Resuscitating Trade

Friday, July 7, 2006

THE BUSH administration faces a dilemma in the wake of last weekend's breakdown of world trade talks. It can allow the hope of freer trade to die, comforting itself that this failure is due mainly to the intransigence of the European farm lobby and to grandstanding by developing countries, foremost among them India. Alternatively, the administration can make one last effort to resuscitate the talks by making a more generous offer to cut U.S. farm subsidies. Tempting though it is to denounce the hypocrisy of the Europeans and Indians, the Bush team should overlook their infuriating behavior and offer further concessions.

The current round of trade talks was launched in 2001, mainly thanks to U.S. leadership. It foundered at first because U.S.-backed intellectual property rules were impeding poor countries' access to essential medicines, but the Bush team broke with the pharmaceutical lobby and conceded enough to defuse this argument. Last year the administration followed up with a reasonable effort to push negotiations forward by offering to reform domestic agricultural subsidies that unfairly damage farm exports from poor countries. The response from the European Union and developing countries was underwhelming.

Despite this record, the United States risks being blamed if trade talks fail -- as now seems likely. Even though the U.S. offer to cut farm subsidies was more substantive than the reciprocal European Union offer, the U.S. position is not above criticism. It would involve reforming subsidies so that they damage trade less, but it would not reduce their quantity, and U.S. negotiators have yet to accept a minimalist proposal from Pascal Lamy, the head of the World Trade Organization, that the United States cap its farm subsidies at less than $20 billion annually, roughly their existing level. Meanwhile U.S. negotiators also seek to shelter domestic textile companies from competition from the poorest countries, notably Bangladesh and Cambodia.

Administration officials may argue, rightly, that other countries take even less defensible positions. But their arguments are more likely to find an audience if the U.S. position is beyond reproach. And besides, the Bush administration should judge itself not by the standard of other countries' behavior but rather by its own principles. President Bush and his officials have repeatedly proclaimed their dislike for the country's scandalously wasteful farm program and their belief that the United States has benefited from trade. They are correct on both counts, so they shouldn't hesitate to propose more serious cuts in agricultural subsidies if that's what it takes to get trade liberalization.

Moreover, the Bush team needs to realize this soon. The president's trade promotion authority expires one year from now, and Congress is unlikely to renew it. Because it will take months to translate a political bargain into a detailed agreement that can be presented to Congress, this month's Group of Eight summit may be one of the last opportunities to breathe life into the negotiations.


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