Tangled Trade Talks


The New York Times
July 11, 2009

There are few things that could do more damage to the already battered global economy than an old-fashioned trade war. So we have been increasingly worried by the protectionist rhetoric and policies being espoused by politicians across the globe and in this country.

Against this bleak backdrop, it is especially good news that the world’s leading developed and developing nations have committed to complete a stalled global trade agreement (the so-called Doha Round) by next year. For that to happen, leaders — especially in the United States, Europe, India, China and Brazil — are going to have to muster real sense and political courage.

The World Trade Organization forecasts that exports from developed countries will fall 14 percent this year, while exports from developing nations will contract 7 percent. The collapse is particularly damaging for poor countries that are heavily dependent on exports. But it is also intensifying the downturn in many rich countries. Reviving trade is essential for economic recovery.

The talks, begun in Doha, Qatar, in 2001, had long been in limbo. They broke down last year after big developing countries — China and India, in particular — rejected demands from the wealthy nations that they lower tariffs on imports of agricultural and manufactured goods and open service sectors to more competition.

But there are signs that the collapse in trade and the rising protectionist rhetoric have awoken many leaders to the advantages of strong international rules to keep trade channels open. This is particularly true of China, which has suddenly found its exports on the receiving end of tariff increases and antidumping suits.

There is no guarantee that a deal can be pulled off. President Obama will have to provide lots of leadership to convince developing countries to make serious offers on market access, and to convince reluctant members of the United States Congress — notably those within his own party — that they will have to make concessions, too.

Big developing countries have been reluctant to reduce tariff ceilings, allowing themselves the option to increase their tariffs at any moment. They have been unwilling to open service sectors, like accounting or electricity generation, to foreign competition. They insist on being able to increase their barriers to protect farmers against sharp increases in food imports from cheaper producers abroad. They must be willing to make concessions on these points.

The rich West will also have to give more. The United States and Europe must slash agricultural subsidies more aggressively and refrain from adding more. The United States will have to reduce its own agricultural barriers — such as the one against Brazilian ethanol. It might have to offer more visas to professionals from countries like India.

The Doha Round was originally conceived in the wake of the 9/11 attacks as a way to encourage development in the poorest countries by providing them access to export markets in the rich world. This is still its goal.

The Group of 8 industrialized nations took an important step on Thursday by following Mr. Obama’s lead and pledging to invest $20 billion over three years to boost agricultural production in some of the world’s poorest countries. We were made nervous by reports on Friday that suggested some contributors might already be rethinking their generosity.

So far, Mr. Obama has been reluctant to spend any political capital at home on trade. But it is important for the president to follow through. The talks opened in Doha were supposed to help the world’s poorest countries. They have now acquired an even broader purpose: reviving global cooperation and the global economy.


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