Mysteries of Trade Diplomacy

This will be registered as one of the biggest mysteries in the history of trade diplomacy: On Aug. 13, 2003 - a month before the WTO Ministerial Conference meeting in Cancún, Mexico - American trade negotiators suddenly decided the U.S. should join the EU's exclusive club of rich countries for perpetual agricultural protectionism. On that date a joint U.S.-EU proposal on agriculture, offered as a means of breaking the deadlock of the WTO Doha Round, was announced with great fanfare.

In a nutshell, the Americans and Europeans were very imprecise in defining their commitment to lowering import barriers and were overly precise in shielding massive subsidies to their own farmers from meaningful reform. Their proposal not only failed to commit to the total elimination of export subsidies, as it should have done, given that these subsidies constitute outright dumping, but it also aimed to introduce provisions allowing them to legally perpetuate a significant part of their worst protectionist practices. It also lacked a pledge to reduce over time - or to even cap - the amount of aggregate subsidies, trade-distorting and non-trade-distorting, to farmers. And while being vague about how tariff and nontariff barriers to agricultural trade would be lowered, the proposal was clearly skewed toward the EU's too-gradual and discretionary approach.

Why American trade negotiators coupled with the Europeans on the eve of the Cancún meeting is a mystery on several counts.

1. Until then the U.S. had stood by its 2002 proposal calling for a rapid dismantling of both agricultural trade barriers and trade-distorting subsidies to farmers.

2. Global agricultural trade liberalization on balance would be very good for the U.S., considering the significant benefits that would accrue to its consumers and its exporting farmers.

3. It is not in the U.S.' best geopolitical interests to unnecessarily share in the EU's dubious honor of being the biggest spoiler of the Doha Round, as has now happened.

The Real Reason for Failure at Cancún

The unexpected U.S.-EU alliance was the fundamental cause of the Doha Round debacle at Cancún. That alliance immediately triggered the formation of an opposition coalition led by Brazil, India and China that not only produced its own agricultural proposal but also remained militant and, admittedly, inflexible on many other issues until the breakdown. That inflexibility is understandable in light of the developed countries' disappointing performance throughout the negotiations. After all, developing countries had been persuaded to support the Doha Round in 2001 because they were told it was the only way to have serious negotiations that would deal with the rich countries' injurious agricultural protectionism.

Perhaps in an effort to deflect questions about responsibility for the failure, the EU's and the U.S.' trade representatives have engaged in an unfortunate blame game. The European officials insist that the decision-making mechanisms of the WTO - based on the pursuit of full consensus among members - is the chief impediment to progress. Their American counterparts place the blame on the "naysayers" - those countries that led the revolt in Cancún. But more unsettling is the unwarranted threat by U.S. Trade Representative Robert Zoellick to move toward bilateral and regional agreements, to the detriment of multilateral negotiations. This threat has already been seasoned with moves designed to make some countries withdraw from the group of 20-plus nations making up the Cancún dissident bloc or else face the consequences when negotiating some other bilateral or regional endeavors with the U.S. The bullying of friendly nations and the avoidance of responsibility do not make for the kind of international leadership that will be required of the U.S. if the Doha process is to be restored (and if the negotiations for the Free Trade Area of the Americas are to advance).

Rescue the Round

For the sake of global prosperity and security, the Doha Round must be rescued and successfully concluded. But trying to restart the negotiations at this juncture might prove counterproductive. Domestic politics will not be auspicious for the main players in the year ahead, and the developing countries should be allowed time to cool down from their Cancún clamor. WTO members, therefore, should formally postpone for a year or two the deadline - still set for the end of 2004 - to finish the Doha talks. A general strategy to resuscitate the talks could next be discussed and agreed upon. It would probably be more realistic to relaunch the round by returning to the discussion of principles instead of details.

However, sooner rather than later, governments of the developed countries must recognize that no other specific issue of the Doha agenda will be resolved until they get serious about agricultural reform. They will have to signal their willingness to fully separate their farm subsidies from production, reduce the monetary value of those subsidies to a reasonable level and significantly lower barriers to agricultural imports. Nobody questions the right of rich countries to give a fair amount of their taxpayers' money to their farmers. What is wrong is to give subsidies in a way that, by severely distorting international agricultural markets, unfairly impedes other countries' exports and impoverishes even more poor farmers in developing countries.