Tuesday, December 12, 2006

previous entry | main | next entry | TrackBack (0)

Susan Schwab begins to answer my question

When we last left our gripping narrative about the Doha round, I asked a question without an answer:

ME: There seems to be a catch-22 on reviving Doha. Other countries won't negotiate seriously with the United States unless they believe that we can get TPA renewed. At the same time, the only way that TPA is likely to be renewed is if Congressmen seen the outline of a Doha deal. How does one escape this conundrum?

[USTR SUSAN] SCHWAB: Good question. [Long pause.]

In this Wall Street Journal story by Greg Hitt, I see that Schwab has a longer answer (hat tip: Glenn Reynolds):
The Doha round of global trade talks stalled after hitting numerous roadblocks over the summer. Now the White House is working to revive negotiations, even as a new barrier looms: a Congress much more skeptical of free trade.

Administration officials have stepped up the campaign to win support for its plan. Trade Representative Susan Schwab, who spent years as an aide on Capitol Hill, is wooing the incoming trade czars of the new Democratic Congress. Speaking recently to the U.S. Chamber of Commerce, she urged cooperation on trade and Doha. "We cannot let a strong, potential Doha deal slip through our fingers," she said.

Treasury Secretary Henry Paulson is rallying support for Doha around the globe. In London, he said Doha remains the administration's "top trade priority," even with the change in control of Congress next year. In Geneva, U.S. negotiators, after months on the sidelines, are taking part in fresh talks with trading partners on thorny issues, such as cutting farm supports.

The administration is banking that all the political maneuvering will help inject some momentum back into the talks by the spring. The goal isn't necessarily to finish a deal then, but to show enough progress to persuade skeptics in Congress to extend the president's trade-negotiating authority beyond June, when it is set to expire. That authority lets the president negotiate deals with other countries, and put them to Congress for an up-or-down vote -- without amendment. As a practical matter, nations generally don't like to sign deals that could be changed in Congress, so extending that authority would buy U.S. negotiators some extra time to seal a Doha deal.

Whether the Bush administration is able to restart the Doha talks could serve as a measure of the muscle behind critics of free trade in the U.S. And if the impasse on Doha becomes permanent, it could herald the closing of the era of global economic integration that began after World War II.

"A failure of Doha really would signal a crisis of confidence in the multilateral trading system," said C. Fred Bergsten, director of the Peter G. Peterson Institute for International Economics, a free-market think tank in Washington. "The WTO would continue to exist. But there would be a big loss of its standing and its credibility." (emphasis added)

This isn't the worst idea in the world -- though I expect David Sirota to be popping a blood vessel sometime in the next week.

With regard to Bergsten's prediction, I actually think the crisis of confidence is already upon us, if this Economist Intelligence Unit survey is any indication:

[T]he Economist Intelligence Unit conducted a wide-ranging survey of 286 executives spread across the world’s main trading regions. The key findings from the research are highlighted below.

Protectionism is thought to be on the rise, particularly in the developed world. Just over 50% of survey respondents thought that protectionism was rising either significantly or moderately in developed markets, with only 16% believing that it was falling (30% regarded the level of protectionism in those markets as stable). A smaller proportion, although still narrowly the majority, of respondents (39%) thought that protectionism was increasing in emerging markets, whereas one-third reckoned it was declining. In practice, while protectionism is difficult to track, its impact on growth is significant.

The impact on business can be severe... Economist Intelligence Unit forecasts show that a relatively modest backlash against globalisation could shave nearly a full percentage point off world GDP growth over the period 2011-2020. One in five executives to express a view (38 companies in total) say their company has had an investment deal fail in a certain market owing to local trade and investment rules over the past three years. More happily, 25% of the overall sample have entered a new market in that same period because of changes in the rules.

posted by Dan on 12.12.06 at 02:59 PM


The American middle class sent a message on economics to Washington, but apparently the Bush administration and much of Congress did not hear it.

Trade is supposed to benefit everyone, but that has not been the case (yeah, we can all buy cheap underwear at Wal-Mart, which of course makes up for not having a pension plan).

The economic pie may be getting bigger but fewer people are getting fat on it.

posted by: save_the_rustbelt on 12.12.06 at 02:59 PM [permalink]

Would this deal address currency pegs and exchange controls or does everyone pretend these have nothing to do with trade?

posted by: Lord on 12.12.06 at 02:59 PM [permalink]

I agree with Save.

I don't quite think the sky is falling the way Dan does. A failed Doha round may be a good signal to the free trade crusaders that their agenda has externalities which are not particularly pleasant for ordinary people (who don't have tenure). The free trade crusaders have really caused this mess by not taking into account the inevitable social and economic disruptions caused by trade liberalization and globalization. A failed trade round will hopefully wake people up the way the failed EU constitution did a couple years ago.

The free trade crowd needs to make a trade off if they want to see their agenda move forward. They will have to find a way to mitigate these disruptions through improvements in education and skills training programs so that working people in developed countries can remain competitive. That is gonna cost money and the costs should be born by those who benefit the most from free trade: shareholders.

I am a supporter of free trade provided it is balanced with efforts to buffer ordinary people from the disruption liberalization inevitably causes.

posted by: SteveinVT on 12.12.06 at 02:59 PM [permalink]

SteveinVT is obviously a gentlemen of great intellect.

On somewhat related news, SecTreas Paulson is in China with a delegation trying to look tough, although I think it is all a show to outflank Schumer-Graham and to make the American people think George Bush really gives a damn about those of us who are not wealthy.

By the way lots of cheap real estate in the Rustbelt, after 5 years of foreclosures the banks can't move the empty properties. I can get you a nice house in Toledo or Flint real cheap.

posted by: save_the_rustbelt on 12.12.06 at 02:59 PM [permalink]

Post a Comment:


Email Address:



Remember your info?