Plan B for Plurilateralists

The president's trip to Europe this week includes a personal effort to kick-start world trade talks. That should end the idea that he was downgrading U.S. trade goals when Rob Portman was transferred from trade chief to budget director. Instead, the president has made clear the U.S. insists on a genuine big deal for world trade – or no deal at all. That's in contrast to what some are calling a "modestly ambitious outcome" – or what Susan Schwab, Mr. Portman's successor as USTR, has rejected as "Doha Lite."

The president laid out what's involved: Europe will "have to make a tough decision on farming," the developing countries will "have to make a tough decision on manufacturing" and the U.S., he said, "is prepared to make a tough decision to go along with them." It's a last-ditch effort, because presidential trade authority expires in a year, and in Congress there's no stomach for half-deals. Indeed Bill Thomas, the powerful chairman of the House Ways and Means Committee, has said Washington should end altogether its support for the WTO.

It's the developing nations, led by Brazil and India, which are calling for just a "modest outcome," and it's time to recognize they have too small a stake to make that case. In fact, the world's 50 "least developed" nations account for less than 1% of global trade, and even with India and Brazil added, the total is less than 3%. The economies that are in fact the world's trade leaders are, not surprisingly, in North America, northeast Asia, the EU and the Asia/Pacific region.

If those trade heavyweights cannot close a satisfactory deal this summer, it will be time to start on Plan B, which would be centered on "plurilateral" or less than global-scale trade agreements. These would retain the key elements of the present multilateral system, which means they must exclude all preferences or preferential treatment; be based on full reciprocity; and be open to all who abide by those rules.

Fortunately the two essential elements to do just that are already in place. One building-block is the General Agreement on Tariffs and Trade's Article 24, which was initially drafted to allow for the original European Community. It provides legal cover for groups of nations to establish FTAs, so long as "substantially all trade" is included. The second building-block is in the several "free trade" agreements the U.S. already has signed, and the others on its current agenda. Included are NAFTA, the recent agreements with Singapore, Australia and Chile, earlier agreements with Jordan and Israel, and the largely completed CAFTA. FTA talks recently begun with Korea and Malaysia have produced encouraging signs (those with Thailand are on hold), and further down the road are several FTAs in the Middle East.

The initial step would be to tie together these separate FTAs into a broader group of nations that share America's free trade goals. Some in Europe are in that category: Britain, the Netherlands, several in Scandinavia and very probably Germany. They seem hardly willing to continue supporting the French-EU insistence on the agricultural policies that have stalled the Doha Round. Yes, Peter Mandelson, EU Trade Commissioner, has said Europe would lose "next to nothing" if the WTO's Doha Round fails, and it's time to test that.

One clue of change in Europe's trade winds came two months ago, when several EU nations wrote Mr. Mandelson to warn him not to make further concessions on agriculture. But those that did not sign the letter included most of the EU's trade heavyweights: Britain, Holland, Germany, Sweden and Denmark. In world trade terms, that's quite a club.

Just as with the existing bilateral and regional FTAs, the new plurilateral free trade group would exist alongside, rather than substitute for, the multilateral system at the heart of the present Doha Round, which has evidently come on hard times. The key advantage of plurilateralism would be to continue the widening of trade liberalization, rather than being stymied by the split between what Robert Zoellick called the "can do" and the "won't do" nations.

But to get the ball rolling the U.S. must return to its traditional position of trade leadership. The whole process started when Cordell Hull, FDR's secretary of state, authored the Reciprocal Trade Act of 1934, and now's the time to resume that role.