Charting a New Course for Trade
As member nations of the World Trade Organization (WTO) prepare to welcome Pascal Lamy as the new head of the global trade body this week, the United States has an opportunity to demonstrate leadership in charting a new course for international trade and global prosperity.
The stakes for United States foreign and economic policy and our broader national security goals are high. If we seize this moment, the United States could lead efforts to correct longstanding inequities in the global trading system and potentially salvage the moribund Doha “Development” Round of trade talks. If the United States instead adopts a passive stance, already tense divisions will grow deeper, and the ideal of a truly global trading system will be undermined.
The Doha negotiations are critical to our future prosperity and security. A well-functioning, rules-based trading system that allows the full participation of all countries will foster cohesion and narrow the divide between the world’s richest and poorest countries. At the launch of the trade liberalization talks four years ago in Doha, Qatar, the world’s rich countries made a commitment to the world’s poorest nations that it would make development a centerpiece of trade, reform the trading system to enable poorer countries the opportunity to compete in areas of relative competitive strength, and allow the full participation of all countries in the international trade regime. The World Bank has predicted that the net outcome of our honoring this commitment and completing a successful Doha round could generate $500 billion in additional income by 2015, with $300 billion accruing to developing countries.
Mr. Lamy, the well-regarded former European Union trade commissioner, assumes the role of WTO director-general at a critical moment in the bumpy history of the Doha trade negotiations. Progress to date has been stalled by endless bickering and finger pointing between the United States, European Union, and other major trading partners and has been marked by a collective absence of political will. Time is running out to achieve a substantive deal in the lead-up to the WTO’s crucial ministerial meeting in Hong Kong in December.
Success is far from assured. And if current public sentiment towards trade liberalization and the recent pace of negotiations are any indication, Mr. Lamy will need all the help he can get.
Global public confidence in the international trading system is eroding as exemplified by the failure of the WTO talks in Cancun in 2003; razor-thin congressional votes held in the middle of the night on regional trade pacts (DR-CAFTA); and the lack of progress in the Doha round. In the United States, a growing number of Americans do not believe that international trade regimes like the WTO reflect their core interests. As the Doha talks have gone in circles, developing countries have grown more and more frustrated by a system that seems perpetually tilted in favor of rich countries and leaves developing nations with rigid rules that make it difficult to compete.
If resolution is to be found in the bitter trade debate, a new consensus must be developed that reflects the values and interests of both the North and South. The United States must demonstrate the political courage to implement a comprehensive approach to trade and development that earns both the support of the American people and our important trading partners in the developing world.
In order to move forward on Doha and restore public confidence in the WTO, the United States should give high priority to pursuing the following three areas at home and abroad:
I. A New Partnership on Agriculture
The United States has an opportunity to break the current stalemate over agriculture between North and South and fulfill the promise of Doha by immediately agreeing to reduce and eliminate trade distorting export subsidies, grant greater market access, and reduce tariffs on agricultural products from the South by a date certain. The European Union, Japan, and others must follow suit.
At the same time, the United States should facilitate this important transition by maintaining a strong commitment to support the agricultural sector by encouraging innovation and the development of new markets. In particular, the United States has an opportunity to bridge the differences between large and small producers in the North and the South, develop new agricultural revenue streams, and strengthen rural communities by investing in a greater role for agriculture in the provision of energy. For example, the United States should support the research, development and deployment of a robust and ambitious biobased fuels and products program with specific goals and benchmarks to evaluate progress. The result would shift our resources away from less competitive trade distorting commodities, reduce or eliminate market barriers to agricultural products, and diversify our energy supply in a manner that will lead to a cleaner, more secure energy future.
In addition, the G20 must make significant good faith efforts to grant improved market access for United States manufacturing, services, and agriculture products at a pace commensurate with their level of development. All countries must do more to encourage South-South trade. Progress must be achieved in resolving the concerns of West African cotton farmers with a long-term viable solution.
II. Broaden the Benefits of Trade
Trade is not an end in itself and the pursuit of greater liberalization alone will not produce gains for all. Opening markets to increased competition will inevitably force some members of society to bear a greater burden of economic adjustment than others. If support for trade liberalization at home is to be sustained, the losses in certain sectors must be offset by meaningful and comprehensive support packages. Given the potential benefits from liberalized trade to the economy as a whole, greater efforts should be made by the beneficiaries of open markets to assist various economic sectors in any transition that may take place. As a result, the United States must acknowledge that a commitment to pursue trade liberalization must be accompanied by a significant and long-term increased investment in assistance to ease economic adjustment brought about by trade and competition.
In the context of the developing world, the promise of Doha will not be achieved by the single-minded pursuit of trade liberalization in the absence of a successful development strategy. Trade is an important instrument of economic growth, but it is not exclusive of other important components of development. Improved market access must be accompanied by increased public and private investment in critical “behind the border” sectors such as education, rule of law, health care and essential medicines, anti-corruption efforts, transportation infrastructure, economic diversification programs, and increased business opportunities for local investors. Trade liberalization should take place at a pace and scale commensurate to the level of development. The Doha round should be accompanied by a systematic program to assess and improve international development performance through capacity-building assistance and technology transfer. Overall, the United States has an opportunity to reinvigorate the original Doha mandate and work towards building a global consensus based on the principle that trade liberalization and development can be advanced together.
III. A More Open, Democratic, and Accountable Trade Regime
The potential benefits of open trade will not be realized unless all countries, but in particular, poorer nations, are given an opportunity to actively participate in key decisions establishing the future terms and rules of international trade. All countries deserve a seat at the table and the WTO should operate under commonly accepted democratic standards of openness. The United States and our trading partners should assess what a proposed trade arrangement would mean for domestic economic and regulatory frameworks before closing the deal and in time to avoid predictable mistakes. Disputes should be heard in the open. Records should be available for scrutiny.
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At the WTO, working together with Mr. Lamy and other nations as true partners, the United States must lay the groundwork for a strategic vision of world trade that expressly recognizes the importance of linking economic growth and development in order to build a future that advances both development and trade together. The ultimate fate of the Doha round may depend on it. We wish Mr. Lamy well.
Jake Caldwell is director of Resources for Global Growth.
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