WASHINGTON, Jan. 10 (UPI) -- There is a slim chance that European and American leaders can combine their efforts over the next two months to raise Lazarus from the dead by reviving the prospect of a successful Doha Round of the world trade talks.
The visit to Washington this week of European Commission president Jose Manuel Barroso and trade commissioner Peter Mandelson to Washington on Monday gave some cause for optimism, not least because after their meeting U.S. President George W. Bush made it clear he understood how high the stakes were.
"We both recognize that the best way to help impoverished nations is to complete this Doha Round, and to encourage the spread of wealth and opportunity through open and reasonable and fair trade," Bush said. Barroso and Bush both instructed their negotiators "to come up with a solution as soon as possible."
"There is now the defining moment. We are really at a defining moment," Barroso said. "It will be a very important signal for the world community if we show that it is possible to have a global approach to trade and development."
The Doha Round is important for three main reasons. First, it is also called the "development round," as the deal intended to be more than fair to the developing world by giving them far better access to rich markets and to capital. The rich world has not got much choice in the matter. The World Trade Organization is a democratic body, in which every country gets a vote, and the poor and developing countries have a lot more votes than the rich. So if the dominant trading blocks of Europe and North America want a world-wide trade deal made enforceable by the WTO, it will have to be agreed by the developing world.
Second, the Doha Round seeks to extend the free trade principle more widely into the service sector, in addition to the trade in manufactured goods where most tariffs have been cut. This will benefit the rich world, where the service sector is far more important in the overall economy. In the United States, for example, fewer than one worker in five is employed in manufacturing (and only one in fifty in agriculture), and over two-thirds are employed in services.
Note that the changing structure of the world economy through globalization has already started to change the balance of economic power here. In 2001, when the Doha Round was first agreed, Indian negotiators were not happy with the concept of much greater freedom to trade in services. But now that India is benefiting from a scorching period of economic growth, led by the Information Technology sector and by India's success is winning outsourcing contracts from European and American corporations, India has realized that free trade in services can be a very good thing.
Third, the Doha Round -- with luck -- could end the most shameful single aspect of the global economy: the $350 billion that the rich countries of Europe and North America spend each year on agricultural subsidies to their farmers. This increases the cost of food to their consumers and locks much of the poor world into poverty by denying their farmers access to the richest markets. Worse still, by subsidizing U.S. and European food exports to the developing world, it makes it much harder for developing world farmers to succeed even in their own home markets.
Sandra Polaski of the Carnegie Endowment think tank in Washington notes that less than five percent of U.S. exports are agricultural while the overwhelming majority are services and manufactured goods. And yet a handful of senators and congressmen from the farm states have long been able to block progress on Doha in order to protect their constituents, and the Bush administration made progress almost impossible soon after the Doha Round was launched with a farm bill that increased farm subsidies by $18 billion a year.
As a result, Polaski notes that the current policy deadlock in Washington means that "the interests of most U.S. exporters are being held hostage to the interests of a small group of agricultural exporters; breaking the stalemate would be beneficial for the U.S. economy as a whole.
"The U.S. proposal may even be counter-productive to the interests of U.S. farmers," Polaski adds. "Future growth in world food demand will come primarily from rising incomes in rapidly growing economies like China and India. Those countries claim that the U.S. agricultural proposal could reduce incomes for their already poor farmers, which in turn would reduce demand for food imports, including from the U.S."
If the terms of a Doha Round trade deal are not very quickly agreed between the two 800-pound gorillas of world trade, the United States and the European Union, then Doha is dead. At the end of June this year, President Bush's "fast-track" authorization to negotiate trade deals and then send them to Congress for a simple 'yes' or 'no' vote will expire, and the new Democratic majorities in Congress do not look eager to renew it.
So if Doha is to succeed, the U.S. and EU had better reach a deal before the end of March, get it agreed at the WTO by June, and then get it agreed by Congress and by the EU Council.
Frankly, the chances are slim. Even if the Democrats, who sounded worryingly protectionist in their campaign rhetoric in last year's midterm elections, agree to back a Doha deal, the Europeans have a problem. It is called the Common Agricultural Policy, which has been built into the DNA of the EU for the past fifty years and which institutionalizes a series of systems of protection for European farmers. Devised and long protected by France, the CAP has now got new support from new members of the EU with big farm sectors like Poland.
Last week, France's Agriculture Minister Dominique Bussereau wrote to Mariann Fischer Boel, the EU's commissioner for agriculture, slamming her plans to reform the EU's farm aid package "an insult to the social model to which European citizens are profoundly and legitimately attached." (And with an election coming in France in May, the French government is unlikely to want to offend the farm vote.)
"I cannot hide how many French and European farmers are shocked by this proposal," the French minister said.
The focus now shifts to Davos in Switzerland, where U.S. and EU negotiators will try to reach a deal later this month. But everything will rest with the political dynamics in Washington, Brussels and in Paris.
