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Elliott was with the Peterson Institute for many years before joining the Center full-time. Her books published there include Can International Labor Standards Improve under Globalization? (with Richard B. Freeman, 2003), Corruption and the Global Economy (1997), Reciprocity and Retaliation in US Trade Policy (with Thomas O. Bayard, 1994), Measuring the Costs of Protection in the United States (with Gary Hufbauer, 1994), and Economic Sanctions Reconsidered (with Gary Hufbauer and Jeffrey Schott, 3rd. ed., 2007). She served on a National Research Council committee on Monitoring International Labor Standards and on the USDA Consultative Group on the Elimination of Child Labor in US Agricultural Imports, and is currently a member of the National Advisory Committee for Labor Provisions in US Free Trade Agreements. Elliott received a Master of Arts degree, with distinction, in security studies and international economics from the Johns Hopkins University, School of Advanced International Studies (1984) and a Bachelor of Arts degree, with honors in political science, from Austin College (1982). In 2004, Austin College named her a Distinguished Alumna.
Given the hurricane of news around immediate crises in the past few months, it’s not surprising that warnings about antimicrobial resistance (AMR)—often called a slow moving tsunami—are getting lost. Without global action, by 2050 there could be as many as 10 million AMR-related deaths each year, which would entail a high cost for the global economy as well. An important—and often overlooked—part of the problem is the overuse of antibiotics in farm animals. (For more on how antibiotic use in livestock is contributing to the spread of antibiotic-resistant superbugs, be sure to check out Kim Elliott's new book Global Agriculture and the American Farmer.) Without action, antibiotic use will grow rapidly in middle-income countries where meat consumption and the intensification of livestock industries are expanding. CGD recently convened a roundtable discussion with technical experts to discuss possible ways to strengthen global cooperation to address livestock’s contribution to AMR. Drawing on that productive discussion, we outline steps that could help make inroads into the problem.
Earlier this year we outlined key elements of a global treaty to reduce antibiotic use in farm animals in this CGD policy paper. This (admittedly ambitious) global treaty—modelled on the Montreal Protocol on Substances that Deplete the Ozone Layer—would support much-needed research, surveillance, and data collection; establish a framework for binding commitments and targets that would evolve over time; and create a mechanism to encourage participation from low- and middle-income countries. A couple of weeks ago, we convened a roundtable discussion with technical experts to build on this idea and assess how a treaty could contribute to global efforts to address AMR. Here’s a rundown of what we learned (without any attribution since the discussion took place under Chatham House rules).
The time is right
There was unanimous agreement that global momentum around the AMR issue is building. The issue was in the spotlight at last September’s United Nations General Assembly, which culminated in a landmark resolution calling for national action with international oversight. The recent creation of a UN Interagency Coordination Group (as set forth in the resolution) is a sign of initial progress toward this effort. Moreover, 90 percent of the world’s population now lives in a country that has developed or is of developing a multi-sectoral national action plan to tackle AMR. Efforts are also ongoing to establish a global database on antibiotic use in farm animals at the World Organization for Animal Health (OIE). Against this background, a global treaty could help fill an existing gap by providing the legal framework to consider important policy and trade issues related to antimicrobial use in farm animals as countries roll-out their national action plans.
Setting up a flexible framework is key
A key question in our discussion was whether such a treaty should focus on livestock, or be comprehensive and consider antimicrobial use in humans as well. Everyone agreed that any treaty should be in the context of the overall One Health approach led by the tripartite collaboration between the World Health Organization (WHO), Food and Agriculture Organization (FAO), and OIE. But many felt a treaty focused on antibiotic use in livestock would be more feasible and realistic. To us, this debate underscored the importance of designing a mechanism for addressing the livestock problem that could stand on its own, or could be slotted into a broader global treaty on AMR.
The need for flexibility was also relevant to the discussion on possible targets for “prudent use.” A treaty framework could include targets focused on multiple dimensions—i.e., for certain animal species (with poultry producers perhaps leading the way); for specific drug classes (per WHO’s list of Critically Important Antimicrobials); or for different practices (growth promotion, prevention, etc.). But considering the extent of knowledge and data gaps in this space, participants argued against setting targets for use in livestock before more information is available. Thus, flexibility would need to be a key feature of the treaty framework so that targets and commitments could be adapted as additional evidence becomes available.
What about a global voluntary industry partnership?
Increased consumer awareness and concerns about food safety and quality are already driving change on the supply-side of the market. In the United States, for example, many fast-food chains are committing to serve meat raised without antibiotics and large meat producers are following suit by voluntarily phasing out antibiotics on the farm. A June 2016 study reported that one-third of the US poultry industry had eliminated or pledged to eliminate routine use of medically-important antibiotics. For example, Perdue—the fourth largest US poultry producer—now uses natural herbs like oregano and thyme, in addition to vaccines and probiotics to keep their chickens healthy. Reflecting on these positive developments, we discussed the potential role industry could play in paving the way forward, especially in light of the current political climate. A global treaty could therefore serve as the stick—spurring industry to keep making progress in anticipation of regulations coming down the pike. The carrot would come in the form of business opportunities for developing antibiotic alternatives. An industry-led partnership could have powerful reinforcing impacts.
As we at CGD continue to chip away at the problem, we’ll seek to broaden our engagement with key stakeholders: researchers and policymakers in low- and middle-income countries; the livestock and pharmaceutical industries; international organizations such as WHO, FAO, and OIE; the wider global health community; and financial industry experts.
Watch this space as we continue to rethink, refine, and adapt our policy proposals. And we’d love to hear additional ideas and feedback in the comments section below.
The United States is a major player in global agricultural markets. American farmers account for around 25 percent of world exports of wheat and corn, and are also among the largest producers and exporters of beef, pork, and poultry. This success is partly the result of those farmers having access to abundant land, deep financial markets, and modern technologies. But as I explore in my new book, Global Agriculture and the American Farmer: Opportunities for U.S. Leadership, it is also the result of government policies that distort markets and undermine the provision of global public goods. The poor in developing countries are particularly vulnerable to the negative spillovers of these policies.
Congress has already begun deliberations on next year’s farm bill, which provides an array of subsidies that form the core of US agricultural policy. In recent years, premium subsidies to encourage farmers to buy crop insurance has been one of the most costly. Producers of sugar, peanuts, and some other crops also receive protection from import competition. Both kinds of policies support higher domestic prices, but they suppress prices for farmers elsewhere. And many developing country governments cannot afford their own subsidies to offset the effects on their farmers. More disturbingly, the aid that the United States provides to help the hungry in overseas crises is far more costly and slower to arrive than it should be, thanks to the farm bill. This is due to obsolete provisions originating in a 1950s farm bill that require food aid to be purchased in the United States, and transported on US-flagged ships.
Other policies that are not always as visible as the farm bill support farm incomes by bolstering demand for their crops, or reducing their production costs. Two that I focus on in the book are the mandate to blend biofuels—made mainly from corn and soybeans—in gasoline and diesel, and the failure to effectively regulate the widespread use of antibiotics in livestock. The biofuels mandate contributed to the 2007-08 food price spikes and is more likely to contribute to climate change than mitigate it as intended. In the latter case, livestock producers have been using antibiotics to promote growth and prevent, rather than treat, disease and these practices are contributing to the global spread of antibiotic resistant superbugs.
In the book, I analyze these policies in detail with particular attention to the deleterious effects for the poor and vulnerable in developing countries. While an overhaul of US agricultural policy to make it less trade-distorting and more focused on providing public goods—such as research and development, environmental amenities, and infrastructure—is desirable, it does not seem likely in the short run. Thus, in the book I recommend more limited steps that still provide important benefits for American taxpayers and consumers, as well as developing countries.
In next year’s farm bill, I recommend that Congress:
Reduce the amount of the subsidy that farmers receive for buying crop insurance (now more than 60 percent of the value of the average premium).
Reform the complicated and increasingly expensive program protecting domestic sugar producers and remove the tight restrictions on imports.
Remove the requirements to purchase food aid in the United States and transport it long distances on US-flagged ships.
In addition, I recommend that Congress eliminate the mandate to blend biofuels in gasoline and diesel, or at least make the mandate more flexible and reduce the amount of biofuel that is derived from food crops. Finally, the executive branch should negotiate global targets to reduce the use of antibiotics in livestock and ensure that veterinarians who oversee such use do not have financial incentives to prescribe antibiotics. In a policy brief accompanying the launch of the book, I focus on food aid reform and more modest steps that Congress could take in the farm bill to lessen the distortions associated with the biofuels mandate and antibiotic use in livestock.
Farmers face numerous risks that markets alone cannot address, so there is a role for government assistance. But the US government supports the agriculture sector at levels far beyond what is socially optimal, or what other sectors receive. Unbeknownst to many, these subsidies go disproportionately to larger, richer farmers and only a few crops receive the bulk of the support—mainly grains, oilseeds, sugar, and dairy, rather than fruits and vegetables. This is not a set of policies that serves most Americans well, much less poor and vulnerable people around the world.
The US agricultural sector is critical to global food security, but many of the policies that currently govern it negatively impact people around the world. In a new book, CGD visiting fellow Kim Elliott argues for practical policy reforms in three areas that are particularly damaging to developing countries: food aid, biofuel subsidies, and antibiotic resistance in livestock. As the US Congress works through a major new farm bill, Elliott joins the CGD Podcast to discuss how the US can reform agricultural policy to achieve better outcomes.
In Global Agriculture and the American Farmer, Kimberly Elliott focuses on three policy areas that are particularly damaging for developing countries: traditional agricultural subsidy and trade policies that support the incomes of American farmers at the expense of farmers elsewhere; the biofuels mandate, which in its current form can contribute to market volatility while doing little if anything to mitigate climate change; and weak regulation of antibiotic use in livestock, which contributes to the global spread of drug-resistant super bugs. While noting that broad reforms are needed to fix these problems, Elliott also identifies practical steps that US policymakers could take in the relatively short run to improve farm policies—for American taxpayers and consumers as well as for the poor and vulnerable in developing countries.
A healthy US agricultural sector is critical to global food security. American farmers help keep food affordable around the world, but they also receive public assistance that too often comes at the expense of American taxpayers and consumers, as well as millions of poor farmers in developing countries. While the farm bill is not the primary vehicle for setting policy on biofuels or antibiotic use, Congress could use the legislation to advance smart policy changes that set the stage for broader reforms.
The controversy surrounding the recent purchase of Venezuelan government bonds by Goldman Sachs is a great reminder of the role that “preemptive contract sanctions” could play in the struggle against odious regimes like that of Nicolas Maduro. In 2010, CGD released a working group report explaining in detail how this new sanctions tool could work. While the political forces have not yet aligned to try this tool against other odious regimes, such as those in Syria or South Sudan, the Maduro regime in Venezuela is more isolated regionally and globally and could be the perfect candidate. To smooth the way, the US Congress should amend the Foreign Sovereign Immunities Act to remove any legal obstacles to applying this sanctions tool in the event that the “planets become aligned.”
What are preemptive contract sanctions?
Preemptive sanctions would work as follows: The United Nations, a regional organization, or individual countries would declare that a legitimate successor to a (named) illegitimate regime would not be bound by contracts, notably including loans, that the illegitimate regime signs after the date of the declaration. The declaration signatories would not allow such contracts, nor any arbitral awards or foreign judgments associated with those contracts, to be enforced in their courts if the successor government repudiates them. Any party owning such a contract would face the significant risk that it may be worthless at some point in the future. Given the role of New York and London in financial markets and contract enforcement, the United States and the United Kingdom would need to be part of any sanctioning coalition. But it would have more legitimacy if the United Nations or an appropriate regional organization sponsored the declaration.
The benefits of applying such a tool are clear. First, it aligns the lender/investor’s profit motives with the declaring countries’ goals. Knowing that a successor regime would have a financial incentive, and legal justification, to repudiate previously contracted debt would deter creditors from signing such contracts in the first place. The illegitimate regime would be starved of external resources because contracts signed by parties in third countries will be at risk because they are unenforceable in declaring countries. Second, this approach avoids the cost of the typical financial sanctions approach involving enforcement of penalties on entities that transact business with the sanctioned regime. And third, it would protect a legitimate successor regime from having to repay the odious debt, without facing higher costs of borrowing, as would likely occur with an ex poste repudiation of the debt. Indeed, Seema Jayachandran and Michael Kremer, who co-chaired the CGD working group with John Williamson, have argued that preemptive contract sanctions might reduce the cost of borrowing by legitimate governments.
Can the politics align?
In 2012-13, CGD scholars argued that the international community should deploy preemptive contract sanctions against the Assad regime in Syria. But Russian support for the regime, plus concerns about the role of terrorist groups in the opposition, undercut support for trying this tool. Since its independence from Sudan six years ago, South Sudan has spiraled downward into what is arguably the worst economic, political, and humanitarian situation in the world. In February, the United Nations declared famine in South Sudan, calling it a man-made disaster that threatens 100,000 with starvation, with another million on the brink of famine. Yet here again, regime change could be messy, and China and others argue that more time is needed to give the current regime a chance to implement an inclusive national dialogue.
Venezuela is more isolated and represents the most viable case for applying preemptive contract sanctions. While President Maduro won the 2013 election, there is increasing doubt within Venezuela about the legitimacy of his presidency, particularly in the wake of his announcement that he will convene an assembly to rewrite the constitution. Moreover, international support for the Venezuelan government appears to be crumbling, even among countries within the region that normally do not take an active role in this type of matter. Given its historically strong political and financial support for Maduro, China will play a pivotal role. As the situation within Venezuela deteriorates, it may be in China’s best interest to add its support for preemptive contract sanctions. By doing so, it may stand a better chance of protecting the value of its current investments in Venezuela, including the value of the loans that will inevitably need to be restructured. Such a move may also enhance China’s status in other Latin American countries that object to Maduro’s actions. And, it could be a demonstration of a willingness to work with the Trump administration on the world stage.
The IMF could be an obstacle
While the 2010 CGD report argues that a small group of developed countries, particularly those that are major legal and financial centers, could effectively employ preemptive contract sanctions, the International Monetary Fund’s (IMF) Lending into Arrears (LIA) policy could stand in the way. The LIA policy prohibits lending to a country that is in arrears to private creditors unless, among other things, the country is “making a good faith effort to reach a collaborative agreement with its creditors.” Certainly a repudiation of debt owed by a successor regime could not be deemed to be “a good faith effort.” Therefore, the set of countries making the declaration, or at least recognizing the declaration, would need to include those that could reject any attempt at the IMF Board of Directors to invoke the LIA policy. This would likely reflect the membership of the UN Security Council, at a minimum.
Getting the USG house in order
The executive branch’s current authority to make a legally enforceable preemptive contract sanctions declaration is uncertain. The CGD report argues that a US declaration could be enacted and enforced under current law, most importantly the Trading with the Enemy Act of 1960 and the International Emergency Economic Powers Act of 1977. However, there are questions about whether the declaration could be made effective or maintained under these laws. A much neater approach would be to amend the Foreign Sovereign Immunities Act to clearly describe the circumstances under which a suit to enforce a contract of a regime declared illegitimate would not be enforced in US courts. The US Congress should begin working with the US State Department on legislation that would support a declaration of preemptive contract sanctions if the international community unites around the goal of getting rid of the illegitimate Maduro regime.
La controversia en torno a la reciente compra de bonos del gobierno venezolano por Goldman Sachs es un gran recordatorio del papel que las "sanciones preventivas de contrato" podrían jugar en la lucha contra regímenes repulsivos como el de Nicolás Maduro. En 2010, CGD publicó un informe del grupo de trabajo explicando en detalle cómo podría funcionar esta nueva herramienta de sanciones. Si bien las fuerzas políticas aún no se han alineado para probar esta herramienta contra otros regímenes repulsivos, como los de Siria o Sudán del Sur, el régimen de Maduro en Venezuela está más aislado regional y globalmente y podría ser el candidato perfecto. Para guiar el camino, el Congreso de Estados Unidos debe enmendar la Ley de Inmunidades Soberanas Extranjeras para eliminar cualquier obstáculo legal a la aplicación de esta herramienta de sanciones en caso de que los "planetas se alineen".
¿Qué son sanciones contractuales preventivas?
Las sanciones preventivas funcionarían de la siguiente manera: las Naciones Unidas, una organización regional o países individuales declararían que un sucesor legítimo a un régimen ilegítimo no estaría obligado por los contratos, especialmente los préstamos, que el régimen ilegítimo firma después de la fecha de la declaración. Los signatarios de la declaración no permitirían que dichos contratos, ni ningún laudo arbitral o sentencias extranjeras asociadas con esos contratos, sean aplicados en sus tribunales si el gobierno sucesor los repudia. Cualquiera de las partes implicadas que posee dichos contratos se enfrentaría al riesgo significativo de que puedan ser inútiles en algún momento en el futuro. Considerando el gran papel de Nueva York y Londres en los mercados financieros y la aplicación de los contratos, los Estados Unidos y el Reino Unido tendrían que formar parte de cualquier coalición sancionadora. Pero tendría más legitimidad si las Naciones Unidas o una organización regional apropiada patrocinaría la declaración.
Los beneficios de aplicar dichas sanciones preventivas son claros. En primer lugar, alinea los motivos de ganancia del prestamista/inversionista con los objetivos de los países declarantes. El saber que un régimen sucesor tendría un incentivo financiero, y una justificación legal, para repudiar la deuda contraída previamente, disuadiría a los acreedores de firmar dichos contratos en el primer lugar. El régimen ilegítimo se vería privado de recursos externos debido a que los contratos firmados por las partes en terceros países estarán en riesgo porque no son exigibles en los países que los declaran. En segundo lugar, este enfoque evita el costo de típicas sanciones financieras que implican la aplicación de sanciones a las entidades que realizan negocios con el régimen sancionado. Y también protegería a un régimen sucesor legítimo de tener que pagar la deuda, sin enfrentar mayores costos de endeudamiento, como probablemente ocurriría con un repudio ex post de la deuda. De hecho, Seema Jayachandran y Michael Kremer, que copresidieron el grupo de trabajo CGD con John Williamson, han argumentado que las sanciones preventivas a los contratos podrían reducir el costo de los préstamos por parte de los gobiernos legítimos.
Venezuela está más aislada y representa el caso más viable para aplicar sanciones contractuales preventivas. Aunque el presidente Maduro ganó las elecciones de 2013, hay cada vez más dudas dentro de Venezuela sobre la legitimidad de su presidencia, particularmente a raíz de su anuncio de que convocará una asamblea para reescribir la constitución. Además, el apoyo internacional para el gobierno venezolano parece desmoronarse, incluso entre países de la región que normalmente no desempeñan un papel activo en este tipo de asuntos. China jugara un papel fundamental dado su apoyo político y financiero históricamente fuerte para Maduro. A medida que la situación en Venezuela se deteriora, puede ser lo mejor para China sumar su apoyo a sanciones contractuales preventivas. Al hacerlo, puede tener una mejor oportunidad de proteger el valor de sus inversiones actuales en Venezuela, incluso el valor de los préstamos que inevitablemente tendrán que ser restructurados. Al mismo tiempo, podría mejorar el estatus de China en otros países latinoamericanos que se oponen a las acciones de Maduro
El FMI podría ser un obstáculo
Mientras que el informe del CGD 2010 argumenta que un pequeño grupo de países desarrollados, particularmente aquellos que son importantes centros legales y financieros, podrían efectivamente emplear sanciones contractuales preventivas, la política de préstamos atrasados (Lending into Arrears (LIA)) del Fondo Monetario Internacional (FMI) podría obstaculizar el camino. La política de la LIA prohíbe prestar a un país que está en mora con los acreedores privados a menos que, entre otras cosas, el país "haga un esfuerzo de buena fe para llegar a un acuerdo de colaboración con sus acreedores". Ciertamente un repudio a la deuda de un régimen sucesor no puede ser considerado como "un esfuerzo de buena fe". Por lo tanto, el conjunto de países que hacen la declaración, o al menos el reconocimiento de la declaración, debería incluir aquellos que podrían rechazar cualquier intento de la Junta Directiva del FMI de invocar la política de la LIA. Esto, como mínimo, probablemente manifieste la membresía del Consejo de Seguridad de la ONU.
Consiguiendo que el Congreso de Estados Unidos se ponga en orden
La autoridad actual de la rama ejecutiva para hacer una declaración de sanciones contractuales preventivas exigible legalmente es incierta. El informe de CGD argumenta que una declaración de los EE. UU. podría promulgarse y ejecutarse de conformidad con la legislación actual, sobre todo con la ley de comercio con el enemigo de 1960 y la ley de poderes económicos de emergencia internacionales de 1977. Sin embargo, existen dudas sobre la declaración si podría hacerse efectiva o mantenerse bajo estas leyes. Una propuesta superior sería enmendar la Ley de inmunidades soberanas extranjeras para describir claramente las circunstancias bajo las cuales una demanda para cumplir un contrato de un régimen declarado ilegítimo no se cumpliría en los tribunales estadounidenses. El Congreso de los EE. UU. debería comenzar a trabajar con el Departamento de Estado en una legislación que favorezca una declaración de sanciones contractuales preventivas si la comunidad internacional se une en torno al objetivo de deshacerse del régimen ilegítimo de Maduro.
Kellyanne Conway called him a “man of action” after a whirlwind first week in which President Trump signed 14 Executive Orders and presidential memoranda, covering most of his key campaign issue areas from health to immigration to trade. It should be noted that President Obama signed 13 such orders in his first week, including an order to close the Guantanamo Bay detention camp, which he was unable to achieve in eight years in office.
President Trump’s agenda will undoubtedly face policy hurdles and legal challenges (starting with Saturday’s late night stay of certain measures in his immigration order), but the breakneck pace at which he has wielded the pen signals his intention to carry through his most strident campaign promises.
In a series of blogs, CGD experts have been examining how some of these specific policy intentions could impact development progress. As you would expect from a group of economists, we believe in—and encourage—evidence-based policymaking, and here we look at what the existing evidence and research tell us about how likely these Executive Orders are to achieve the president’s stated goals.
On Friday night, President Trump signed an executive order temporarily banning refugees and citizens of seven majority Muslim nations from entering the United States. Our research shows this ban will result not only in serious harm to the world’s most vulnerable, but will also alienate allies the United States needs to fight violent extremism and protect American interests.
Some months after the attacks of September 11, 2001, the US government shut down all unofficial, unmanned border crossings with Mexico. In 2013, that crossing was reopened. The re-opening has been a win-win for people on both sides of the border. But with Trump’s executive order calling for construction of the border wall, much remains to be seen in the realm of US-Mexico cooperation.
The New York Timesreported last week that the Trump Administration is considering a new Executive Order that mandates cutting all funding to bodies that give full membership to the Palestinian Authority and fund abortion amongst other categories, but also suggests “at least a 40 percent overall decrease” in remaining US funding towards international organizations. The proposed cuts would do almost nothing to reduce the deficit while weakening US national security and international leadership.
On his first day in the office, President Trump signed an executive order reinstating a 30-year-old political hot potato, the “Mexico City Policy." Like many, I will point out that reinstating the global gag rule does not reduce abortion.
By Amanda Glassman, Mayra Buvinic, and Charles Kenny
The scale of the turnout at the Women’s Marches across the world recently, along with President Trump’s early reinstatement of a ban on US funding for organizations that offer family planning services in foreign countries, seem to suggest an administration already at odds with an entire gender. On this podcast, three CGD senior fellows weigh in on the evidence that engaging and empowering women—both at home and overseas—makes good sense, especially in an America-First strategy.
Boquillas del Carmen is a tiny village just over the Rio Grande from Big Bend National Park in Texas that experienced a tremendous decline when US authorities closed the border in 2002. For decades, the town’s economy depended on tourists crossing over to enjoy spectacular views of the Chisos Mountains while eating homemade enchiladas at the one or two restaurants in town. Many would also buy beautiful wire sculptures of scorpions, road runners, or other local handicrafts. You had to pay a couple of dollars to someone to row you across the river, known as the Rio Bravo in Mexico, because there is no bridge there. And if you didn’t want to walk, or just preferred the fun of it, you could pay someone else to take you up the hill to the village on a burro. My brother and I made that trip with our parents when we were small and on a spring break camping trip to Big Bend.
The Rio Grande River from Boquillas del Carmen, Mexico
Then, some months after the attacks of September 11, 2001, the US government shut down all unofficial, unmanned border crossings with Mexico, including the one at Boquillas. Suddenly there were no more tourists. And local residents could no longer cross into the United States to buy groceries and other supplies. The closest legal crossing after 2002 was at Ojinaga, some 200 miles of punishing, mostly dirt, roads away. The population of Boquillas shrank from around 300 to roughly 100 and the restaurants and bars closed. Many, like Lilia Falcon, who succeeded her father in running the family restaurant overlooking the river, left and came to the United States to find work.
Under pressure from locals on both sides of the border, as well as park officials who wanted to make crossing easier for scientists and the elite Mexican firefighting team stationed in Boquillas, US authorities reopened the crossing in 2013. The rowboat is back, as are the donkeys, and the tourists are coming back as well. My husband and I recently visited Boquillas and had lunch at the reopened Falcon’s restaurant. The January weather was spectacular, as were the views. And on our way back, we saw a man returning from the US side with piles of groceries that would have been far more difficult to get to Boquillas without the new crossing.
The re-opening has been a win-win for people on both sides of the border. A broader cooperation agreement on temporary labor movement could do even more to enhance prosperity on both sides of the border. The details are in this report written by Michael Clemens and based on the deliberations of a CGD working group chaired by former Mexican President Ernesto Zedillo and former US Commerce Secretary Carlos Gutierrez.
And, despite criticism and President Trump’s threat to withdraw from the North American Free Trade Agreement (NAFTA) if Mexico does not agree to unspecified changes, that agreement has also been a win-win for most people in both countries. According to one back of the envelop calculation, the United States is $127 billion richer and Mexico is $170 billion richer as a result of the additional trade spurred by NAFTA. The agreement is not without warts—improvements in working conditions in Mexico, including narrowing of the wage gap with the United States, have not been as broad or deep as expected. But a recent empirical study estimates NAFTA increased overall Mexican welfare by 1.3 percent and 0.08 percent for the United States. Some might take these statistics as evidence that it is a bad deal for the United States. But the disparity in benefits reflects key differences in the two economies. First, total merchandise trade in Mexico, most of it with the United States, adds up to nearly 70 percent of the economy there, versus just 20 percent in the United States. Second, average Mexican tariffs were twice as high as the already low average US tariffs prior to NAFTA.
Boquillas del Carmen, Mexico, with the Chisos Mountains of Big Bend National Park in the distance
Shortly after my return to Washington, President Trump issued an executive order calling for construction of the border wall that he had promised to build during the campaign. Imagine the view from Boquillas with a wall in the foreground. Imagine what that policy would do to the people of Boquillas, and to so many others throughout the hemisphere.
Originally published in October 2013 and updated January 2015
Food security has arisen again on the development agenda. High and volatile food prices took a toll in 2007–08, and in many low-income countries agricultural yields have risen little, if at all, in the last decade. Moreover, food production in these poor countries is especially vulnerable to climate change. Meeting this demand is a global challenge. The Food and Agriculture Organization of the United Nations (FAO) is expected to lead the way in meeting this challenge and, with the arrival in 2012 of the first new director-general in 18 years, it has an opening to restructure itself to do so.
With the Office of the US Trade Representative (USTR) reported to be considering a downgrade of India, trade ties between the two countries are even rockier than usual. Worse, the decision could be announced soon after a newly elected Indian government takes office in May, potentially starting a new relationship on a very sour note. Arvind Subramanian, a senior fellow at CGD and the Peterson Institute, recently warned about these risks in a piece in India’s Business Standard.
It sounded pretty serious to me, so I invited Arvind and CGD senior fellow Kimberly Elliott, author of Delivering on Doha: Farm Trade and the Poor to join me on the Wonkcast to help me better understand what troubles the US-India trade relationship.
At the core are disputes about intellectual property rights, in particular, pharmaceuticals.
“India-US economic relations have been deteriorating quite a bit in the last few years,” says Arvind. If the US does downgrade India (the confusing technical term is “Priority Foreign Country status”), India would be grouped along with the most egregious countries in terms of not doing enough to respect intellectual property rights, Arvind explains.
At stake for the US pharmaceutical industry (known to its critics as “Big Pharma”) is not just India’s own vast market, but potentially markets in other developing countries as well, Arvind says. “What India has been doing with intellectual property is potentially a model for other developing countries to emulate,” he says. “If that happens, there are consequences for Big Pharma all around the world.”
If India is violating intellectual property rights rules, why not bring a case at the World Trade Organization (WTO)? According to Arvind, “the US is not willing to do that, partly because it feels like it might lose that case and therefore its legitimacy would be undermined.”
Kim explains that at the heart of the dispute are differing interpretations of international trade rules about what constitutes a violation of intellectual property rights. US interests favor a stringent interpretation, while developing countries such as India argue that that the rules provide for a lot of flexibility. Rather than file a WTO case and risk losing, the US might prefer to bring the issue into the political arena by downgrading India’s status.
Kim agrees that such a risk exists, and she welcomes Arvind warning against it. But she doesn’t consider it likely. Priority Foreign Country designation is “pretty rarely used, and the USTR is pretty careful about when and how they use it,” she says.
Since this clash in interpretations over intellectual property rights stretches far beyond US-India ties, I ask Arvind and Kim to state their views on the dispute in a broader framework of global access to medicines.
“I think the core problem with trying to negotiate global rules,” Kim explained, “is that intellectual property is all about striking a balance—you want to incentivize innovation, on the one hand, but the societal benefits come from spreading those innovations as broadly as possible.” This balance should be stuck differently in rich and poor countries, she argues. “It costs a lot to develop a new and effective drug… developing countries with small, poor markets can’t afford those prices. You need a different set of rules for poor countries to ensure global access.”
I ask whether part of the argument is that small, poor markets are not going to provide much incentive for development of new medicines anyway, since investors will base their decisions on expected market in the large, rich markets.
Arvind agrees, saying that “the balance between what you should do to incentivize and what you should do to provide cheaper drugs is different when you’re small and when you’re big.”
But he emphasizes that markets change as countries grow—in the past 20 years Brazil, India, and China have all become very large markets. Their influence changes as they become richer and larger, in part because they become able to pay a fairer share of R&D.
When asked about what advice they would give the USTR about its upcoming decision on India’s status, both Kim and Arvind agreed that it was a tricky situation.
Kim suggests that the USTR should not downgrade India but instead bring parts of Indian law that seem to be in violation of international rules to the WTO.
Arvind says: “Don’t even get close to naming India as a Priority Foreign Country. Let a new government come into power, [and] start a new dialogue on broader trade issues.”
He emphasizes that “there is much more to the relationship than pharmaceuticals” and the US-India relationship should not be dragged down by intellectual property disputes.
Listen to the full Wonkcast for more on US-India trade ties and intellectual property rights rules.
The debate over genetically modified organisms (GMOs) has been raging for twenty years and there is still more heat than light around the topic. While some developing countries have embraced the technology, much of Africa has followed the European Union’s precautionary approach. While not a panacea, GMOs could be part of a new green revolution in Africa if governments address the policy and institutional weaknesses that prevented Africa from participating in the first one, and if GM technology continues to develop.
It is widely believed that oil prices impact food prices in developing countries. Yet evidence on this relationship is scarce. Using maize and petrol price data from east Africa we show that global oil prices do affect food prices, but primarily through transport costs, rather than through biofuel or production cost channels. For inland markets, world oil prices have larger effects on local maize prices than do world maize prices. Furthermore, oil price shocks transmit much more rapidly than maize price shocks, suggesting that policies to assist food insecure households during correlated commodity price spikes should consider transport cost effects.
How and by how much do global crude oil price shocks affect local food prices, particularly in countries with high levels of subsistence food production? Brian Dillon will present his paper “Global Oil Prices and Local Food Prices: Evidence from East Africa”, which tackles that important question, focusing on maize markets in the four major east African economies: Ethiopia, Kenya, Tanzania and Uganda.
The CGD Working Group on Global Trade Preference Reform
The CGD Working Group on Global Trade Preference Reform shows how changes to trade preference programs could greatly benefit those living in the poorest countires at very little cost to preference-giving countries.
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Our work on pull funding—market-like incentives for the delivery of products and services needed by poor people—paid off last month with an announcement at the G-20 Summit in Mexico that five countries and the Gates Foundation will provide $100 million for agricultural technology innovations to benefit farmers in Africa. CGD is now urging that the approach be applied to big technology challenges, such as a new form of fertilizer.
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