World Trade Organization (WTO)

The World Trade Organization opened investigations on December 17, 2007 into possible U.S. violations on international trade rules through its subsidies to farmers. The investigation was prompted by the approval of the U.S. Senate of a $286 billion farm bill. Brazil and Canada deem U.S. subsidies to exceed permitted levels and distort trade in crops like corn, cotton, rice, soybean, and wheat. The U.S. trade attorney, Juan Millan, claims “the U.S. has designed its farm programs to ensure compliance with the existing negotiated limits on domestic support.” The dispute over farm subsidies may prove to be a milestone, as Brazil’s complaint includes payments for ethanol production, and the trade body has until now mostly distanced itself from energy issues. The panel is expected to issue a first ruling in 2008.

In an unprecedented ruling on December 12, 2007 the WTO granted the Caribbean nation of Antigua the right to violate copyright protection on films and music from the U.S. The award could be worth up to $21 million and is part of a dispute between the countries over online gambling. The WTO’s ruling states that the U.S. had wrongly blocked online gambling operators in Antigua from American markets, while it allowed online betting on horse races. Antigua and Barbuda has claimed damages of a much more significant magnitude, $3.44 billion a year, and while the ruling is somewhat of a setback, it is significant for the precedent it sets. Lawyers claim that carrying out the decision will be difficult, and the question still remains of how much the act is actually worth. The U.S. has fought Antigua’s claims persistently and after the ruling was announced the U.S. trade representative issued a warning to Antigua to avoid acts of piracy while talks proceed.

The WTO dispute settlement body, comprised of all the members of the organization adopted on January 15, 2008 the panel report on Norway’s complaint against the EU’s anti-dumping measures on salmon. The report states that the EU’s measure against Norwegian salmon is inconsistent with WTO rules on 22 points. The panel also found a number of errors in the EU’s calculations of costs for Norwegian companies, errors significant for determining whether dumping has taken place or not.

European Union (EU)

The 2nd EU-Africa summit was held in Lisbon on December 8-9, 2007. The summit was identified by Portugal, holding the European Council presidency in the second half of 2007, as a top priority in light of claims that Europe is losing its influence in Africa to China. The meeting was overshadowed by the controversy surrounding the attendance of the leader of Zimbabwe, Robert Mugabe, who is accused of severe human rights abuses in his country. German Chancellor Angela Merkel and other European leaders harshly criticized Mugabe, while British Prime Minister Gordon Brown did not attend the summit at all. The result of the summit was the adoption of a Joint EU-Africa Strategy and the first Action Plan forging a strategic partnership between the two continents.

Trade relations between Europe and Africa, however, remain strained. In December the preferential trade agreements that Europe had with African, Caribbean and Pacific countries, expired and the WTO found that those agreements violated world trade rules and ordered the EU to either extend them to all poor countries or withdraw them altogether. The bloc chose to sign Economic Partnership Agreements (EPAs) with individual African regions but was faced with formidable opposition. Under those agreements the EU’s import barriers to African goods will be lifted, but African countries in return would be expected to open up their markets to the EU, thus losing the advantage they have so far enjoyed. Representatives of most African countries have so far refused to sign them.

The EU is also coming under increasing pressure from the WTO and the U.S. regarding its policy towards genetically modified organisms (GMOs). The EU’s environmental commissioner, Stavros Dimas, made a proposal in November to ban the planting of a genetically modified corn strain, citing scientific research suggesting long-term risks in planting the so-called Bt corn. Over the past decade the EU has remained the last region largely free of GMOs. It has kept a moratorium on the issue while promising further scientific research. Proponents of GMOs, such as the U.S. also cite scientific research claiming such products do not harm the environment. When the full European Commission takes up the case in the next few months, the main issue will
be to find the right balance between science, politics, and trade.

African Union (AU)

A joint UN-African Union peacekeeping force took over peace efforts in Darfur on December 31, 2007, but only 9,000 of the planned force of 26,000 are in Darfur now. The peacekeepers have faced significant obstructionism from the Sudanese government, which threatens to doom the mission.

The African Union granted financial contributions to member states affected by internal displacement. The PRC Sub-Committee on Refugees, Returnees, and Internally Displaced Persons assessed the humanitarian situation of forced displacement by visiting camps and areas of return. Based on its evaluation the Sub-Committee made specific recommendations and offered financial support through UNHCR amounting to $600,000 to Cote d’Ivoire, Guinea, Liberia, and Sierra Leone.

World Bank Group (WB)

On December 14, 2007, the World Bank secured an unprecedented $25 billion to confer to the world’s poorest countries over the next three years. China, Egypt, and Latvia were among the 45 countries that contributed. The amount gathered represents 42% more than last year’s donations and is added to the $6.3 billion the Bank received as compensation for the loan repayments it lost as a result of debt relief. This injection of funds represents a triumph of multilateralism, but also a victory for the Bank’s new president Zoellick, who managed to reassure Europeans disillusioned by his predecessor’s lack of vision and direction. Germany contributed $2.2 billion, and the United Kingdom, the single biggest donor, pledged $4.3 billion, surpassing for the first time the U.S. Zoellick added to the fund another $3.5 billion from other parts of the Bank, choosing to spend it in the poorest countries of the world, instead of lending it to middle-income countries, or investing it in the private sector.

The World Bank issued on December 20, 2007 new figures of recalculated economic output for 146 nations in the world, including China. The calculations of purchasing power parity, which compare the relative buying power of people across different countries, put China’s output at about 40 percent less than previous estimates had suggested. These new figures strengthen China’s argument that its currency, the yuan, is not significantly undervalued and does not need to rise against Western currencies. The World Bank had previously calculated China’s output at $8.8 trillion; a figure which is now revised down to $5.3 trillion, as the World Bank calculated China’s purchasing power parity to be closer to the market exchange value.

International Monetary Fund (IMF)

The IMF issued a report on January 17, 2008 on Pakistan’s economy compiled jointly with the Fund’s staff and economic managers of the government. The report states that although the outlook for 2008 remains favorable, government policies may not succeed in achieving the inflation target or reduce the current account deficit. Capital inflows could cover the current account deficit but there exist risks that some of them could be delayed. In light of this, the report recommends stronger fiscal adjustment efforts, tighter monetary stance and greater exchange rate flexibility. The report does not take into account the events following the assassination of Benazir Bhutto on December 27, 2007.

The IMF also issued an economic outlook for Iraq, suggesting that prospects for the Iraqi economy look promising for the coming year, but growth depends on political stability. Iraqi oil production was forecast to climb by 200,000 barrels a day to 2.2 million barrels a day in 2008. The higher oil output could push growth to 7% in 2008 and 2009 from 1.3% in 2007. Higher oil prices have offset production shortfalls and boosted currency reserves. Last December, the IMF approved a 15-month $744 million loan agreement with Iraq to help preserve economic and financial stability, as well as to further investment and production in the oil sector.

United Nations Security Council

Democratic Republic of Congo (DRC): A UN-backed summit took place in Goma, the capital of North Kivu, and was aimed at bringing peace, security and development to the eastern region of the DRC. The delegates discussed the possibility of granting amnesty to certain belligerents, such as dissident General Laurent Nkunda. The UN refugee agency estimates that over the last year, as a result of conflict, military build-up, and lawlessness, more than 400,000 people have been displaced in North Kivu.

Sudan: On January 17, 2008 the Sudanese government released eight rebel detainees to the new United Nations-African Union hybrid peacekeeping force called UNAMID. The eight members of the Justice and Equality Movement were released in El Fasher in North Darfur, and the move is seen as evidence of a change of heart in the Government. After meeting with both the Government and rebel groups UN and AU envoys are hopeful that talks aimed at ending the conflict can resume.

Myanmar: The slow rate of change in Myanmar has prompted the Security Council to say that an early return of UN special envoy Ibrahim Gambari could further progress towards democratization and national reconciliation. Mr. Gambari has a standing invitation to return and requested to go in January. The Government, however, has expressed a preference that his visit be postponed until mid-April.