On a recent visit to China, U.S. Trade Representative Susan Schwab hit all the familiar themes. China's massive trade surplus. Its currency, which many U.S. officials believe is purposely undervalued. But then she made an unusual request. China, Schwab declared, "can and should have a role in getting these [global] trade talks back on track."
That the Bush administration now has to rely upon China to deliver global free trade negotiations is a sign of how badly trade talks have collapsed. Overshadowed by the summer war in the Middle East and the British terrorism scare, the most recent round of World Trade Organization negotiations, called the Doha round, has fallen onto life support. In all likelihood, the talks now will fail, for the first time in the history of the WTO. (There is new talk of resuming the negotiations, but nobody has set a timeline.) This is a news story of major consequence, since Doha at least offered an opportunity to make trade more equitable. But the United States and Europe can only blame themselves: Despite the supposedly pro-trade agenda of the White House and European leaders, they have done little to make the Doha Round more acceptable to the world's poor, who now have more power in the WTO due to the rise of Brazil, India, China, and other developing world economies. This failure has allowed other developed nations, like Japan, to backslide as well. The result could potentially hurt poor and rich nations alike.
After the failure of the 1990s "Washington Consensus" notion that unfettered free trade would help poor countries, many developing nations considered a retreat to economic nationalism. In Latin America, where income inequality and urban unemployment rose in the 1990s, a mere thirty-five percent of those surveyed in one 2002 poll said the state should allow the private sector to control economic activity. But pure economic nationalism is no longer feasible; even longtime holdouts like India have moved away from such policies.
Given this context, as Doha was launched its advocates called it the "development round," suggesting that the major powers would take actions that opened more markets to the poorest countries and helped them prosper from trade. Though no one expected Doha to be a panacea for poor countries' plights, one analysis by the International Food Policy Research Institute found that, overall, developing countries would gain twice as much from a successful Doha round as wealthier nations.
But as they proceeded, any time negotiations came close to forcing Western nations to swallow some of the pain of globalization, those nations balked. As major developing countries like Brazil called for reducing rich-world farm subsidies, Europe refused to cut their agricultural tariffs and quotas. Their refusal gave Congress the cover needed to pressure U.S. trade negotiators to back down from cutting agricultural supports. Even when WTO head Pascal Lamy suggested limited cuts in rich-world farm subsidies, the U.S. negotiators balked, saying they preferred no deal at all to a compromise in which large developing countries traded moderate cuts in their tariffs for moderate cuts in U.S. and European agricultural support. Perhaps uncoincidentally, almost immediately after Doha failed this summer, Missouri Senator Jim Talent, of the Senate Agriculture Committee, introduced a bill extending America's farm subsidies, which cost some $25 billion per year. ''We are proud that the U.S. stood up and held the line,'' Bob Stallman, president of the American Farm Bureau Federation, told The New York Times. ''No deal is better than a bad deal.''
The collapse could have significant consequences. The White House has tried to position freer trade as one solution to the poverty and frustration felt by citizens of the Middle East. (This was one reason why the talks were launched in Doha, the capital of Qatar, only two months after the 9-11 attacks). With the talks' breakdown, it will be harder for the United States to make that argument, and some Middle Eastern leaders may blame the United States for the Doha problems. As Andrew Kohut, president of the Pew Research Center, told : "This reinforces the view that America is conducting its foreign policy -- in this case trade -- in its own interests." What's more, in the absence of multilateral trade talks, many nations will focus on bilateral and regional agreements, which in Asia tend to exclude the United States. (The free trade deal signed between China and ten Southeast Asian countries is one example.) Such bilateral and regional deals could further weaken the entire system of multilateral institutions, already on the defensive after six years of attacks by the Bush administration.
The hardest hit by such a dynamic may be the poorest citizens of all. Smaller bilateral and regional trade deals normally do not include the poorest, weakest nations, instead typically bringing together countries like the United States and, say, Singapore. The bilateral deals also do not offer the same opportunity as the WTO talks do for all poor and rich nations to sit down together and rethink how to make trade work for the developing world, or to consider how to handle job losses in richer countries caused by global competition.
Most Americans seem to have paid little attention to Doha. But Lamy, head of the WTO, recognized the peril. "The trauma of this collapse may not yet register on the streets of New York, Paris or Tokyo,'' he wrote in an open letter to trade ministers throughout the world. "But for cotton growers in West Africa and beef producers in Latin America, there is already an impact."
Joshua Kurlantzick is a senior correspondent at The American Prospect and a special correspondent at The New Republic.
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