Trade Deal Looks More Like a Distant Dream
Tuesday, July 4, 2006
GENEVA -- Globalization moves in fits and starts, sometimes three steps forward, sometimes two steps back, sometimes at a gallop, sometimes at a crawl. It took a nasty tumble last weekend, when a conference intended to advance a worldwide trade agreement ended in failure.
The gathering was supposed to produce a detailed blueprint that would lead to the completion late this year of the Doha round of talks, which are aimed at lowering barriers to commerce among the 149 member nations of the World Trade Organization. Instead, the breakdown laid bare the strong resistance among many, and perhaps most, of the WTO's members to the sort of market-opening measures that the Bush administration and its free-trade allies envisioned when the round was launched in 2001.
Most striking was the defiance expressed by trade ministers from developing countries at a news conference after the meeting had ended with virtually no movement in long-held negotiating positions.
One after another, Latin Americans, Africans and Asians on the podium pointed out that the talks had been proclaimed a "development round," with the interests of nations like theirs supposedly paramount. They asserted that the biggest concessions must come from rich countries and that they had no intention of exposing vulnerable groups, such as subsistence farmers, to the chill winds of foreign competition. Accordingly, they said, they must retain extensive rights to exempt "special" and "sensitive" products from tariff cuts.
"We are the demandeurs of the round together with all other developing countries," said Alfredo Chiaradia, Argentina's trade minister. Seconding that view was Dipak Patel, Zambia's trade minister, who said countries such as his had learned from bitter experience to question the wisdom of free-market prescriptions from the World Bank and other lending institutions. "We're not here . . . to accept more market access," he said. "We've had enough of that."
And Kamal Nath, India's commerce and industry minister, voiced incredulity that he was being asked for bigger percentage cuts in his country's tariffs than rich countries were willing to make in their own. "If they will cut 70 [percent], I will cut 60; if they cut 60, I cut 50," he said. "But they say, 'We'll cut 20, and you cut 70' -- well, that's not what this round is about."
Those countries' chief antagonist was the United States, which was represented by Susan C. Schwab, recently appointed U.S. trade representative. Schwab repeatedly maintained that the Doha round, named for the Qatari capital where the WTO started it, must achieve an "ambitious outcome." That would mean tariff cuts that are deep enough, and with few enough exceptions for special products, to generate significant new trade around the world, including in big developing markets such as India, Brazil, Indonesia and South Africa.
She did not dispute that the United States had emerged as the outlier in the talks, in opposition to most of the WTO membership. "Isn't that what leadership is about?" she said in an interview. She said she was "dismayed with the number of countries that just seem willing to settle for some least-common-denominator solution."
The United States is especially adamant that tariffs on agricultural goods must come down sharply; on that issue, its strongest adversaries include rich nations such as the European Union and Japan. The Bush administration wants to give American farmers new opportunities for shipping their products abroad -- a political necessity, in the administration's view, to offset the losses some farmers would suffer from cuts in government subsidy payments that would be part of a final Doha-round deal. The subsidy programs of rich countries are widely blamed for leading to overproduction of crops that depresses prices on world markets, hurting farmers in the developing world.
U.S. officials argue that tariff cuts are economically beneficial for the developing world in general, especially since more than two-thirds of the tariffs levied by developing countries are imposed on products from other developing countries. And they make no apologies for seeking deeper cuts from countries such as India that have generally higher tariffs to begin with; while the average legal ceiling on U.S. tariffs is 3.6 percent, the same figure for developing countries is about 43 percent, WTO data show.
Undercutting the U.S. free-trade position, however, is the accusation of hypocrisy. The administration's critics note that its negotiators are seeking to shelter U.S. textile and apparel companies from the impact of a proposal that would eliminate all duties and quota limitations on products made in several dozen very poor nations, most of which are in sub-Saharan Africa.
Although by some estimates the "duty-free, quota-free" proposal could give a major boost to the anti-poverty impact of the Doha round, U.S. textile makers fear that they would be hurt by a flood of imports from some of the poor countries, especially Bangladesh and Cambodia. So the administration is insisting on the right to exempt a small number of products from the plan -- exactly the sort of protection for powerful interests that U.S. officials decry in other countries' policies.
If the standoff in the current trade talks leads to a collapse of the round, there is no danger that global commerce will grind to a halt or that the trading system will plunge into chaos. Existing WTO rules governing trade among its members will continue to apply.
But participants at this weekend's meetings acknowledged that a failed round could lead to a fracturing of the multilateral trading system as big powers strike more two-way and regional trade partnerships. U.S. officials have never been shy about saying that while they prefer big worldwide deals, they will pursue smaller pacts with willing partners as an alternative. Schwab took the same stance.
"At this point, we're fully committed to the Doha round," she said. But she added, "it might be noticed here" that a U.S. free-trade agreement with Oman passed the Senate a few days ago, and that the next round of talks on a similar accord with South Korea is imminent.
The prospect that smaller deals will eventually dominate global trade, and undermine the WTO's clout as the system's arbiter, puts developing countries in a dilemma because they are eager to keep the leverage that WTO rules give them.
"We have the biggest stake in the multilateral system," said Celso Amorim, Brazil's foreign minister, at the developing countries' news conference. He noted that WTO rules enabled Brazil to win a judgment declaring U.S. cotton subsidies to be illegal.
The last time globalization stumbled badly, at a rancorous WTO meeting in Cancun, Mexico, in 2003, the member nations put the Doha round back on track the following year in part because of their concern for preserving the multilateral system. Could something like that happen again?
"There is something to be said for everyone staring over the precipice," Schwab said.