Last Chance to Avert Hibernation

The Doha round of trade liberalization has been for the most part a tale of three ugly Fs: frivolity, frustration and fiasco. The frivolity of those countries that were supposed to lead by example; the frustration of those that entered the round with ambitious expectations; and the fiasco that the lack of progress has made for the international community at large.

Ironically, there were good reasons for this tale to have evolved differently. They are the same ones that launched the round in November 2001:

• More open markets worldwide would bring about very large economic benefits for both developed and developing countries.

• Commerce is not only an engine of prosperity but also a powerful means of promoting peace and security.

The pacific consequences of trade should never be overlooked, least of all in this era of new threats to security. Yet this is exactly what happened throughout negotiations in 2002 and 2003. The sense of urgency, commitment and leadership that U.S. trade diplomats exhibited in getting the talks started vanished shortly thereafter, making it easy to predict the collapse of the WTO Cancún meeting in September 2003--as I did in this space.

Back on Track or More Disillusionment?

The atmosphere of acrimony and cynicism that prevailed before, during and after the Cancún breakdown has changed over the course of this year. The first wind shift came in January, when U.S. Trade Representative Bob Zoellick sent a letter to all WTO trade ministers. In it he signaled an auspicious departure from the infamously protectionist U.S.-EU joint proposal on agriculture that was made a few weeks before Cancún and precipitated the meeting's failure. Trade diplomacy at various meetings all over the world has been particularly intense since late April. Whether they've been in London, Dakar, Paris, Geneva, Santiago, Sea Island or São Paulo, all meetings have attempted to narrow differences.

Everybody seems to feel that progress after July--and probably well into 2005--will be impossible because of the political circumstances in the U.S., Europe and elsewhere. Moreover, there is concern about whether the existing trade-promotion authority enjoyed by the U.S. Executive Branch will be extended by Congress when it comes up for review next year. It is feared that in the absence of tangible progress at the WTO talks the extension could be blocked.

That aside, WTO headquarters in Geneva has left behind the lethargy of past months with the aim of clinching some meaningful agreements by the end of July. Of course the original objective of concluding the talks this year has been, if not explicitly, then practically, abandoned. The chief goal now is simply to avoid a situation in which 2004 becomes another lost year for the round. This will not be easy even given the modest thresholds adopted to meet that goal, as for example something the WTO ambassadors diffusely call "frameworks for modalities of negotiation in agriculture and nonagricultural products."

Serious Hurdles Ahead

Not surprisingly--and without ignoring the enormous difficulties in other areas--agriculture will continue to be the biggest stumbling block. The U.S. and the EU have already offered more flexibility on the crucial question of export subsidies, but they will need to make much more headway on import barriers and domestic subsidies. And developing countries must become more ambitious trade reformers. They must recognize that they have much to gain not only from improved access to rich countries' markets but also, and very substantially, from their own trade liberalization.

Let's hope the reduced expectations of 2004 can be met, but we must be realistic about the obstacles that will be encountered. Some of these obstacles, paradoxically, stem from the mercantilist logic of reciprocal liberalization that for more than half a century has driven the impressive expansion of international trade. Politicians don't start by acknowledging that unilateral liberalization is good in and of itself. They generally assume that opening one's market is a necessary evil in order to gain access to others' markets.

Developed countries, for example, argue that they must receive large concessions from others if they are to pay the high price of dismantling their agricultural protectionism. They ignore the fact that by reforming their farm policies they'd collect two big prizes: lower prices of farm products for their populations and huge savings in taxpayers' money now spent on questionable farm subsidies. Developing countries, which are absolutely right in being angry over the rich countries' remaining protectionism, are very wrong in so ardently holding on to their own. With these mind-sets, both groups inflict pain on themselves. In the case of developing countries, the idea that opening one's own markets is a concession takes on almost perverse consequences. According to this wrongheaded notion, the poorer a country is, the fewer--if any--concessions it should make. However, it so happens that the less open a country is, the more likely it is to remain poor.

Will arguments of this type carry any weight at the WTO talks? If they don't, the Doha round could be forced into a long period of hibernation, which will have very negative consequences for all.