World Trade on the Ropes

Written By Brian Hicks

Posted August 4, 2006

In the boxing match of global commerce, the World Trade Organization is in a position to award championship belts. Unfortunately, though, the fighters too often walk away from the ring.

Such was the case in the aptly-named Doha Round, the WTO’s most recent shot at creating a unified trade mechanism that would allow wealthy countries to display their respective competitive advantages while giving developing nations a boost on their way to self-sufficiency and market-based parity.

When WTO director general Pascal Lamy rang this round’s closing bell, he may have sounded the death knell of meaningful movement. The success of this phase was important because of what it represented – an agreement that solidified the world’s economic growth as a means to peace and prosperity in the wake of 9/11.

In this respect, the Doha Round (named after its recurring meeting site in Qatar’s capital city) follows the legacy of the WTO’s predecessor, the GATT.

The General Agreement on Tariffs and Trade, better known as the GATT, rode the wake of World War II, whose destructive scope required an intense restructuring of the political and economic map of the world. The United Nations was formed in the heat of that big bang, and the GATT was signed with the intention of forging financial ties to increase interdependence and avert future catastrophic wars.

In 1995, after several rounds of negotiations among countries that were party to the GATT, the WTO was formed as the trade body that would actually govern relations and disputes among signatories.


New Name, Old Game

The Doha Round, convened in the Persian Gulf emirate of Qatar after Seattle proved too protest-ridden to play host, is also called the Doha Development Agenda. The political onus of this round is immense, with not only the big developing countries Brazil, India, and China taking part (Russia is still in negotiations for WTO membership), but a diverse palette of newly-independent European and African states also looking for someone to give them bootstraps they can pull themselves up by.

Instead, the US has remained obstinate regarding its subsidies to American farmers. Though I come from the heartland, where droughts and frost can ruin an entire year and legislators guard their voters’ interests by babying the agricultural base, the welfare system currently in place fosters not competitiveness but complacency.

In the face of Brazil’s ethanol boom, for example, the US should increase efficiency and let liberal market forces do the deciding. It is noble to want to spare farmers from the disasters that befell so many rural Americans early in the 20th century, but the major threat they face is not their Angolan counterparts but the mega-farms and factory meat operations that are using economies of scale to outprice nearly every sunrise-to-sundown homestead.

On the other side of the equation, there is the Latin American Bolivarian Alternative, spearheaded by Venezuela’s Hugo Chavez. It is the new populist order in this side of the developing world, posing a threat to the free-trade basis of the WTO. Simply put, if first-world protectionism blocks the door to sustainable wealth for emerging economies, other forces will step in.

This is especially salient as Washington and US trade negotiators have been the primary party-poopers for WTO changes to national agricultural subsidies. After all, developing countries often have little more to export than the fat of their land, and if US ports are prohibitive in quotas and pricing, there is little chance that anything more than a pastoralist economy will sprout in those lands.

Conference in the Corner

Moreover, Venezuela is now pushing its case as the newest member of Mercosur, the Latin American common market. As half of Mercosur’s members rejected the US-backed FTAA (Free Trade Area of the Americas), there is a demonstrated preference for regional peers who understand each other’s situations to forge the strongest ties among themselves, leaving the United States to blow its market-access horn in the dark.

Every single member of the WTO except one – wily Mongolia – is part of some type of regional trade apparatus. Perhaps the nomadic yurts and horseman lifestyle gives rise to a special kind of loner on the steppe, but in general, geographic affinity has proven to be a powerful force in bringing countries’ trade policies closer together.

As in so many key issues with worldwide consequences, George W. Bush is in a position to either tout or torpedo the Doha Development Agenda. And it’s not just the former pilot who’s flying this plane. "Fast-track" trade authority passed by Congress in the 90s is set to expire in July of next year. That expedited power has enabled the inking of 14 trade deals involving the US in both bilateral and multilateral structures, with another 11 in the works.

So Washington apparently has bought in to the regional and non-WTO trade agreement idea, and its torrid signing pace means that the Doha round probably would not hurt the US economy so badly that it would actually make the protectionist House of Representatives dial down the subsidy regime.

But to others among the WTO’s 149 member countries, a little courage and a lot of action on Capitol Hill is needed to kickstart the system that has been idealized since 23 nations signed the GATT in 1948.

The international community is bigger, there is more to go around, and the stakes are higher – it’s time for another round.

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