Wednesday, December 17, 2008
THE WORLD won't be giving itself a trade liberalization deal for Christmas. Talks aimed at salvaging the Doha round of negotiations have fallen through, with no agreement among the United States, Europe and the major emerging economies such as China, India and Brazil. To be sure, this was always a long shot. India and China had brought the Doha round to a screeching halt last summer by insisting on protecting their farmers through tariffs that the United States could not accept. And it was never terribly likely that the gap could have been bridged during the waning days of the Bush administration, much less when the global economy is gripped by uncertainty.
Even a successful Doha round would have yielded modest benefits to global trade. Still, its demise is regrettable both substantively and symbolically. Precisely because economies are in retreat around the world, trade is more important than ever as an engine of recovery and growth. This is no time to hand the forces of protectionism any sort of victory. The World Bank recently forecast that world trade, which grew 6.2 percent in 2008, will shrink by 2.1 percent in 2009 -- the first such contraction since 1982. Capital flows to developing countries could drop by half, the World Bank predicted. At the same time, the International Food Policy Research Institute has reported that the failure of Doha could cut world trade by $1 trillion, because it might prompt countries to abandon the voluntary tariff restraint they have exercised.
President-elect Barack Obama needs to reassure Americans and U.S. trading partners around the world that free trade will be part of his plan for U.S. economic recovery. If his campaign for the White House had a weakness, it was the mixed signals he sent in this regard. Mr. Obama frequently acknowledged the benefits of trade, but he just as frequently denounced specific agreements, including the North American Free Trade Agreement with Canada and Mexico, which he made an ill-advised pledge to renegotiate.
Mr. Obama's party is, of course, deeply divided between protectionist constituencies such as organized labor and pro-trade technocrats such as those who populate his economic team. Mr. Obama's apparent first choice for the key job of U.S. trade representative, Rep. Xavier Becerra (Calif.), embodies Democrats' ambivalence. He voted for NAFTA in 1993, then later repented; he opposed a similar deal for Central America and the Dominican Republic; he favored a pact with Peru and opposed one with Colombia. As it happens, Mr. Obama's record looks pretty much the same. (The vote on NAFTA came before he was elected to Congress.) The only person who can clear up the confusion over trade policy is the next president himself, and we hope he'll take the first opportunity to do just that.