Monday, July 24, 2006

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Doha, R.I.P.????

World trade talks have collapsed. The Financial Times' Alan Beattie and Frances Williams explain:

A last-ditch meeting in Geneva of the six core “Doha round” negotiators – India, Brazil, the US, EU Japan and Australia – broke up amid recriminations over irreconcilable differences about farm liberalisation. The US continued to argue for big cuts in farm import tariffs to open up markets for its farmers, a demand fiercely rejected by the European Union, Japan and India, who said America had first to go further in offering to cut agricultural subsidies.

The Doha round, which began in November 2001, will now enter indefinite suspension unless and until a consensus within the World Trade Organisation’s 149 member countries can be found to revive it.

The Economist explains why this is a tragedy (excerpted by Megan McArdle):
Last year, the World Bank estimated that global gains from trade liberalisation would equal roughly $287 billion, of which $86 billion would accrue to developing nations, lifting at least 66m people out of poverty. Activist groups including Greenpeace and Oxfam were quick to condemn both Washington and Brussels for intransigence over agricultural subsidies, saying that rich-world self interest is leaving the poor to suffer.

Without further progress at the WTO, those keen on liberalising trade will focus on regional and bilateral agreements. These are already proliferating... just about every one of the WTO's 149 members is a party to a regional trade agreement of some sort.

But these smaller agreements are a poor substitute for global progress. While they improve flows within the deal, they distort markets by favouring certain countries over others, even if their goods offer less economic value. The proliferation of special regulations, which companies must spend time and money to understand, does nothing to free up trade generally.

[Why the question marks in the title?--ed.] Because trade rounds have been declared dead before and were revived. Doha looked dead after Cancun and was brought back to life by Bob Zoellick. On the other hand, the hard deadline here is the expiration of President Bush's Trade Promotion Authority in June of next year. Beattie and Williams are sober about the chances for a resurrection of Doha:
Historical experience provides a little hope but not firm ground for optimism. The previous “Uruguay round” of trade talks was in essence suspended in 1990 after similar disagreements between countries. Arthur Dunkel, then director-general of the WTO’s predecessor organisation, continued to take soundings among member countries and produced his own “Dunkel draft” suggestion for a final deal a year later, leading eventually to a final agreement in 1994.

But the current situation differs from 1990 in two respects: Pascal Lamy, the WTO’s director, has already been deeply involved in trying to get countries to agree, and because the White House is likely to lose the “fast-track authority” granted by Congress when it comes up for renewal next year.

WTO members can continue negotiating, but if the world’s largest economy cannot pass trade deals through its legislature, it seems unlikely the talks will have any urgency.

Developing.... I hope.

UPDATE: Simon Lester has a good roundup of who is blaming who for the collapse of the talks.

posted by Dan on 07.24.06 at 05:16 PM


I'd like to think this is developing as well, but it really doesn't look that way.

The American side, with farm bill reauthorization coming up next year in Congress, could have been more forthcoming with respect to farm subsidies. Actual farm program expenditures last year were several billion less than called for by the American proposal for Doha (the administration argument being that in a bad year more would need to be spent).

But this assumes that American unwillingness to stake out a position for greater cuts in US farm subsidies was the real reason Europe, Japan and India resisted reducing their import tariffs. It wasn't. Most likely the administration was unwilling to take the domestic political heat for proposing lower farm program spending without any hope that it would lead to an agreement; in fact, import tariffs are even more politically sensitive to our negotiating partners than farm subsidies are in Congress.

The door is now open for a resort to increased protectionism in many countries whenever their governments perceive public nervousness about economic trends. No longer will they feel constrained by fear of jeopardizing a global round of trade talks. For the United States, the Doha round held out the promise of political cover for cuts in farm subsidies amply justified on their merits anyway, and now that is gone too.

posted by: Zathras on 07.24.06 at 05:16 PM [permalink]

I think that, as long as a sizable share of votes can be gained through domestic agriculture support, approaching trade liberalization through the eradication of farm subsidies will be a very, very slow process. I'm pessimistic about Doha, but it will be interesting to see what happens in the future. Hopefully sometime soon another round will be more successful.

posted by: Michael Plouffe on 07.24.06 at 05:16 PM [permalink]

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