Monday, July 25, 2011

Why the Doha Round Is in Deep Trouble

Apologies for the blog silence over the last week or so; I was travelling for work and had nary a free second to post.  (I trust you survived without me.)  And since the US FTA debacle remains at basically the same place where I left it (i.e., a frustrating, painful and unnecessary stalemate created by the White House), I want to stop obsessing about turn away from the FTAs tonight and look at another depressing trade issue: the sorry state of the WTO's Doha Round of multilateral trade negotiations.

Columbia University's Jagdsish Bhagwati has a typically excellent op-ed in yesterday's NYT (h/t Steve Craven) on this very issue.  He laments, rightly I think, the bipartisan lack of support for the Doha Round, despite the fact that it has "far greater potential to create prosperity and help working Americans" than the pending FTAs that are currently sucking the life out of the US trade policy debate.  Bhagwati argues that the round deserves our attention and strongest efforts, and his reasoning is clear and pretty irrefutable:
Bilateral trade agreements are not the same as free trade. Yes, they liberalize trade for the parties involved, but outsiders then face a handicap. The discrimination comes in the form of barriers like tariffs and antidumping charges, which countries impose on imports that they believe are priced artificially low.

When the United States negotiates bilateral deals with other countries, the unbalanced nature of the one-on-one negotiations also opens the way for all manner of lobbies to ram their self-serving demands into the agreements.

For example, when Washington negotiated free trade deals with Chile and Singapore, Wall Street lobbied to curtail those countries’ right to impose restrictions on capital flows at times of crisis — even though the International Monetary Fund now admits that such restrictions often make sense. Business lobbies have also pressed for excessively favorable treatment on intellectual property rights.

American labor unions have learned these same tricks, urging Democratic legislators and administrations to block bilateral trade deals unless their demands for labor protections are met, as they did with the three long-delayed agreements now pending.

But larger countries with more clout, like India and Brazil, will allow no such provisions. They correctly see these labor provisions as a form of anticompetitive protectionism. And they point out that it takes chutzpah for the United States to argue for labor rights abroad that often exceed those at home.

Moreover, when powerful business and labor interests can extract concessions in those bilateral deals, they have no reason to support a multilateral trade agenda. Mr. Obama’s trade representative, Ron Kirk, points out that business leaders press bilateral trade deals, not the Doha round. The proponents of bilateral deals always complain that multilateralism is too slow. This surely confuses cause and effect....

The failure of Doha would cause immeasurable harm. It would undermine the credibility of the W.T.O. and its progress in promoting multilateral trade liberalization, and it would begin to erode the binding dispute settlement mechanism, an achievement unparalleled in other international institutions.

The value of that mechanism was demonstrated just this month, when a W.T.O. panel ruled for the United States and the European Union in a case challenging China’s restrictions on exports of industrial raw materials.
Bhagwati then offers a four-point roadmap for concluding the Doha Round.  It relies on one man - President Barack Obama - to "set our trade policy in the right direction" and get the Round across the finish line:
First, Mr. Obama needs to bring the business lobbies on board....

Next, the canard that Doha offers little gain for the United States must be put to rest....

President Obama must persuade labor unions, core Democratic constituents, that they are wrong to buy into the fear-mongering that says trade with poor countries produces poverty in rich countries....

The president should ask Democrats and Republicans to immediately add the Doha round, as it has been negotiated over 10 years, into the same all-or-nothing package as the three bilateral deals. Such a bold gesture has a precedent. After sitting on the fence his first year in office, President Bill Clinton embraced the cause of trade, despite the political costs, and fought fiercely, and against great odds, for the Uruguay round. Mr. Obama should do no less.
The specifics of Bhagwati's recipe for Doha success are different from those that Phil Levy and I set forth in an IBD op-ed last December, but the overall point of each piece is identical: Doha is extremely important, and its fate rests in the President's hands alone.

Unfortunately, as Levy and I noted last year, the political and economic conditions for White House leadership on Doha were much better back then than they are now, and, of course, the Obama administration did absolutely nothing to advance the Round since that time.  Nothing.  So, while I applaud Bhagwati's analysis and efforts, I think he's absolutely kidding himself if he really thinks that this already-campaigning President will wake up tomorrow and start vigorously defending the Doha Round and spending significant political capital convincing US businesses and, more importantly, American labor unions(!) that multilateral trade liberalization is an important and worthwhile endeavor.  Indeed, the current FTA impasse is a crystal clear reminder of President Obama's abject refusal to take on US labor unions in order to promote an American free trade agenda.  So why would he and his political team do it with a much larger (and more economically significant) trade agreement?

Quick (and obvious) answer: they wouldn't, and thus, the Doha Round remains in deep, deep trouble for the foreseeable future.

The sooner we all realize this sad fact, the faster we can formulate appropriate contingency plans, such as putting the Round on ice until, oh I don't know, 2013 when the White House will (hopefully) be occupied by someone more amenable to free trade.

It certainly couldn't get any worse.

1 comment:

Colin said...

Bhagwati is a smart guy, so I don't understand why it is such a struggle for him to grasp that Obama doesn't care about free trade. At all. Given Bhagwati is a Democrat, maybe it's just a case of partisan blinders.