Ready for a Launch? the Prospects for Global Trade Negotiations

By Brainard, Lael | Brookings Review, Fall 2001 | Go to article overview

Ready for a Launch? the Prospects for Global Trade Negotiations


Brainard, Lael, Brookings Review


With only two months left until the World Trade Organization meeting in Doha, Qatar, it is still an open question whether trade ministers will agree to launch a new round of global trade talks. How the question is resolved matters for the livelihoods of millions both in the developing world and in the wealthiest nations. The current economic slowdown makes agreement all the more important but also more difficult. Market forces no doubt will continue to drive globalization forward regardless of the outcome in Doha. But whether negotiations are launched--and on what basis--could determine far into the future the rules under which further globalization takes place and the distribution of benefits among and within nations. Much is at stake.

Impediments to the launch of negotiations are serious but surmountable. Reconciling the divergent interests of the world's trading nations will require accommodation among key industrialized nations--the United States, Japan, and the European Union chief among them--and agreement between these nations and key middle-income and poor countries. In addition, each nation--the United States in particular--must enter the negotiations with broad domestic support.

Getting to Yes among the Wealthiest Nations

The outlines of an agreement among the industrialized countries have been discernible for some time. The question is when and how each can make the requisite trade-offs among domestic interests to strike the deal.

Having been burned in their efforts to launch a world trade round at the 1999 WTO meeting in Seattle, American policymakers may hesitate to be out front in pursuing that goal this year. But leadership in the global trade system is in America's national interest. The U.S. agenda includes ambitious goals for opening agricultural and services markets (where it has many allies) and modest goals on social issues (where it has few). The key U.S. defensive priorities include antidumping--or unfair trade remedies--and protection in a few vulnerable sectors.

The United States has pushed market access as the central thrust of the next trade round. Doing so is in America's interest and is also the strongest point of common interest with developing nations. In particular, the last world trade round--the Uruguay Round, implemented in 1995--mandated follow-on negotiations for market access in agriculture and services, both areas of particular U.S. strength.

Today, farmers face tariffs averaging 50 percent, and quotas continue to hinder trade in major farm products, while negotiations have brought average industrial tariffs down to 4 percent, and quotas on industrial products have been banned. Similarly, services sectors are presumed closed unless countries offer them up to foreign competition, while the reverse is true for all other products. There is also a strong logic for the next round to lock in open markets for the products and services associated with the new economy rather than risking far more contentious negotiations in the future, once barriers have grown and vested interests formed.

But, agricultural liberalization is a sensitive issue for Japan and Europe, since both heavily subsidize their inefficient farm sectors. In reality, the European Commission has a considerable interest in WTO negotiations on agriculture. A deal that forces subsidy cuts would enable the Commission to blame the WTO for agricultural reforms that will be essential if big farm producers like Poland are to join the EU without busting the budget--half of which now goes to farm support. Moreover, there is particular urgency because the so-called "peace clause" preventing agriculture disputes between the United States and the EU is set to expire in 2003.

But France strongly opposed the agricultural terms negotiated in Seattle and will remain resistant unless the EU broadens the agenda to include subjects such as investment and competition policy.

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Ready for a Launch? the Prospects for Global Trade Negotiations
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