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Trading with the enemy

By MARTIN WALKER, UPI Chief International Correspondent   |   Aug. 18, 2003 at 6:41 AM   |   Comments

, France, Aug. 18 (UPI) -- World trade is growing at 6 percent this year. That's more than it did in the happy boom-like 1996 of recent memory, and after the unexciting 3 percent growth last year, and the 1.5 percent shrinkage of dismal 2001, it should be cause to celebrate. It should also be grounds for optimism about next month's World Trade Organization summit in Cancun, Mexico.

Only 10 days ago, many trade experts were deeply gloomy about the Cancun summit, reckoning that the world's 133 assembled trade ministers were heading for the kind of disaster that sank the 1999 WTO summit in Seattle. But since then, the European Union's Trade Commissioner Pascal Lamy and his American counterpart, Bob Zoellick, have reached a kind of deal.

So they should. The two men are old friends, having worked together as sherpas (top-level aides) preparing the Group of Seven summits back in the heady days after the fall of the Berlin Wall, when Zoellick worked for the first Bush presidency and Lamy worked for the EU Commission president. They have even run marathons together.

Between them, the EU and the United States account for almost half of the world's gross domestic product, some 60 percent of its trade and close to three-quarters of its investment capital. If these two gorillas of the global economy can reach a deal, the rest should be able to fall into line.

That is how world trade politics used to work. That was how the Uruguay Round of trade liberalization talks was settled 11 years ago, after a quiet backroom deal between the United States and the EU at Blair House in Washington. That was also how the WTO was brought into being.

But since then, times have changed, and the WTO is now a body that includes fast-growing China, and where each nation gets a vote. Moreover, times have changed because of the emergence of the anti-globalization movement with the riots at the Seattle summit, and the subsequent economic slowdown and the bursting of the dot-com bubble. Then came the Sept. 11, 2001, attacks, the war on terrorism and the war in Iraq.

Ironically, it was the 9/11 terrorist attacks that gave life to the prospect of a historic deal on trade. When the world's trade ministers gathered at Doha, in the Persian Gulf emirate of Qatar, just two months after al-Qaida's attacks on New York and Washington, the wave of sympathy for the United States helped lubricate the trade talks.

The deal was simple and sound. In return for giving the rich world of Europe and the United States what they wanted in intellectual property rights, investment safeguards and more free trade in services, the developing world would get the deals they needed in terms of agricultural and textile trade and access to the rich U.S. and European markets. Above all, the deal contained the implicit promise that the rich world of the north would stop spending a billion bucks a day to subsidize their farmers, and give the poor world of the south a chance to compete.

But then President Bush signed his farm bill, boosting agricultural subsidies, and France's President Jacques Chirac dug in his heels against serious reform of the EU's protectionist farm program. Along with transatlantic trade rows over genetically modified foods and tax breaks for U.S. exporters, the Iraq war chilled U.S.-EU relations.

The deal that Lamy and Zoellick have now reached puts the EU and the United States back on the same wavelength. That is the good news, because nothing will get achieved in world trade while the two giants are at loggerheads. But their deal, an agreement in principle on how and where to make progress on a global trade deal, does not do much for the poor world. The bad news is that leaves many of the rich world's export subsidies intact, and allows them to continue subsidizing their farmers by reclassifying the billions in handouts as "non-distorting" trade mechanisms.

The question now is whether the U.S.-EU private agreement will be enough to persuade the rest of the world to swallow it. India and Brazil, two of the biggest players on the "poor" side, have already signaled their dismay. Kevin Watkins, research chief of Oxfam, one of the most influential non-governmental organizations, says of the deal "a more effective strategy for poisoning the negotiations at Cancun it would be hard to imagine."

The best that can be hoped for is that the Cancun summit agrees to keep kicking the ball down the road, rather than end in the kind of total disaster that could wreck the WTO system altogether. Yet the United States seems to be preparing for this, signing up a series of bilateral trade deals with individual countries that steadily undermine the WTO's core commitment to reaching multilateral agreements. Still, there is one consolation. If the current flawed system allows world trade to keep growing at 6 percent -- doubling every 12 years -- matters could be a great deal worse.

© 2003 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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