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A Tough Month for Trade

Prepared by: Lee Hudson Teslik
June 25, 2007

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Last-ditch talks in Potsdam, Germany, seemed perhaps the final hope for squeezing some sort of watered-down deal out of the Doha round of multilateral trade negotiations. With those talks now collapsed (Bloomberg), and President Bush’s fast-track trade promotion authority set to expire June 30, the Doha round and its history of false starts may finally be on its deathbed. But a number of experts, including some adamant free-trade hawks, now argue Doha’s passing might not be such a bad thing.

The five-year negotiations accomplished a fair amount, if not a final deal, argues CFR Senior Fellow Jagdish N. Bhagwati in a recent interview. The very fact that this week’s negotiations took place between a whittled down group of four delegates—the United States, the European Union, India, and Brazil—and not the thirty-some parties initially involved, testifies to this point. “We were cleaning out all peripheral things,” Bhagwati says. “Now it’s a game between four major groups.” That game failed to secure a deal, of course, and the longtime sticking points of agricultural subsidies and barriers to market access remain profound obstacles, but Bhagwati says the fact that talks focused around these core issues is itself an accomplishment.

More daunting, perhaps, is the possible expiration of Bush’s trade promotion authority (TPA). The so-called fast-track authority grants the president power to negotiate trade deals independently, then present them to Congress for a simple yes-or-no vote, avoiding the complicated process of congressional markup that can prove a death sentence for trade pacts. A new Backgrounder examines the possible ramifications of TPA’s expiration, which takes effect June 30 unless Congress acts to renew or extend it. Free-trade advocates are concerned the loss of fast-track will jeopardize future trade negotiations. The United States currently has four bilateral agreements negotiated and awaiting congressional approval, and is undertaking bilateral negotiations with eight other countries (WSJ) including Thailand and Ecuador. It remains possible that many or all these potential partners will refuse to negotiate with the United States if the executive branch loses TPA, given that any agreement, once negotiated bilaterally, would face major revisions in Congress.

More generally, the expiration of fast-track underlines increasing U.S. ambivalence toward free trade, which promises to be a divisive issue in the 2008 U.S. presidential elections. A Foreign Affairs article notes a decided drift toward protectionism, particularly with respect to emerging China, while a new Council Special Report examines how the U.S. Trade Adjustment Assistance program might be reformed to better protect American jobs. Daniel T. Griswold, the director of the Center for Trade Policy Studies at the CATO Institute, says that abandoning TPA “sends a negative signal to the rest of the world that we’re confused on trade policy and temporarily bowing out of negotiations.” Yet Griswold adds that doomsday predictions go too far, noting that the expiration of fast-track “doesn’t raise any trade barrier—it only reduces the chance of lowering barriers.” Bhagwati too finds cause for hope, noting the evaporation of TPA could circularly spur progress: “I’m optimistic, for a perverse reason, which is that in our own self interest we will have to pass some form of fast-track. Otherwise we’ll be big sore losers in the world trade system.”

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