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July 31, 2006 [LINK]

Doha trade talks collapse! (?)

While the world's attention has been focused on Israel and Lebanon, the Doha (Qatar) Round of multilateral trade negotiations was suspended ten days ago, a severe blow to hopes for expanded internatonal trade. Delegates from the U.S., the European Union, Brazil, India, Japan, and Australia could not agree on how to reduce restrictions on imports of farm products, so the head of the World Trade Organization, Pascal Lamy, shut down the meetings in Geneva. There is no plan to reconvene in the immediate future. The Doha Round was launched in late 2001, in recognition by the United States and other Western countries of the need to promote economic opportunities in the Third World so as to counteract the appeal of political extremism and terrorism. This is one of those rare cases where many people grasped the connection between economic policy and national security, which is one of my primary research interests. The problem is that the connection between those two issues is a subtle, paradoxical one, and whenever a problem or issue can't be boiled down to a simple sound bite, there is a tendency for the perceived urgency to dissipate over time.

Political economy blogger Daniel Drezner (who is moving from Chicago to MIT) cautioned that warnings of total collapse are a routine part of such high-stakes multilateral negotiations, so it may not be the end of the world. He is strongly pro-trade, a position I with which I am largely sympathetic, but I place less emphasis on estimates of aggregate costs and benefits of trade. As anyone who studies social science knows, there are huge pitfalls when one tries to infer utlility comparisons from aggregate data. Moreover, there is a danger in adopting trade liberalization as a dogmatic mantra. To me, the point is not so much arguing how much or how little "society" gains (or loses) from trade, but rather in how to fashion a trade policy that infuses an economy with dynamic competition without causing large-scale disruption. It is a practical question requiring sharp observation and wise judgment. If none of a country's companies are going bankrupt, there is probably too much protection. If the number of bankruptcies gets to the point that the national unemployment rate climbs noticeably, there may not be enough protection.

"Do as we say, not as we do." That pretty much sums up the overall U.S. position on economic policy in the Third World: Balance your budgets! Eliminate import restrictions! And never mind our own transgressions! It is a sad fact that domestic political pressure makes it extremely difficult for advanced industrial nations to live up to their avowed free trade principles by putting their agricultural sectors to competition. As the editorialists at the Washington Post put it, "The truth is that both the United States and the European Union made political decisions not to confront their farm lobbies, even though agricultural liberalization is at the heart of the Doha Round." Though they are bit hasty to deride politics (ironic!), they are correct to point out that making concessions on farm subsidies would save billions of U.S. taxpayer dollars. Who would suffer? Mostly, wealthy sugar cane growers, cotton planters, and rice farmers in the southern "red" states. This is not to minimize the blame deserved by European governments who prop up inefficient small farms, hurting their own consumers as well as potential agricultural exporters in Third World countries.

The chairman of the House Agriculture Committee is none other than our own Congressman Bob Goodlatte, who represents Virginia's Sixth District. The U.S. Congress needs to enact policy reforms that promote world trade, without which the cause of peace and freedom will slowly wither away.

Posted (or last updated or commented upon): 01 Aug 2006, 12: 44 AM

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