DOHA Round not yet dead

By Sallie James

Sallie James is a trade policy analyst at the Cato Institute.

April 30, 2006

Obituaries are being drafted and published for the Doha Round of global trade negotiations. But even if the end-of-April deadline is missed, there is still time before the "real" deadline at the end of July. The global gains from free trade and open markets in goods and services are too large to simply let slip away.

April 30 is the date World Trade Organization members set at their Hong Kong meeting in December to reach agreement on key issues of a global trade deal. That deadline looks increasingly unlikely to be met. If the missed deadline was not depressing enough, there was new cause for pessimism last week with the announcement Rob Portman, the top U.S. trade negotiator, is to move to a new job.

Collapse of the Doha Round would be an enormous loss. Developed and developing country members stand to gain from liberalized trade in goods and services and from a strengthened multilateral trading system. The World Bank has estimated the global gains from liberalizing merchandise trade would be worth almost $300 billion annually, with around half of those gains accruing to developing countries. Opportunities to generate that magnitude of improvement in global welfare are rare.

The problem is that political will is in short supply. There is a real danger those countries that are less than enthused about reforming politically sensitive areas of their economy may point to the United States' seeming "abandonment" of the round as a way to avoid any blame for the talks' collapse. WTO Director-General Pascal Lamy himself has said a global trade deal would require, among other things, the United States to agree to deeper cuts in farm subsidies.

In that context, Mr. Portman's appointment to the Office of Management and Budget may not be the sign of Armageddon that some fear. It could even give new impetus for reform of the U.S. agricultural sector. Certainly it comforts those hoping for reform to know the person in charge of the purse strings is acquainted with the importance of reduced U.S. domestic agricultural support to the Doha Round.

Reducing government protection and support for agricultural commodities will, first of all, benefit U.S. consumers, exporters and import-consuming industries. So even unilateral liberalizing of trade is worthwhile. But agricultural reform also will give a much needed boost to a Round in dire need of leadership from major trading nations.

A successful conclusion to the Doha Round requires much more than a U.S. commitment to lower the support it gives to its farmers, however. The architecture and political realities of the WTO mean that other members must contribute to that outcome.

The European Union is regularly and rightly painted as a culprit for stalemate in this round. Its meager offer on greater agricultural market access has been rejected by agricultural exporters, many of them developing countries. Its proposal for exempting so-called sensitive products from tariff reductions could cancel any commercially meaningful opportunities that might have come from the offer.

The major developing countries -- specifically Brazil and India -- are not blameless, either. Partly in dissatisfaction with the proposals on agriculture, they refuse to agree to significant reductions in industrial tariffs. Market access improvements in nonagricultural products, as well as services, are an important goal for developed countries.

Plenty of blame can be assigned here but a solution would be far more dear. All sides know what needs to be done for an agreement to be reached. All members know what is at stake.

Expiration of the Bush administration's Trade Promotion Authority in mid-2007 places a tangible limit on the amount of time WTO members have to negotiate. Allowing for the necessary work of translating commitments into members' tariff schedules, that means July 2006 is a much more important date. The April deadline was put there as a marker along the way. The fact that the deadline is likely to come and go is worrying, but not terminal.

The important point is there is still time if all WTO members -- not only the U.S. -- can muster the political will to move forward. In that regard a personnel change at the USTR is the least of the Round's worries.

This article appeared in The Washington Times.