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Opinion: Trading matters

Published by The New York Sun on 2006-03-22

If you're depressed about all the talk of a new wave of protectionism in the wake of the Dubai ports fiasco, a lunch with Jagdish Bhagwati may be salutary.

A longtime professor at Columbia University, he is the world's most prominent trade economist, and he has been watching intently as fears escalate that what is known as the Doha Round of trade talks will founder. When I sat down with him the other day, I found him decidedly optimistic.

Professor Bhagwati was present at the biennial meeting of the World Trade Organization in Seattle November 1999, when an attempt was made at launching multilateral trade liberalization talks.

In contrast to the success of seven rounds under the umbrella of the earlier General Agreement on Tariffs and Trade, the Seattle attempt failed as anti-globalization critics took to the streets and violence.

Yet, the Round was launched just two years later in Doha, as WTO members sought to assert their support for globalization post-9/11. Just two years down the road, in 2003, the next WTO meeting in Cancun failed to conclude the Doha talks. Nearly everyone, including the American Trade Representative, Robert Zoellick, and Pascal Lamy, then the European Union's Trade Commissioner, drew alarmist conclusions.

But not Mr. Bhagwati, who wrote an article in Foreign Affairs titled: "Don't Cry for Cancun." He pointed to progress on some key issues and argued that, despite the failures, the negotiating countries would return to the negotiations. And they did. Just before the Hong Kong meeting in 2005, he again predicted that the negotiations would not fold. Indeed, they continue.

As Mr. Bhagwati looks back on what has been accomplished at Cancun and Hong Kong, over four years of negotiations since the launch of the Doha talks, he claims that optimism is justified. More disagreements have been resolved at this stage of negotiations, he argues, than in the Uruguay Round, which dragged through eight years.

The contentious "Singapore" issues, which included curbs on foreign investment, have been withdrawn by the European Union. The African nations have been given one-way free market access by Europe, Japan and America. The intellectual property agreement has been modified to accommodate the need to provide generics more freely to the poor countries. Export subsidies in agriculture are finally to be terminated by 2013.

Now the final act has opened in the Doha play. It is now up to the European Union, America, India, and Brazil to make the reciprocal concessions which will bring the talks to a conclusion. The EU and America are being asked to cut the agricultural subsidies that lead to overproduction. These subsidies are exaggerated, and the prospects for a deal compromised, by shoddy assertions. Mr. Bhagwati argues that ill-informed but financially flush nongovernmental organizations like Oxfam have propagated the myth that the subsidies amount to $1 billion a day when the production-distorting subsidies amount to less than $100 billion annually.

What has made the home stretch of the Doha Round somewhat complicated is the unwillingness of the big developing countries to make the sort of concessions that would please the 30 wealthy industrialized countries, who are headquartered in Paris under the rubric of the Organization of Economic Cooperation and Development. OECD countries produce for two-thirds of the world's gross domestic product of $60 trillion, of which America's share is $13 trillion.

The European trade commissioner, Peter Mandelson, a confidant of Prime Minister Blair, says he can cut the subsidies more than he has agreed to so far, provided India and Brazil open their manufactures and services. India is able and willing to provide concessions on its high manufactures tariffs: Indian industry is flush with confidence in its competitive ability today, thanks to the IT success. Brazil also, as President Lula made clear during President Bush's visit a few weeks ago, wants Doha to succeed.

Still, Professor Bhagwati says, the real question may turn on whether America can deliver on its share of trade concessions in this final stage of the Doha talks. Will the Congress, increasingly skittish about trade-liberalizing legislation, go along when it comes to the crunch? The Democrats voting for liberalization have steadily shrunk in number. The Republicans are not dwindling so fast; but it is still a hard sell with some of them.

Yet, despite Senator John Kerry's demagoguery over outsourcing (he likened outsourcing firms to Benedict Arnolds) and the anti-trade pronouncements of Rep. Nancy Pelosi and Howard Dean, among others, Mr. Bhagwati thinks it is hard to imagine that prominent Democrats would vote against a Doha Round agreement. The meeting in London last week of ministers from wealthy nations was inconclusive. But Mr. Bhagwati, who has a long record of being proven right in his contrarian stands on trade issues, believes that WTO will complete negotiations by the end of the year.

"You can count on President Bush providing fulsome support to this dash. After all, he must be hungry for such a multilateral success when he has been accused ad nauseam of being a unilateralist," he says.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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