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The Caravan to Cancun

Author: Jagdish N. Bhagwati
July 2, 2003
Wall Street Journal


Although the ministerial meeting of the World Trade Organization in Seattle broke down in disarray -- its stated objective of a new round of multilateral trade negotiations in ruins, and the anti-globalization movement newly triumphant -- the post-Sept. 11 meeting in Doha was a success. The anti-globalizers were mostly absent and the new round was launched. But as member governments prepare for the next WTO meeting in Cancun in September, complacency ishardly called for. History could repeat itself, not as Doha but as Seattle.

Critical Issues

Many of the elements that imploded at Seattle are in place at Cancun: the anti-globalizers seek a field day; the governments are divided on critical issues and will likely come without an agreed text; and the U. S. has frittered its attention on piffling bilaterals that threaten the multilateral system in ways that the energetic U.S. Trade Representative Robert Zoellick astonishingly will not recognize.

The anti-globalizers worked overtime to lay siege at Seattle. If President Clinton's sherpas were aware of these plans, they were strangely complacent. Equating Seattle with Microsoft and Boeing -- and assuming naively that Seattle would embrace the meeting because trade, after all, had brought the place prosperity -- they forgot that the city's politics makes Boston blush for its inadequate liberalism! So when the protests came, the city was overwhelmed.

For anti-globalizers who found the premodern sheikhdom of Doha distant, and who were intimidated by the security concerns post-9/11, Cancun poses a real opportunity to relive Seattle. The frustrated antiwar movement is allying with the anti-globalizers: this is truly the coalition of the willing. Having lost the "anti-war," they will want to win Cancun.

Cancun is as accessible as Seattle was. It takes only a few hours from California to get to Cancun, and a great welcome awaits the demonstrators. Mexico has a tradition of activist students who passionately oppose the government's enthusiasm for globalization. Mexico is rife with fanciful arguments linking the ills in Chiapas to Nafta. But there is also the reality that agricultural liberalization under Nafta has triggered political fallout since last year as the adjustment required is set against the subsidies that expand U.S. agricultural production. Besides, Jorge Castaneda, whose leftist credentials might have helped, has resigned from President Vicente Fox's cabinet. And, while we may forget, the anti-globalizers will not -- Mr. Fox was once Coke's man in Mexico City!

Yet if Cancun offers an opportunity to the anti-globalizers, it is also a trap for the pro-globalizers. For as in Seattle, they come unprepared. Two years after Doha, the key issues on which tentative agreements were to be reached are still unresolved. Now two years is not that long; but part of the problem is that the governments at Doha set a three-year deadline for the new round to be completed, when the Tokyo round had taken four years, and the Uruguay round took over seven. If the expectations from Cancun (and for Doha to conclude on time) are not scaled down in advance -- by characterizing Cancun as a guidepost in a marathon -- then the anti-globalizers will take credit, which is not their due, for a failure that is not one.

But while characterizing Cancun as a guidepost is essential, agreement at Cancun to seek agreement in key areas of discord is equally essential. So is an affirmation that negotiations will proceed at full speed.

Fortunately, agricultural liberalization, a key source of discord, finally offers the prospect of movement, which Cancun could cement with a credible declaration of intent. Last week, the European Union agreed to start reducing the subsidies that increase farm production and exports. The accord was a step forward, even if taken with arthritic knees. The offensive farm subsidies in the U.S. were perversely increased in the administration's post-Doha Farm Bill. But the U.S. is now offering a plan to reduce agricultural tariffs and subsidies to uniform levels for all countries.

Two other problem areas are unfortunately located in Washington. Intellectual property protection, which is about collecting royalties rather than about trade, was bodily pushed into the WTO in 1994 as a TRIPs (trade related intellectual property) regime, under lobbying pressure led by the pharmaceutical industry. The game plan was to ensure that the WTO's trade sanctions mechanism would kick in to support the enforcement of patents. Now, thanks to AIDS and anthrax, the agreed regime is under attack from civil society groups on moral grounds and from economists on economic grounds.

Worse are the anti-dumping rules. Masquerading as "fair trade" rules, these are used unfairly as protectionists' favorite tools. While the EU is also a sinner, and the anti-dumping virus has spread far more successfully than SARS, U.S. industry and Congress are the villains with the pitchforks: They are powerful and passionate defenders of these outrageous rules.

Some poor countries also need to understand that economic prosperity will not come their way if they negotiate under the influence of two fallacies being peddled by a handful of populist economists and NGOs: that protectionism is to be given up by rich countries, not poor ones, and that the trading system is asymmetrically stacked against poor countries. Protectionism is as bad for the poor as for the rich. Besides, the average industrial tariffs in rich countries are below those in poor countries. As for agricultural subsidies, one might think that these would be higher pro rata to output in rich countries because they have more money to burn. But this too is far less so since defense and protection of agriculture through subsidies are two priority budget items in many poor countries also.

'Spaghetti Bowl'

In the end, it is up to Washington to lead in this multilateral effort. But will it? In place of stroking the French, who can hold up agricultural liberalization at Doha by the EU, Washington is acting peevish, striking back rather than striking a deal. It is also pursuing, as did the EU for years without our vigorous protests, a number of bilateral Free Trade Agreements, adding to the maze of preferences that blight the trading system: a "spaghetti bowl" of rules of origin and tariffs. We have managed to reproduce in the name of "competitive" free trade the chaos in the world trading system that "competitive" protectionism produced in the 1930s! A USTR pursuing free trade deals of all kinds, good and bad, regardless of the architecture that will arise, is like a handyman who is busy filling potholes without a road map. We deserve better.

Mr. Bhagwati is University Professor at Columbia and Andre Meyer Senior Fellow at the Council on Foreign Relations. He is the author, most recently, of "The Wind of the Hundred Days: How Washington Mismanaged Globalization" (MIT Press, 2002).

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