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ON JAPAN: Doha and Bush's Second Term

Author: Edward J. Lincoln, Director, Center for Japan-U.S. Business and Economic Studies, New York University
December 15, 2004
Newsweek Japan

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One of the bright spots in the Bush administration's first term was its ability to get Congress to approve authority for the President to negotiate international trade agreements (subject to only a yes-no vote by Congress without any changes). This is important in the American political system since the Constitution gives the right to set tariffs to Congress. Armed with this authority, the Bush administration then managed to get the Doha Round of multilateral trade negotiations in the WTO started in the fall of 2001.

These large rounds have played a very important role in lowering global trade barriers in the past half century, and this one is no less important. However, reaching agreement is a difficult process, especially since many of the politically easy reductions have already occurred. As a result, the Doha Round reached an impasse a year ago at the ministerial meeting in Cancun, and is not yet back on track.

But now the Bush administration has another four years to bring this round to a successful conclusion. I am not privy to White House strategy sessions, but it is quite likely that finishing the Doha round will receive a high priority during George Bush's second term. All presidents and their cabinet officials like to point to real accomplishments while they were in office. Being able to say that they had gotten authority from Congress, created the Doha Round, and brought it to a successful conclusion would certainly be a major accomplishment for both President Bush and the head of USTR.

This Republican administration may be especially eager for this outcome. After all, in its second term, the Clinton administration had sought renewed negotiating authority from Congress (which had lapsed after the end of the Uruguay Round) and failed to obtain it. The Clinton administration also presided over the protest-ridden 1999 WTO ministerial meeting in Seattle

where a new multilateral round failed to materialize. As a result, if Bush succeeds, Republicans can boast about how much more successful than the previous Clinton administration they have been. As a Democrat, I must say that the actual historical record is much more complex, but politics works on simple images.

Due in part to disappointments like the Seattle meeting and the impasse in the Doha Round, the Japanese government has eagerly embraced a new strategy of bilateral free trade agreements. Personnel at METI have been shifted away from WTO negotiations to these bilateral talks. The presumption, often voiced to me by Japanese officials, is that the Doha round is effectively dead and that the bilateral negotiations are the way of the future. If the Bush administration chooses to make a major effort to bring the negotiations to a successful conclusion, therefore, the Japanese government may be in for a rude shock.

The sticking point, of course, will be agriculture. The Bush administration has regarded the Japanese government as very unhelpful (to put it mildly) in the Doha negotiations of the past three years because of an unyielding position on agricultural issues. Even the so-called free trade areas that the government has negotiated with Singapore and Mexico included virtually no meaningful reductions in agricultural barriers, and in the Doha negotiations the government has offered nothing of consequence.

In order for the Bush administration to achieve a goal of completing the Doha Round, therefore, it will necessarily put pressure on Japan to make significant reductions on agricultural barriers. That pressure will intensify as the negotiations move along, and may come fairly quickly. Keep in mind that the Bush administration would probably prefer to have the negotiations finished and the vote in Congress taken well before the next presidential election so that passage is not complicated by election-year politics.

The time is long overdue for Japan to open its agricultural market further, including rice. The Japanese economy will be better off shedding relatively unproductive agricultural jobs (and forcing remaining farmers to be more efficient). Furthermore, the Doha Round will reduce barriers abroad to the sophisticated manufactured goods Japan exports. As a result, the government should see compromise as in the national interest. But I greatly doubt that the Japanese government is prepared to move on agriculture as quickly and thoroughly as will be necessary. How ironic that those in the Koizumi administration who strongly favored Bush's reelection could face a rocky time on trade now that the election is over.

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