Tuesday, July 25, 2006

Financial Times Editorial - Free trade's best defence is the truth

Financial Times Editorial - Free trade's best defence is the truth
Copyright The Financial Times Limited 2006
Published: July 25 2006 03:00 | Last updated: July 25 2006 03:00

If Doha is not dead, its pulse is barely detectable. The collapse yesterday of overnight talks between six big players has made a timely and meaningful agreement about trade liberalisation impossibly unlikely. The stumbling block was a disagreement over agricultural protection: the US was pressing for big reductions in tariff barriers, but others, fearing a flood of subsidised food, were unwilling to accept this unless the US reduced its farm subsidies. The deeper cause is that the few who enjoy trade protection have proved far more politically effective than the majority who stand to gain from liberalisation and often do not realise it. If there is a future for free trade, that will have to change.

It is true that reports of the death of trade rounds are sometimes exaggerated. The Uruguay round looked beyond help in December 1990 but it was later resurrected. It is hard to imagine a similar miracle now.

Broad agreement this summer was essential because President Bush will lose his "fast track" negotiating authority in July 2007. Such is the time it takes to move from international agreement to US law that the window of opportunity is almost certainly now closed. "Fast track" delegated negotiating authority to the executive branch and enabled the President to make a take-it-or-leave-it offer to Congress. This is critical: no other country would agree to a balanced deal in the knowledge that Congress would then pick and choose from its provisions, motivated by an army of interest groups. Yet there is little appetite to renew the President's negotiating authority on Capitol Hill. The case for trade liberalisation is simple: it is not wise to throw rocks into your own harbours. Liberalisation has run aground because its defenders have failed to make that simple argument. They have relied instead on the mercantilist fiction on which the entire World Trade Organization is constructed: that trade negotiations are supposed to balance the pleasure of increased export opportunities against the pain of cheap imports.

Any consumer will tell you that there is nothing painful about consuming Japanese cars, French champagne and Chinese flat-screen TVs at ever-lower prices. Politicians have not proved adept at linking that intuitive proposition to their negotiating positions. The result was a trade round that every negotiator could afford to walk away from. Now the industries that used to push hard for multilateral liberalisation are settling for bilateral trade deals, red tape and all.

In retrospect, branding Doha the "development round" was poor tactics. Trade liberalisation was squeezed between the bleeding-heart campaigners who did not believe that trade could help developing countries, and the heartless lobbyists who did not care. Free trade's defenders now have some time to develop a new sales pitch. Perhaps they should try the truth.


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