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Ill Trade Winds Blowing

Prepared by: Robert McMahon, Editor
April 28, 2006

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Now nearly half a decade old, the Doha Round trade talks are known more for missed deadlines than meaningful progress on lowering global trade barriers. But the World Trade Organization's announcement that the April 30 deadline on agriculture talks would lapse aroused the deepest concern yet about the round's prospects. Also prompting concern from trade analysts and politicians was the Bush administration's move to transfer its chief trade negotiator, Rob Portman, to a White House position, raising doubts about the U.S. commitment to Doha (WashPost). New verbal jousting by European Union and U.S. representatives did little to instill confidence that the world's two largest economies were committed to reaching a deal (UK Times).

At stake in the Doha round is a chance to lift dozens of grindingly poor countries out of poverty, and maintain a string of global trade deals, as cfr.org's Robert McMahon explains in this Background Q&A. There is concern that a failure on Doha could undermine the numerous initiatives underway to address poverty. The World Bank is poised to forgive the debt of nearly twenty nations, leading industrial states are ready to boost aid to developing states by $50 billion, and the United Nations continues to press its Millennium Development goal to halve world poverty by 2015.

But trade liberalization has the potential to raise the welfare of the world's poor more dramatically than any of these initiatives by spurring economic growth, improving domestic technology, and breaking up local monopolies. William Cline, a Center for Global Development senior fellow, writes in a recent Foreign Affairs article that richer countries are "taking away from developing countries twice as much in trade protection as they provide aid." Doha is meant to cut these distortions by crafting a "grand bargain" in which developed states lower agriculture barriers, allowing predominantly rural poor countries access to their rich markets. In return, the developing world's emerging countries are expected to lower barriers to services and manufactured goods from the developed world.

The talks are now snagged on agricultural issues, with three main actors—the European Union, United States, and Group of 20 developing nations—prodding each other for concessions. The United States has offered sweeping cuts in farm subsidies, conditioned on reciprocal moves, but time is running out on presidential authority to act without congressional interference. President Bush's trade promotion authority, which says Congress must vote up or down on trade deals with no amendments, runs out in July 2007, and there are doubts it will be renewed by increasingly protectionist-minded legislators. Bush administration officials insist they are committed to Doha. Portman, who is headed to Geneva to meet other trade representatives in early May, will spend much of his final weeks in office trying to salvage the round.

Eleventh-hour brinksmanship has been a hallmark of previous trade rounds, but trade analysts—and increasingly business leaders—are worried that a failure of Doha could upset the steady move toward liberalization worldwide. Fred Bergsten, who directs the Institute for International Economics, writes that this could "trigger a sharp reversal into protectionism and bilateralism and perhaps erode the WTO itself, causing substantial problems for the economies and foreign policies of all countries involved" (Foreign Affairs).

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