The collapse of the Doha round of trade negotiations over farm subsidies will likely stand with the Smoot-Hawley tariffs as one of the major blunders in US trade policy. To be sure we protected the right to send millions of dollars to US farmers regardless of income or need, but we almost certainly lowered the possibilities for the 99.9% of Americans working in other industries.
U.S. subsidy payments fell in 2007 as commodity prices rose. Congressional mandates for ethanol, which uses corn, have also contributed to the higher prices. Boondoggle that those requirements are, U.S. negotiators could have at least taken advantage of them to make their lower subsidy offer last year. America's trading partners might have been impressed back then; now, not so much.
The U.S. also seems to have erred in insisting on farm-market access (i.e., lower tariffs on food products) to match its cuts in trade-distorting ag subsidies, rather than asking for lower tariffs for manufactured goods and better access for services. The U.S. farm lobby may be strong -- strong enough to muscle Congress in May into passing the new $300 billion farm bill over President Bush's veto. But Americans were always going to benefit far more from a Doha deal that gave their industrial goods and services better access to emerging markets.
The Bush Administration was calling the shots on this negotiation, but Democrats in Congress have also spooked the rest of the world with their protectionist talk -- from their farm-bill veto override to their refusal to ratify a bilateral trade deal with U.S. ally Colombia. For all their talk about listening to America's partners, Democrats have their fingers in both ears on trade. [More]
We have also added an irritating complication for future relations with the emerging economic giants, China and India. Most crucially, it is the products that will comprise our future prosperity - services and technological innovation that will he hamstrung the most. It is also an ominous sign that countries like China are looking forward to unilaterally imposing trade rules similar to what the West became used to. I think we are in for a rude shock when governments representing the growing markets of the world decide they can dictate trade terms now.
"In the long term the debacle in Geneva marks a break of immense importance. The rules governing trade will become more inscrutable, because agreements between individual states will replace the framework that had been globally accepted up to now. The WTO will lose its influence as the referee in disputes. The price will only gradually be perceived by businesses, but it will be high. The trade system is losing the dependability that exporters urgently require."While a Doha would have taken considerable time to fully engage, the benefits of freer trade that could change the world for my sons and grandchildren may be postponed for another generation. Or at the least, until stark economic conditions force trade reality upon narrow minds.
"Above all the failure of the WTO talks reflects the changing power relations in the world. Gone are the days when the US and Europe could set the tone and largely draw up the world trade agreements amongst themselves. China and India took a tough stance. They fight hard for their interests and only support free trade when it suits them. The old industrial powers will slowly realize the bitter truth of this. Geneva was just a foretaste." [More]