The Doha Round of global trade talks collapsed amid bitter recriminations last week. Officially, the talks are in “indefinite suspension,” but they are as good as dead if governments do not make fundamental changes in their thinking. That means facing down powerful domestic agricultural lobbies and taking the long view on the benefits of continuing liberalization. A more immediate concern is that bureaucratic energy will shift to other trade negotiations, a far less satisfactory alternative.
As feared, a last-ditch attempt by key countries — Japan, Australia, Brazil, the European Union, India and the United States — failed to revive the Doha Round. As expected, agriculture was the culprit. The U.S. continued to demand greater cuts in tariffs on farm imports and more access to foreign markets. Just about everyone — Australia was the lone exception — balked, insisting on more cuts in subsidies to U.S. farmers, a step Washington was not prepared to take without guarantees from its trade partners.
Attempts to reach agreement were also complicated by developed nations’ insistence on increased access for their products in developing nation markets. The stalemate forced Mr. Pascal Lamy, the director general of the World Trade Organization, to formally suspend the talks, because there was no political will to make a deal.
Trade negotiators returned home, shrilly denouncing other governments while boasting that they protected the interest of their country. In Japan, farmers make up a minuscule portion of the economy — and an even smaller percentage of the population — but the government’s determination to shield them from foreign competition — and win their support at election time — has come at the expense of more competitive sectors of the economy.
For example, while a shrinking number of rice farmers are cosseted, manufacturers lose market access overseas. The situation is similar, although not quite as pronounced, in the EU and the U.S. It is estimated that farmers worldwide collect about $1 billion a day from their governments. Not only does that insulate them from competition; it also results in excess production that lowers world prices, doing even more harm to farmers that do not receive such largess.
A trade deal was projected to yield some $300 billion in gains annually. Consumers worldwide will now pay more for essential products, taxpayers will shoulder the burden of subsidies to their own farmers, and many of the world’s poorest citizens will be denied the opportunity to better their lives.
Despair is pushing growing numbers of youths toward extremism and violence. At least 25,000 farmers in India have committed suicide over the last decade. Our leaders repeat that prosperity is the foundation of peace, stability and security, yet they refuse to back those words with action.
There is a chance the talks could resume, but not until late in the fall. Japan will be consumed with the transition of its government as Prime Minister Junichiro Koizumi makes way for his successor. And U.S. congressional elections will prevent Washington from making any politically difficult moves until after November. The last round has made clear that no government will move unilaterally.
In the meantime, governments, spurred on by the Doha stalemate, are focusing on bilateral and regional trade negotiations. It is troubling that the number of preferential trade deals has doubled in the last decade — a period that overlaps with that of the Doha Round, which commenced in 2001. Nearly half of world trade now occurs under their ambit.
Japan, China and South Korea are pursuing deals with the 10-member Association of Southeast Asian Nations, and many of those same governments are working on bilateral accords. Japan has reached agreements with Mexico, Singapore and Malaysia and is negotiating with South Korea, Indonesia, Chile and the Philippines, to name but a few.
Each of those talks consumes the time and attention of trade negotiators, thus diminishing the likelihood that they will be available if the Doha Round resumes. Moreover, the deals create a “spaghetti bowl” of trade rules that confounds the goal of simplifying and expediting trade. Often they reflect particular political circumstances and create stumbling blocks, rather than building blocks, to freer trade.
Worse, the shift in the balance of power during bilateral negotiations tends to leave poorer states even more disadvantaged. Deals are less likely to be optimal for them. Negotiating requires diplomatic resources that they do not have. For them, it is better to strike one multilateral accord than to have to negotiate many bilateral ones. There is a simple solution to this mess: Get the Doha Round back on track.
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