U.S. Trade Policy in the Aftermath of the Failure of the Cancun Round of the WTO
an interview with Professor Andrea K. Bjorklund of University of California, Davis, School of Law
David M. Boelke

Posted Monday, December 1, 2003
4 U.C. Davis Bus. L.J. 2 (2003)

Professor Bjorklund's areas of interest include international trade and investment, public international law, and international litigation and arbitration. After graduating in 1994 with a J.D. from Yale Law School, Bjorklund worked at Miller & Chevalier, where she practiced in the areas of international trade and international arbitration, and worked with clients with respect to compliance with the Foreign Corrupt Practices Act. She clerked for Sam J. Ervin III, on the U.S. Court of Appeals for the Fourth Circuit, and then served as senior counsel to Thelma J. Askey on the International Trade Commission. She also worked in the Legal Adviser's Office of the U.S. State Department, where she defended the United States in arbitrations brought under Chapter Eleven of the North American Free Trade Agreement. Professor Bjorklund spoke with the Business Law Journal about the walkout of developing countries at the recent Cancun round of the World Trade Organization (WTO) and its possible repercussions on U.S. international trade as well as domestic policies, particularly in the area of agricultural subsidies.

Q: How has the walkout of developing countries at the Cancun round of the WTO affected U.S. strategies for promoting international trade liberalization in general?

A: I don't think that the United States will give up at all on a global, 148-country negotiation to try to liberalize trade, but I do think you will see an even stronger focus on regional trade pacts like the Free Trade Area of the Americas and also on bilateral pacts. The United States has just concluded a free trade agreement with Chile, one with Singapore, and one was concluded with Jordan within the last few years. So I think you will see more bilateral negotiations.

Prior to this, there had been discussions in Congress regarding a Free Trade Area of the Americas, as well as further trade agreements with Sub-Saharan Africa. I take it that you do see these issues being addressed again in the foreseeable future?

Yes, I think that is a core part of the United States' trade policy. The negotiations for the Free Trade Agreement of the Americas are ongoing. There is a complicated schedule of negotiations that started a few years ago. The representatives from the countries meet at regular intervals and talk about the various parts of the proposed treaty. I believe the process is scheduled to be concluded with the draft agreement in place by 2005. That may be a little overly optimistic, but I think that is still the formal schedule.

So you don't think there will be any substantial repercussions from the Cancun round in terms of getting some of these countries on board?

There could be. There was an article in the New York Times today about unrest in Bolivia, an anti-globalization movement among some people there. It may be that the Free Trade Agreement of the Americas will not cover every country in the Western Hemisphere but I don't see the bigger economies abandoning this goal. This may have a deleterious effect on relations between bigger-economy countries like Brazil, Argentina, and Chile and the poorer countries like Bolivia, Ecuador, and Paraguay. That could obviously be a less than desirable result if you have further polarization between what are perceived as have and have-not countries. Even though Argentina has weathered a very significant financial crisis, I think its economy is certainly more developed and wealthier than several other Latin American countries. It is true, however, that so far Brazil and Argentina appear to be standing with the lesser-developed countries in Latin and South America; to the extent they hold firm, the negotiating power of all of those countries will obviously be enhanced.

The U.S. trade representative, Robert Zoellick, used pretty fiery rhetoric in denouncing the delegates who walked out, saying that they were responsible for obstructing meaningful trade reforms. Do you think that is an accurate assessment?

In a superficial light, of course he is correct. If someone isn't coming to the table to negotiate, they are obviously disrupting negotiations, but that fact should not take away from their right to refuse to negotiate. One could also reasonably view the disruption as occurring at a previous time, stemming from the developed countries' refusal to put certain items on the table. The rights and wrongs of what has happened and is happening in the global trading economy are not exclusively the domain of one group of countries or the other.

Do you think Zoellick's statements will chill further trade talks, or do you think they will have much of an effect at all?

I don't know that his statements, as such, will chill further trade talks. There's a level of diplomatic rhetoric involved; he has different constituencies to satisfy. Those remarks may have been ostensibly directed at the developing countries, but they were also directed towards our free trading partners, towards the Administration that he serves, towards vested interests in the United States. That doesn't mean that I necessarily think trade talks will resume on a smooth schedule, but I don't think you can attribute that to Zoellick's remarks as such. He is a very able person, smart, experienced, and not likely to fly off the handle. You might surmise he had good reason for saying what he said. I don't think it was an uncalculated remark.

One of the principal complaints from delegates of developing countries was the failure of the U.S. and other developed countries to trim their agricultural subsidies. How do you see agricultural subsidy policy changing in the U.S. in the next few years, if at all?

It's such an extraordinarily complex issue. The history of agricultural subsidies in the United States stems, of course, from reasonable concerns about protecting some small farmers from the vagaries of the market and vagaries of the weather. However, you now have massive subsidies that completely distort trade. On the other hand, they provide some protection against market uncertainty. It's certainly true that agribusiness takes advantage of these protections as well as the small farmer, but getting some kind of change through Congress will be terribly, terribly difficult. So, I would like to see some kind of change but I'm not optimistic that there will be any change in the next few years. Maybe we'll see some change over time if we continue to face massive budget deficits because it may be that agriculture will finally be targeted for budget reduction purposes.

Another complicating factor is the War on Terrorism- a phrase I don't particularly like- but the United States now has greater concerns for national security. Certainly the United States has never been loath to justify most anything it wanted to do under the guise of national security. You can make a not-unreasonable argument that the United States should retain some of the way to sustain itself in the event of some kind of world war or unrest in certain parts of the world that might affect the food supply to the United States, and I think you're going to see that argument trotted out to justify continued subsidies. That, too, is a mixed bag. You have people with living memories of World War II and the significant effects on food supplies because of the war, so I think you're going to see that argument to justify continued subsidies and bolstering of the U.S. farm program -- and you're going to see the same in Europe.

Do you see our agricultural policies as necessary and productive in meeting our domestic food needs, or counterproductive to those ends and why?

Well, it's hard not to view some of the programs as counter-productive when you're paying farmers not to grow crops and you have people starving in certain parts of the world. On the other hand, you can make a reasonable argument that some safety net should be in place because if farmers are forced to gamble on the absolute uncertainties of the weather- whether they are going to get enough rain, whether there's going to be enough sun- that perhaps nobody would stay in business, that it's an unfair burden and risk allocation for anybody to shoulder. But we've gotten so far away from safety-net guarantees to outright subsidies that I don't think that, as these subsidies are structured now, they make much sense.

If it were to take effect, what effect do you think a substantial reduction in agricultural subsidies would have within the U.S. agricultural sector and the U.S. economy in general?

One thing to keep in mind is that we've been talking about the agricultural sector as if it is a monolithic entity, but there are different subsidies for different crops. So you're probably going to see different results in different sectors, depending on how many subsidies a sector is currently getting, depending on the volatility of the world markets for that particular commodity, and depending on the comparative advantage the United States has in producing that particular good or product. If you were to end sugar subsidies, I think you would not have cane sugar being produced- certainly not in Florida- and you would have less beet sugar but you would probably still have some beet sugar production in the Midwest. As far as corn or wheat are concerned, I think you would still have significant amounts of corn and wheat being produced in the United States; a large portion of the United States is well-situated for producing those kinds of goods. In California, you would still have wine, you would have a lot of the fruit crops still being produced. But, it's so hard to gauge- the market has been distorted for so long and in so many different ways that it's very difficult to say what would happen in the absence of these subsidies.

Of course, part of the reason that the developing countries were walking out in Cancun is that the United States does not operate in a vacuum. The effect of a U.S. reduction of subsidies would change depending on what other countries would do with their subsidies. The United States is unlikely to dismantle any of its subsidies unless Europe is doing the same thing, so you're going to have some pressures from outside the United States on the U.S. market. If the United States were to change its subsidies, some developed countries and developing countries would probably change some of their practices, for example by increasing production to target the U.S. market in the anticipation of greater market access. In the simplest case, lowering subsidies ought to decrease production for a time, resulting in a corresponding rise in prices and then eventually in an increase in production. However, sometimes when prices go lower they encourage more production as people seek to get a higher total return. So it's hard to know how people are going to react.

One of the most vocal opponents of US policy in this area was Mexico, the host of the WTO round. Do you see our trade relationship with Mexico becoming more tenuous in the future?

That's an excellent question. It could well be. Mexico benefited from NAFTA, I think all three countries benefited from NAFTA over the first ten years, but those benefits may be waning somewhat. Mexico has recently faced an outflow of jobs to Indonesia and China. Some of the trade barriers that Mexico faces in sending its goods to the United States and Canada were to be phased out in NAFTA, but certain sectors were excluded from the tariff reduction scheme. How negotiations go with respect to the phase-out of those remaining sectors could have a big effect on U.S.-Mexican relations. Certainly, the relationship between the Fox Administration and the Bush Administration has not been as chummy as it was earlier in Bush's tenure. It is a little hard to know how things will play out, but Mexico certainly thinks it should have greater access to the United States markets.

I know another issue of tension between Mexico and the U.S. is whether amnesty should be given to illegal immigrants from Mexico currently living in the U.S. It appears to be off the table since 9/11 and the resulting national security concerns. Do you see this being addressed again within the next few years?

Well, we have a presidential election coming up in a year, so I don't see that going anywhere until at least after November 2004. Obviously, it will depend in part on who is elected but in California, we've seen the response to giving illegal immigrants access to driver's licenses, which is apparently going to be rescinded as soon as the new governor is sworn in. I think that sentiment will carry the day at least for several years.

The treatment of illegal immigrants has become intertwined with the so-called War on Terrorism, which has resulted in widespread mistreatment of illegal immigrants, regardless of any connection any individual person actually has to terrorist activity. The treatment of immigrants in deportation camps is horrifying and unfair. Unfortunately, unless we have several years without terrorist activity in the United States, that is unlikely to change.

What kind of effect do you think the increase in deportations and immigration law enforcement will have on California businesses that rely substantially on immigrant labor?

Well, it doesn't seem that the supply of either immigrant or non-immigrant labor is significantly diminished yet. Certainly, as far as businesses that are abiding by immigration laws are concerned, they wouldn't have been employing the illegal immigrants anyway. Now to the extent that businesses, including those in the agricultural sector, rely on illegal immigrant labor, the recent events will likely affect their ability to hire workers. In the state as a whole, with over 6 percent unemployment it seems that there is a large supply of legal immigrant labor and non-immigrant labor. I don't think that businesses will have a very hard time filling their employee rolls for some period of time.

What implications does all this hold for the U.S.' continued involvement with the WTO? Is the WTO likely to compel changes in U.S. policies in future rounds?

I think the U.S. will remain a part of the WTO as will most countries, even if some may decline to participate in certain aspects of it. The clout that the WTO has to compel changes in U.S. policy depends on the policies in question. In terms of smaller policies, the United States will likely implement WTO rulings about how the U.S. laws regarding unfair imports, like cases imposing safeguard measures with respect to steel products, have been implemented. But the WTO doesn't have sufficient clout to make the U.S. change its overall policy with respect to alleged unfair imports. Could the WTO somehow force the United States to limit its agricultural subsidies? Certainly on the surface, it doesn't have that kind of clout. It doesn't mean that the Director General of the WTO and some of its constituent committees would not try to encourage the United States to do that, but the WTO is really a group of nations. It doesn't have a great deal of independent authority.