The sense of urgency is palpable in recent statements by trade ministers and leading economists; as the European Union’s Trade Commissioner Peter Mandelson put it, the Doha round of trade talks, which once promised sweeping multilateral deals, is facing some “very serious time limitations” (AP). U.S. farm subsidies could well be a deal-breaker, and if President Bush’s fast-track-trade-promotion authority expires this summer and isn’t renewed by Congress, the window for passing significant subsidy cuts might pass. Meanwhile, EU countries do not seem particularly inclined to make deep reductions in their own agricultural tariffs, nor are major developing countries like India and Brazil very keen to open their markets to Western competition. As CFR’s Jagdish Bhagwati argues in a recent interview, there are obvious disconnects between the concessions countries expect of others and the concessions they themselves are willing to make.
Should Doha fail, the consequences would be broadly felt, especially in the developing world. Stalled efforts at multilateral trade deals could well prompt developed countries to strike bilateral deals with other developed countries and to ignore less efficient budding economies from which they don’t have as much to gain. This report from the Carnegie Endowment examines the potentially enormous economic benefit Doha could have for developing countries.
Just as worrisome is the effect a Doha collapse could have for the World Trade Organization. The WTO is already sufficiently riddled by ambivalence about its authority that many countries, including the United States, have simply ignored rules they don’t like. Most recently, the United States has stonewalled (BBC) on a WTO ruling pertaining to U.S. internet gambling legislation. A new CFR Special Report focusing on the WTO’s dispute-settlement system argues that taking a casual attitude toward WTO authority is “reckless”: It fails to recognize the WTO’s value, both as an arbiter of trade disputes and as a mechanism through which the inherent inefficiencies of cross-border trade can be smoothed over to the advantage of all parties involved.
Moreover, the report says if the Doha round or other diplomatic attempts at trade liberalization fail, the number of disputes brought before WTO tribunals could multiply significantly. This could clog operations and could “increase resentment of the WTO in the United States, weakening U.S. commitment to its traditional postwar role as the bulwark of the international trading system.” In a recent CFR Online Debate, Daniel J. Ikenson, a trade expert at the CATO Institute, says such resentment can even verge on irrationality: “To some true believers, dispute settlement losses concerning U.S. trade remedy laws can only be explained with the framework of some broader conspiracy.” But his debate opponent, Robert E. Lighthizer, who heads the international trade department at the Skadden law firm, warns of overreach: “WTO panels have increasingly seen fit to sit in judgment of almost every kind of sovereign act—including U.S. tax policy, appropriation policy, environmental measures, and public morals, to name a few.”
At their core, questions about the WTO’s role are part of a broader, theoretical dialogue about the benefits and pitfalls of globalization, but they have very real consequences. One recent estimate from a paper by the Peter G. Peterson Institute for International Economics says U.S. incomes are 10 percent higher across the board than they would be if the U.S. economy were self-sufficient. Nor are the effects limited to the economic realm. Recent U.S. negotiations with Brazil over ethanol trade were motivated in large part by President Bush’s goal of “energy independence,” an initiative aimed at improving national security as much as economic efficiency.