The failure of the world's most powerful governments to launch a new round of global trade talks last week is not likely to slow the pace of globalization, but it could usher in a period of trade friction and cause the already burgeoning U.S. trade deficit to climb even higher.
That's the consensus of trade experts, economists and business leaders polled since the meeting of the World Trade Organization collapsed Friday night. They predicted that any further liberalization of the world's trading rules would have to wait at least two years, until after a new U.S. president and Congress have been elected and a new governance structure has been put in place at the WTO headquarters in Geneva.
"The grim message of Seattle is that not only won't we have a new round now, but we won't have one for some time," said Peter Kenan, a widely respected international economist at Princeton University. "And in the meantime, there will be a whole new set of trade issues that will come along that will fester."
"Things are going to just limp along until there can be a wholesale rethinking of the trade strategy," said Julius Katz, deputy trade negotiator in the Bush administration and an international consultant in Washington.
History records that there have been no major advances in trade during this century without the leadership of the United States. That role was first put in doubt in 1997 with Congress's defeat of "fast track" legislation. And those doubts were only confirmed last week by the stubborn negotiating stance taken by the European Union and the open revolt staged by developing countries.
"I think there has been serious damage done to the ability of the U.S. to shape the world trade agenda," said Daniel K. Tarullo, a former Clinton economic adviser now teaching at Georgetown University Law Center. "We can still exercise a veto, effectively, but it's clear we cannot, on our own, move the ball forward."
At the Economic Strategy Institute, Managing Director Lawrence Chimerine worries that, without some mechanism to open up markets for U.S. products and services, particularly in Asia, there's no prospect of controlling a U.S. trade deficit that is now approaching $300 billion a year. In his view, that is an economic and political time bomb just waiting to explode at the first sign of an economic downturn in the United States.
Flush from their self-proclaimed "victory" in Seattle, the left-leaning coalition of unionists, environmentalists and human rights activists plans to redouble its efforts to have Congress block the recently negotiated U.S.-China trade deal that would open the door for China's admission to the WTO. Also in jeopardy: trade treaties lowering tariffs of goods from the Caribbean and Africa.
"The antis smell blood," said C. Fred Bergsten, director of the Institute for International Economics.
The business community is already scrambling to battle stations. "On China, we're taking a take-no-prisoners attitude," vowed Thomas Donahue, president of the U.S. Chamber of Commerce. "We've told our people that we have to get out of bed and go to work."
The political fallout will not be confined to the United States. Jeffrey E. Garten, dean of Yale University's School of Management, predicted that foes of globalization who used the Internet so effectively in Seattle to marshal their forces will now train their sights on other targets, such as the International Monetary Fund, the World Bank, and separate negotiations now underway on environmental and health issues.
"There's been a real democratization of the debate over trade and globalization," Garten said. "What Seattle showed was that there is a lot more angst beneath the surface."
In some respect, it may make sense that the world might want to take a few years to absorb all the economic, social and political consequences of a decade in which the volume of global trade and cross-border investment has skyrocketed. In the optimistic view, history may record this as the pause that refreshed the movement toward further trade liberalization.
Nor should it be surprising that the pace of trade negotiations has slowed. After all, the early rounds were relatively simple affairs, focused primarily on lowering tariffs on industrial goods. But many of the remaining issues facing negotiators require countries to make much more fundamental and difficult changes in the way they organize their societies, trading off economic interests against political, cultural and moral values.
"We've already got all the low-hanging fruit," said Laura D'Andrea Tyson, first chairman of Clinton's Council of Economic Advisers and now dean of the business school at the University of California at Berkeley. "From now on, it's going to be slow going."
Without another round of global trade talks, slow going is likely to mean that governments and businesses looking to open new markets will turn to bilateral or regional agreements, such as the one being discussed by the European Union and the Mercusor group of developing countries in South America.
At the same time, countries looking to redress grievances they have with current trading rules may resort to unilateral sanctions rather than pinning hopes on any reform of those regulations. That, in turn, could prompt retaliations and raise the overall level of trade tensions.
"This thing is very serious," warned Sylvia Ostry, a former Canadian trade negotiator who now teaches at the University of Toronto. "I don't know if the WTO system can survive. It's badly weakened right now."