The Doha Round is moving forward slowly. That might not be so bad, but time is running out. The Hong Kong meeting of member nation ministers didn't accomplish much.
Claude Barfield surveys the views of some knowledgeable observers ("The Doha Round: Bang or Whimper?") and comes down on the pessimistic, "whimper," side.
Agricultural interests in the E.U. are a key stumbling block to progress. Large developing countries are also reluctant to make the industrial and services concessions that might give the E.U. a pretext to compromise.
Two short papers look at political steps the U.S. could take to put pressure on the large developing countries, and/or the E.U., to move the negotiations forward.
Writing in Foreign Affairs before the Hong Kong meetings, C. Fred Bergsten thinks the U.S. should threaten the Europeans with a potential Asian free trade area: Rescuing the Doha Round . As Barfield summarizes Bergsten's argument:
Fred Bergsten of the Institute for International Economics, a leading international trade economist, admits in Foreign Affairs that the multilateral negotiations “are faltering badly,” and the Doha round may become the “first multilateral trade negotiation to fail since the 1930s.” He believes that only a “galvanizing incident,” a “policy jolt” can save the talks. Harkening back to events leading to the successful conclusion of the Uruguay Round, Bergsten posits that the “effective weapon” that the United States employed at that time was “the APEC strategy”: the commitment to an alternative regional trade arrangement that would encompass the entire trans-Pacific region. This move brought the Europeans and some developing countries to their senses, according to Bergsten. Today, he argues that the United States should adopt a similar tactic: that is, utilize APEC to “fulfill the vision of a decade ago” and start negotiations on a Free Trade Area of the Asia-Pacific (“It may be the only tool available to bring Doha back to life.”)
Unfortunately,
Fred Bergsten’s call for a threatening movement toward a trans-Pacific FTA defies the current realities of East Asian trade politics. APEC has been moribund since the late 1990s and is being overtaken by the ASEAN + Three (Japan, Korea, China) intra-Asian negotiations.
Adam Posen ("The United States Needs German Economic Leadership") thinks that the advent of Angela Merkel as German Chancellor opens up opportunities:
Recent discussions have thankfully already made it trite to recognize that agricultural trade liberalization would do more than almost anything else to bring the developing world out of poverty (Cline 2004 and references therein). It has also become obvious that in the absence of such liberalization, the Doha round of multilateral trade negotiations will fail. The rich world’s resistance to liberalization ultimately rests upon the ability of France and Poland to subsidize their farmers using the European Union’s common agricultural policy (CAP) rather than buying them out. If Germany can get the French and Polish governments to do what it did to reduce its workforce of coal miners in decades past—and what South Korea is committed to doing to buy out its own farmers—then the dominoes will have little choice but to fall in Tokyo and Washington as well (particularly after the official statement made at the APEC Economic Leaders Meeting in November 2005, which put the ball in the European Union’s court).
Only Germany has the bilateral economic relationships and the sizable EU net donor position to give it real influence over French and Polish policy, and every prior trade round has depended upon Germany to step up precisely this way. Past instances of such leadership relied upon German industrial exporters prevailing upon the German government to base its policies on the overall stake of the German economy in the trading system. But for the past few years Germany has gone in the opposite direction, with Schroeder caving in to French President Jacques Chirac’s agricultural demands and leaving the United Kingdom out to dry on its EU budget proposals to link its rebate to CAP reform.
Merkel could save the Doha round by reinterpreting [see the footnote below on "reinterpreting" - Ben] the budget deal just made on agricultural support funds at the EU summit. Germany can keep the agreed amount of money for the EU agriculture budget unchanged but use that money in different ways than export subsidies and other trade-distorting agricultural aid. So doing would remove a transatlantic conflict (and threat of the United States legitimately scapegoating the European Union) while helping the poor countries. Merkel could even offset some of the drag on German consumption from her own proposed sales tax increase by getting German food cheaper, making it more worthwhile for her to go up against Germany’s neighbors. This would be a good payoff for a return to traditional German leadership in EU trade policy and something the United States would be grateful for but cannot by itself achieve.
Footnote:
A claim could be made that all the EU states just committed to not reopening the budget deal on agriculture until at least 2009. But, as with the Stability and Growth Pact, the EU Takeover Code, the EU Services Directive, and so on, all intergovernmental agreements within the European Union are subject to renegotiation in the guise of reinterpretation if the major states decide to do so. There is certainly no reason the French and Polish should get away with keeping the CAP deal more sacrosanct than all the other deals.
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