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Trade in the Balance

Prepared by: Robert McMahon, Editor
September 11, 2006

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The Doha trade round is not dead yet, although a summer of heightened discontent may have made it appear so. Even at this late date, with no breakthrough in sight, major players in global trade are scrambling to salvage the five-year-old negotiations, once promised as a lifeline for scores of developing nations (AP). Finance ministers of the Asia-Pacific Economic Cooperation Forum, whose members account for nearly half of global trade, have vowed to restart the talks. A twenty-nation bloc of emerging-market states met in Brazil at the weekend, joined by top U.S. and European trade representatives. They reached no agreement on resumption of Doha talks because of a continued impasse over agriculture subsidies, but there was a general hope that talks would revive after U.S. midterm elections in November (NYT). Australia is also hosting a meeting of key trade states on September 20-22. World Trade Organization (WTO) chief Pascal Lamy just concluded a trip to China, where he pressed the trade colossus to play a more constructive role in reviving the Doha talks (AFX).

The flurry of activity is seen as a last-ditch effort to rescue the Doha talks (McClatchy). All sides are keenly aware that U.S. presidential trade-promotion authority will soon expire, which could sideline the main catalyst in eight previous multilateral rounds of negotiations. Those rounds resulted in a steady lowering of barriers over fifty years and the creation of the WTO. The removal of barriers in the current round could lead to hundreds of billions of dollars in annual global gains, say groups like the World Bank. A failure of Doha raises concerns that a "backlash against globalization (FT) will generate more protectionism in the [leftover] vacuum,” writes C. Fred Bergsten, director of the Institute for International Economics. A new CFR Critical Policy Choice report urges President Bush to commit the political capital to reach a successful conclusion to Doha. Author Daniel W. Drezner acknowledges the domestic risks involved but argues that just as trade liberalization proved an effective Cold War strategy, “trade expansion can and should be presented as a critical element of the long-term grand strategy of the United States to defeat terrorists and spready democracy."

Reason magazine’s Managing Editor Jesse Walker takes a dim view of the Bush administration’s political will: “Asked to choose between freedom and the farm lobby, Washington will opt for agribusiness almost every time.” Congressman James Kolbe (R-AZ), chairman of the House Appropriations Subcommittee on Foreign Operations, is another critic of farm subsidies. “It makes zero sense to wipe out the benefits of U.S. foreign assistance in order to keep paying our farmers to be inefficient,” he writes in the Washington Post. Washington has offered to cut its agricultural subsidies by an average of more than 50 percent, conditioned on reciprocal EU moves. But the European Union and other parties are pressing for further cuts. Some trade experts worry that in the absence of a global trade breakthrough, the United States will lead the charge toward what they say are trade-distorting bilateral agreements, a trend outlined in this Backgrounder. But the crowded political agenda in Congress ahead of November’s midterm elections will make it tough to push through approval (LAT) of even modest pacts with Peru, Colombia, and Oman.

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