How Will The Poor Trade Up?
As members of Congress fan out across the country for the August recess, most of them in full campaign mode, there is one issue you can be sure won't merit a mention to their constituents: the collapse of the Doha trade round last month. But while Doha's demise will have no electoral consequences in November, it's an unqualified disaster that casts a shadow over the economic future for millions of people around the world.
The Doha round was launched immediately after Sept. 11, at a time when people still felt the urgency of strengthening economic ties to developing nations. The reasoning: Destitute autarkies such as Afghanistan were exporting little more than conflict. Encouraging wealth and interdependence for these countries just might protect rich countries from future attacks.
But while these security concerns were legitimate, Doha's greatest significance was as a tool against global poverty, pure and simple. It was driven by the idea that trade, in conjunction with responsible foreign aid, could lead to prosperity in the developing world. This is an idea that must not die with Doha. If it does, we will end up placing unrealistic expectations on America's foreign aid budget, even as we give poor countries an excuse to avoid economic openness.
Why is openness important? According to World Bank economists David Dollar and Aart Kraay, developing countries that have opened themselves the most to trade have outperformed all other economies. In the 1990s alone -- and this excludes the East Asian tigers -- the gross domestic product of poor but open countries rose twice as fast as that of rich nations. Thanks to the economic growth brought on by trade, millions were spared the misery of abject poverty.
With Doha negotiations in the deep freeze, the United States needs to embrace an ambitious bilateral trade agenda. Of course, bilateral agreements are no substitute for multilateral ones; multilateral agreements propel the world toward economic openness faster. But without a multilateral round on the horizon, the United States cannot afford to remain idle.
Negotiations with South Korea are a good starting point. No other country the United States is negotiating with has an economy the size of South Korea's. Sealing a deal with that country could revive prospects for broader trade talks encompassing a number of developing nations. We would further increase the momentum for a new round by targeting even larger economies, Japan's foremost among them. A U.S.-Japan agreement would have the added virtue of deepening our most important Asian alliance in the face of threats by North Korea.
America's own neighborhood offers more reason for optimism. Along the Pacific coast, from Mexico into Central America and all the way down to Chile, every country except Ecuador is either negotiating a free-trade agreement with the United States or already has one. On the Atlantic, Doha's failure gives us the green light to initiate talks with Brazil, the largest economy in South America.
The future of free trade hinges on writing these agreements one by one. That's why Congress should arm the U.S. trade representative with more staff. The Senate should also sign off on the House-passed Trade Capacity Enhancement Fund, a $522 million initiative to help developing countries prepare and implement free-trade agreements with the United States.
And even as we go about tackling bilateral deals, we mustn't forget the parallel track of granting trade preferences. Preferences are designed to open America to more exports from developing countries, and they are generally less contentious than full-blown trade agreements. They are one of the few components of Doha that everyone agrees should be made into law. With trade preference bills in the House and Senate enjoying bipartisan support, it would be senseless not to pass them quickly.
In the end, however, no trade agenda will succeed if we don't address agricultural subsidies in the United States. We cannot afford to let Doha's failure become an excuse to reauthorize subsidy programs in next year's farm bill. Subsidies and quotas shift more costs to American consumers and put us at a disadvantage when negotiating trade deals.
The worst thing about farm subsidies is not that they're wasteful -- though they are -- it's that they devastate the export sectors, the engines of growth, in developing nations. It makes zero sense to wipe out the benefits of U.S. foreign assistance in order to keep paying our farmers to be inefficient. Overcoming the resistance of the agricultural lobby, which has received these subsidies for decades, demands a concerted effort and will require leadership from President Bush as well as U.S. businesses. We will also need to hear from advocates of the world's poor.
The trade landscape before us is terra incognita. Not since the General Agreement on Tariffs and Trade was established in 1947 has a multilateral round such as Doha collapsed. If the United States does not advance an ambitious bilateral trade agenda, there's little hope that trade will spread to less developed countries. And no amount of foreign aid will lift these countries out of poverty if they have no prospect of joining the global economy.
The writer, a Republican representative from Arizona, is chairman of the House Appropriations subcommittee on foreign operations.