AFF Sentinel Vol.5#33

Word six weeks ago that the ag issues stalling the Doha round had been resolved and only non-ag issues remained was surprising. But the odds were still long.

So recent news that very high-level talks in Geneva had stalled and the round had collapsed has been greeted with everything from mourning and burial to placid responses that resurrection has been happening for seven years and could again.

Essentially, China and India had agreed to lower their tariffs on industrial goods in exchange for billions of dollars in EU and U.S. agricultural tariff and subsidy cuts, according to the Wall Street Journal ("Global Trade Talks Fail As New Giants Flex Muscle," John Miller, 07/30/08). But, after all that tremendous progress, China and India then insisted on a safeguard clause permitting tariff increases on key crops like sugar, cotton and rice if there were sudden import volume surges. The U.S. had suggested a trigger point of a 40 percent increase while China and India wanted ten percent. At an impasse, the talks collapsed.

U.S. Trade Representative Susan Schwab refused to declare the Doha round dead, citing "enormous progress" and "what the U.S. has put on the table remains on the table." Of course, a Democratic administration could change that.

It's critical that Bush Administration U.S. trade negotiators have meanwhile not been idle. They've completed bilateral trade agreements with South Korea, Columbia, Peru and Panama. Unfortunately, the Democrat-led Congress has absolutely refused to even consider any trade agreements save Peru.

What's at stake? Investor's Business Daily ("Has Free-Trade Era Died With Doha?" 07/31/08) notes that 2007 U.S. trade amounted to roughly $4 trillion, up from $1.19 trillion in 1990. Total trade - exports plus imports - accounted for nearly 29 percent of GDP (2007). Over the last decade, 20 percent of our growth has come from exports.

The world's businessmen have not been idle either. During seven years of Doha dithering, global trade flows have increased 70 percent, to $14 trillion, according to Cato Institute trade expert Daniel Ikenson, in a Wall Street Journal editorial, "Greasing the World Economy Without Doha." The International Monetary Fund noted the overall global economy expanded by 30 percent to $54.4 trillion.

Ikenson said "trade facilitation" - "streamlining the administrative and physical procedures involved in actually moving goods across borders" -- have recently been contributing heavily to global trade growth. If countries continue cutting red tape, growth can continue, even without a Doha boost.

Ikenson said leading global economists claim bureaucratic red tape, shoddy logistics and communications hobble any improvements that could come from lowered tariffs. As a positive example, the World Bank cited the implementation of online customs declarations by India that reduced delays by seven days.

U.S. agriculture interests were not agreed on the Doha round. Wall Street's Miller noted that sugar, dairy and cotton growers opposed Doha because they feared losing substantial subsidies and tariff protection. Corn and ethanol lobbies opposed cuts in tariffs on imported biofuels included in the round. Mainstream livestock organizations wanted increased market access in developing countries that Doha included. The recent Korean market opening is estimated to be worth $30/head, for example.

Veteran observers noted this round of WTO negotiations has been more complicated because more countries than ever participated. Some fear the Doha round was possibly the last chance for a sweeping global agreement. Smaller or regional agreements involving a limited number of countries may now be all that's attainable.

Ironically, it is the countries with the largest masses of poor people who need the lift an improving world economy would provide - China and India -- that blocked the agreement.

The problem with a Doha failure is that major agricultural commodity subsidy cuts like the ones the U.S. and EU offered are only made in response to major access deals in the developing world, something only a global trade deal offers. Developed countries are not going to drastically cut all commodity subsidies for a small deal with few countries.

Some folks look at seven years of Doha negotiations and conclude it will never happen. Others are encouraged that the 30 major countries hammered out complex, major issues never before resolved and got within one backsliding issue of a sweeping agreement.

The bottom line: we need every agreement the U.S. can hammer out with any country. Major trading partners like Canada, Mexico, South Korea and Japan must be carefully attended to. Because gains from a major, global agreement can still not be counted on.

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