Waking Up to Trade
AFTER MONTHS of neglecting global trade liberalization, the Bush administration is returning to the fray. On Monday it unveiled a proposal in the international trade negotiations known as the Doha round to cut farm protectionism in exchange for reciprocal cuts in other countries. U.S. export subsidies, already minimal, would be eliminated; subsidies to farmers would come down a bit; and some tariffs would be cut by 90 percent. These reforms would make excellent sense even in the absence of trade negotiations. But by proposing them in the context of the lagging Doha talks, the administration hopes to revive that process and secure a double gain.
Whether it will do that is another question. Japan's agriculture minister, speaking for a country that subsidizes its farmers three times as lavishly as the United States does, complained that the U.S. proposal would not cut its farm payments enough. The Europeans and the leading developing countries have been more positive, but they have failed to offer concessions to match the American proposals.
The worry is that apparently modest dilution of the U.S. position can have the effect of gutting it. For example, the United States proposes to lower the World Trade Organization cap on production-linked subsidies for American farmers by 60 percent, an apparently bold measure. But the cap is so high that the United States could accept a cut of about 25 percent without reducing its actual payments at all. And a complicated loophole allows it to accept a further cut of about 25 percent without reducing the real level of protectionism. So unless the proposed cut is more than 50 percent, it may not be worth having.
The same is true about the U.S. proposal on tariffs. The headline cut of 90 percent for all developed countries sounds impressive, but its real effect depends on the size of the loophole allowed for each country's "sensitive products." The Bush administration, to its credit, has proposed that only 1 percent of products can be classified as sensitive. Even a modest change to that position would undermine its value. Equally, tariff cuts of less than 70 percent are unlikely to be meaningful, because tariffs are already substantially below the legal caps that the deal would be lowering.
If the Bush administration can secure a deal with its international partners, it will still have to sell it to Congress. Last week chairmen of the Senate and House agriculture committees wrote to U.S. Trade Representative Rob Portman, warning him not to adopt positions that preempt Congress's authority to write the next farm bill. This is a troubling demand: The whole point of U.S. commitments to trading partners is that they constrain policy at home. Saxby Chambliss (R-Ga.), the Senate Agriculture Committee chairman, has also tried to slip a four-year extension of the existing farm program into a pending budget bill, a frontal attack on the administration's negotiating position.
The administration has a record of caving in to Congress, but it must not do so this time. The farm program epitomizes the sort of wasteful spending that must be cut if the United States is to solidify its finances ahead of the retirement of the baby boomers. It also epitomizes the injustice in the international trading system. From a domestic perspective, there's no sense in a program that channels 70 percent of its resources to the richest 10 percent of farmers. From an international perspective, it's unjust that the rich world supports its farmers to the tune of $350 billion annually, driving down prices for producers in the poor world. Surely the administration can win an argument against a policy that harms the world's poorest while ripping off U.S. taxpayers.