Wednesday, March 22, 2006

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The U.S. hedges its bets on the Doha round

Until 2006, the Bush administration's policy of "competitive liberalization" in trade had been pretty much symbolic. FTA's with Bahrain, Morocco, or even the CAFTA countries were economically insignificant. Neither the EU nor India was going to feel compelled to move on Doha because of CAFTA.

This year, however, there have been annoucements to negotiate FTAs with Malaysia and South Korea. Competitive liberalization has a bit more teeth to it.

Alan Beattie points this out in the Financial Times:

It’s always wise to have a Plan B. As the US urges progress in the “Doha round” of trade talks, it is also chasing bilateral trade deals across east Asia. These proposed pacts, which include South Korea, Malaysia and Thailand, will act as insurance for a disappointing round. They also put down a marker for future US influence in the region.

The US has for several years pursued a policy of “competitive liberalisation”, pursuing both multilateral and bilateral liberalisation. This irks many trade experts who say bilateral deals do more to divert and complicate trade than advance it.

But the US strategy is clear. William Rhodes, senior vice-chairman of Citigroup and chairman of the US-Korea business council, says: “Because the Doha round has been moving so slowly...there will be more of these bilateral FTAs like that being negotiated between the US and Korea.”

The bilateral talks have a sense of urgency. The US’s “trade promotion authority” – the White House’s right to submit entire trade agreements to Congress for a Yes-No vote – expires in the middle of 2007.

While the expiration of this authority sets a hard deadline for Doha, it will also close the window for the US to sign bilaterals. Karan Bhatia, deputy US trade representative with responsibility for Asia, says: “TPA is concentrating our focus on making sure we lock down agreements that we believe can and should be achieved before that deadline. We are pushing forward aggressively with Korea and Malaysia to try to close those before the time expires.”

The $64 billion dollar question is whether these propoed FTAs will convince the EU to relent on ag subsidies and India and Brazil to relent on non-agricultural market access.

At a minimum, the European Commission is making noises about more FTAs in Asia.

Developing.... at least until TPA expires.

posted by Dan on 03.22.06 at 12:05 AM


Trade rounds seem like the politics of constant crisis. How many rounds have been concluded since the formation of GATT? A few years delay seems like the norm, not the exception.

While signing a FTA with S. Korea has a larger impact on trade than CAFTA, for it to pressure Europe, India or Brazil it needs to either be trade distorting in a way that seriously harms the politicians in these countries (could any plausible trade diversion to S. Korea be politically costly enough to cut Ag subsidies in Europe) or it has to change the perception of the U.S. bargaining positon (India, Brazil and Europe have to believe that this bilateral agreements are a real substitute to the WTO).

I would put Dan's $68 billion on these bilateral deals having very little pressure on these countries. (Is blogging this profitable or does Fletcher pay baseball size contracts?)

But, it could be an effective agenda setting mechanism for the Doha round. For exampe, if most countries have agreed to investment arbitration in their bilateral treaties with the US, arbitration would be an obvious issue to include in a TRIMS type agreement.

posted by: Nate on 03.22.06 at 12:05 AM [permalink]

Aren't these bilateral FTAs filled with special intellectual property clauses to protect the entertainment industry and the pharmaceutical industry? I kinda remember this was the case with Australia.

My guess is that the Bushies think they can get more out of multiple bilateral FTAs than out of a single multilateral agreement in the Doha round.

posted by: jasper emmering on 03.22.06 at 12:05 AM [permalink]

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