 25, 38, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 62, 63, 64, 65, 67, 70, 71, 72, 80, 126, 128, 129, 130, 133, 137, 143, 144, 145, 146, 147, 150, 155, 160, 171, 183–184, 185, 186, 191, 194, 197, 199, 202–203, 207, 208, 212, 215, 218, 219, 221–223, 226, 227, 228 US Democrats, 12, 53, 63, 64, 65, 66, 67, 70, 72, 128, 129, 137, 142, 143, 144, 145, 146, 150, 183, 210, 221, 222, 226, 227 US Democratic Party, 53, 65, 126, 129, 137, 222, 227 US farm bill 2002, 10, 46, 143–146, 150, 152, 156, 159–160, 171, 183, 203, 206, 211, 212, 217 US House of Representatives, 7, 58, 61, 62, 70, 71, 143, 144, 145, 147, 150, 183, 219, 222 US negotiating position (see also US negotiating proposal), 17, 53, 56, 62, 72, 127, 139, 140, 154, 177, 183–186, 198, 199, 207, 208, 211, 222 US negotiating proposal (see also US negotiating position), 39, 152, 154, 176, 177, 184, 185, 212–213 US presidents (see also US administration), 6, 7, 12, 17, 25, 36, 41, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 67, 70, 72, 128, 130, 137, 143, 146, 147, 150, 160, 176, 183, 184, 197, 202, 206, 210, 215, 219, 221, 222, 227, 228

Index US presidential system, 25, 51, 52, 72, 128, 227 US Republican Party, 53, 72, 129, 137, 222, 227 US Republicans, 12, 53, 57, 63, 64, 65, 66, 67, 70, 72, 128, 129, 137, 142, 143, 144, 145, 146, 150, 182, 183, 185, 202, 208, 210, 221, 222, 226, 227, 228 US Senate, 7, 36, 56, 57, 59, 60, 62, 70, 71, 143, 144, 145, 146, 147, 150, 158, 160, 182, 183, 197, 199, 202, 219, 221, 222 US trade bill 2002 (se also trade promotion authority), 143–147 Veto players, 2, 3, 4, 6, 7, 8, 10, 12, 20, 21, 23, 25–27, 34, 35, 70, 80, 83, 95, 101, 103–106, 107, 118–119,127, 133, 138, 150, 151, 183, 188, 209, 216, 224–225 Veto points, 21, 26 Veto power, 7, 24, 26, 27, 53, 60, 62, 76, 80, 219 Voluntary defection (see also involuntary defection), 82 Westminster democracy, 115, 116, 119, 223 Win set, 17, 18, 28, 229 World Trade Organization (WTO), 1, 4, 5, 6, 8, 9, 11, 30, 34, 36, 37, 42, 43, 44, 45, 46, 68, 74, 79, 80, 81, 82, 83, 87, 89, 116, 119, 126, 127, 130, 131, 132, 134, 135, 136, 137, 138,

275

139, 140, 142, 143, 144, 148, 149, 151, 153, 155, 157, 158, 159, 161, 162, 163, 164, 165, 166, 168, 169, 170, 173, 174, 175, 176, 177, 180, 181, 182, 184, 185, 187, 191, 192, 193, 194, 195, 196, 197, 198, 199, 201, 202, 204, 206, 207, 209, 210, 211, 212, 213, 214, 215, 221, 223, 225, 226, 229 Workers’ party, 97, 99, 104, 134, 135, 138, 148, 156, 157, 164, 165–166, 167, 212 WTO Advisory Group, 116, 148–149 WTO Committee on Agriculture, 139, 141, 153, 170, 173 WTO director-general, 5, 158, 163, 194 WTO members, 1, 5, 37, 42, 44, 45, 46, 126, 135, 138, 139, 140, 142, 143, 149, 155, 157, 163, 170, 173, 174, 175, 176, 180, 181, 182, 186, 191, 192, 194, 195, 196, 197, 198, 199, 201, 202, 203, 210, 211, 213, 215 WTO ministerial meetings, 1, 4, 5, 125–127, 139–143, 149–151, 152–159, 173–182, 194–201 WTO negotiations, 6, 11, 30, 34, 79, 80, 81, 83, 89, 116, 119, 125–127, 130, 131, 132, 137, 139–143, 152–159, 161, 163, 164, 165, 166, 168, 169, 173–182, 192, 193, 194–201, 204, 206, 209, 210, 212, 214, 223, 225, 226 Zone of possible agreement (ZOPA), 30, 31, 33