Glorious news from Potsdam, Germany! Global trade negotiations suffered yet another blow—perhaps a crowning one this time—as a meeting of trade ministers from the U.S., European Union, Brazil and India broke up early on June 21 with the parties declaring that they are hopelessly deadlocked. And here's more glad tidings: congressional authority for President Bush to negotiate trade pacts expired June 30, adding to the woes facing the global talks.
Let me explain. I'm a journalist by trade, and as most people suspect, we journalists relish a good disaster story. After more than 25 years working for newspapers, the portion of my brain that welcomes news beneficial for the welfare of humanity has atrophied, or at least it fails to function on matters about which I'm writing. My current focus is a book on the WTO and the Doha Round, the global trade talks named for the capital of Qatar where they were launched in November, 2001. Following the debacle in Potsdam, I'm happy (in my perverse journalist way) to report that as disaster stories go, the Round is shaping up as a corker.
As a reporter who covered the 2001 World Trade Organization meeting in Doha, I vividly remember the idealism that pervaded the gathering. Braving the perceived risk of traveling to the Persian Gulf just two months after the Sept. 11 attacks, delegates from the 140 countries belonging to the WTO reached an accord after six grueling days on the agenda for a "development round." The goal was to strike agreement by Jan. 1, 2005 on new international trade rules that would be much fairer for developing countries than the current ones, and in so doing give the world's poor a better chance to reap the benefits of globalization. By eradicating many trade barriers and inequities that hamper growth in the developing world, the new rules would help "drain the swamp" of poverty in which terrorism flourishes—or so the attendees hoped.
Not only is the deadline long passed, but those noble goals are clearly running afoul of harsh political and economic realities, especially as the negotiators have confronted the issue of trade in agriculture, the sector in which the bulk of the world's poor make their living. On a couple of occasions since Doha, WTO meetings have eked out progress, but more often than not, they have collapsed amid an orgy of finger pointing, and although the specifics change from meeting to meeting, the basic story has remained the same: Developing countries accuse the United States of refusing to cut its lavish farm subsidy programs, especially in crops such as cotton, where payments to American farmers help generate gluts on world markets that depress the prices received by farmers in countries such as Mali and Zambia. The European Union is blamed for balking at opening up its markets for products such as beef, poultry, and dairy because of the political clout of its cosseted farmers—and the same for Japan and South Korea, which zealously protect their rice growers with tariffs hundreds of percentage points high. The rich nations, for their part, contend that developing nations aren't offering enough concessions to make it worthwhile for them to undertake politically painful measures. In particular, big and fast-growing emerging markets such as Brazil, India, Indonesia and South Africa are rejecting demands to slash their barriers to manufactured imports; India is also taking a very tough stance against opening up its agriculture to more foreign competition.
A year ago, those fundamental gaps in negotiating positions led WTO Director General Pascal Lamy to declare a "suspension" of the Round. Hope rose anew earlier this year that U.S. Trade Representative Susan Schwab and her counterparts from other leading member countries might be able to rejuvenate the process and secure at least the broad outlines of a final pact before the expiration of Trade Promotion Authority, the legislation that ensures any deal struck by the administration will get an up-or-down, amendment-free vote in Congress. But the debacle in Potsdam has dashed those hopes, and now an even more daunting hurdle is looming—the 2008 U.S. election campaign, which makes it harder than ever for the Bush administration to offer meaningful concessions lest voters in key farm districts turn against Republican candidates. Other countries, meanwhile, will be loath to move as long as the administration lacks Trade Promotion Authority, because any deal that is struck among WTO members could be subject to crippling amendments when it comes up for approval on Capitol Hill.
Given all that, prospects are nil for a far-reaching agreement of the sort envisioned at Doha, which would have sharply lowered tariffs and subsidies for both agricultural and industrial goods while also significantly expanding trade in services. The best that can be hoped for prior to the U.S. election—and even for this scenario, chances aren't bright—is a "Doha Lite" deal, which would accomplish a few worthwhile goals (eliminating the most offensive sorts of farm subsidies, for example) but fall far short of dramatically changing the rules of trade for developing countries. The most probable scenario is that the Round will be put in abeyance for a couple of years, in the hope that a new U.S. administration will put a high priority on gaining congressional negotiating authority and concluding the Round—hardly an assured outcome, since trade has become such a contentious issue in the U.S. political debate. Even if the Round staggers to a finish in, say, 2010, it will likely be the Lite version, for the same reasons that have kept the main parties from coming together so far.
Why does this make for a disaster story? It is not that global trade will grind to a halt in the absence of a Doha accord; existing international trade rules will remain in effect. But in addition to the lost opportunity for improving the rules, a Doha failure would endanger the WTO, the institution charged with preserving the multilateral system that has governed commerce among nations since the end of the Second World War. That system, created to prevent a recurrence of the protectionism and exclusive trade blocs that helped deepen the Great Depression, gives basic rights to all countries that accept the rules—in particular, "most favored nation" treatment, which means member countries cannot capriciously discriminate against the products of other members. Its dispute settlement system gives even small and poor countries the right to bring grievances against rich and powerful ones—witness the victory won in the last couple of years by tiny Antigua over the United States in a case involving internet gambling.
The WTO is already at risk of being sidelined as the main rule-setter for global trade, thanks to the proliferation in the past few years of bilateral and regional free-trade agreements such as the ones the Bush administration has struck with Australia, Bahrain, Morocco, Oman, Singapore, the Dominican Republican and five Central American countries plus several more that are pending congressional approval. Failure to achieve a respectable result in the Doha talks could call the organization's credibility further into question, conceivably undermining its authority to adjudicate disputes. Hurt most would be developing countries, because in a world dominated by bilateral and regional accords, they are much more likely to be bullied by trade negotiators from rich countries, who can use their big markets as leverage to extract concessions from the smaller fry.
See why this tale appeals to a journalist? Too bad for the rest of humankind.