From Seattle to Hong Kong

Jagdish Bhagwati

From Foreign Affairs, December 2005 -- WTO Special Edition

Summary:  There have been eight rounds of multilateral trade negotiations prior to Doha. Although they all ended well, it is important to remember that few went smoothly. Negotiators in Hong Kong now face real obstacles, but there is reason for hope -- if, that is, they have the will and courage to do what is necessary to succeed.

JAGDISH BHAGWATI is Senior Fellow in International Economics at the Council on Foreign Relations and University Professor in Economics and Law at Columbia University. He was Economic Policy Adviser to the director-general of the GATT and a member of the expert group that recently reported on the future of the WTO. His latest book is In Defense of Globalization.

During the period between the end of the Uruguay Round and the launching of the Doha Round, the pharmaceutical industry insisted that the TRIPS agreement was a done deal and should not be revisited (except to make intellectual-property protections tighter) -- even though virtually all trade rounds in the past have included renegotiation of issues that had been dealt with before. This game plan backfired, however, when the spread of AIDS in Africa and the widely recognized need for cheaper anti-retroviral drugs created huge pressure on the pharmaceutical industry during the few years preceding the Cancún meeting. The U.S. firms resisted this pressure for a long period. But finally, just prior to Cancún, the firms capitulated in the face of public opprobrium and handouts or threats from the Bush administration and agreed to accept a reduction of restrictions on the production and use of generic drugs. Thus, like the Singapore issues, the TRIPS problem was effectively avoided at the Cancún talks. And intellectual property largely remains off the agenda in Hong Kong, although some key details of a revised agreement (including protection for geographic brand names such as Burgundy wine, Parma ham, Roquefort cheese, and Darjeeling tea) remain to be worked out in a low-key fashion.

As important as these developments were, the central breakthrough at Cancún was the emergence of the Group of 20 (G-20), led by Brazil, India, and South Africa. Seen at first as spoilers, these countries had played a negligible role in earlier negotiating rounds. Press coverage of the MTNs tended to focus almost exclusively on the interplay between the European and the American trade representatives, who were treated as the stars of the trade talks with others sidelined to obscurity. At Cancún, however, this dynamic finally changed. Celso Amorim, Brazil's foreign minister, made a dramatic stand, planting the flag of the developing world on the MTN map and forcing the media to pay attention to its interests. In past years, the Quad -- the United States, the EU, Japan, and Canada -- had set the terms of the negotiations. After Cancún, however, the agenda was set by a new Group of 5, which included the United States, the EU, Brazil, India, and Australia (as a representative of the Cairns Group of 17 agriculture-exporting countries).

Cancún thus represented a triumph for developing countries, which suddenly gained recognition and a political stake in the negotiations. Indeed, the G-20 even managed to demand successfully that the EU and the United States go back to the drawing board and come back with improved offers on agricultural subsidies and trade barriers. This development augurs well for the future, since effective negotiations can occur only among equals; finally, representatives from Washington and Brussels face opponents their own size (or near to it).

Even the fact that the Cancún talks did not wrap up the Doha Round should not be seen as a failure. After all, at the time of Cancún, the Doha Round was only two years old. Both the Tokyo and Uruguay Rounds had taken much longer to close. Finishing Doha so quickly would have taken a miracle, and miracles do not happen in trade.

REASONS FOR PESSIMISM

Despite all these positive developments, there are still reasons for pessimism about what negotiators will accomplish at Hong Kong. The most difficult issue is lowering agricultural protections; in recent months, Washington and Brussels have lobbed related offers and counteroffers at each other without much progress. The EU itself is divided between France and its allies, which oppose making any serious concessions, and the United Kingdom and the Nordic countries, which favor accommodation.

The French opposition to the liberalization of agricultural trade rules seems animated by the popular and populist conviction that reducing such barriers would constitute an attack on both French agriculture and French culture. To its opponents in France, endorsing globalization would mean a surrender to Anglo-Saxon neoliberalism, which stands in contrast to the more equitable French view of how society and the economy should be managed. French opposition is also motivated by the fact that unemployment there is now near the two-digit level (in 2003 and 2004, it hovered around 10 percent when adjusted to a U.S.-comparable estimate). Much of the French public mistakenly attributes this problem to globalization rather than to the government's structural and macroeconomic policies. This non sequitur compounds the fact that high unemployment rates often produce popular opposition to opening markets to foreign competition. Similar problems afflict Germany.

The Bush administration, by contrast, clearly favors trade liberalization through the Doha Round, as the president has unambiguously declared. Yet even in the United States, political support for this position has seriously eroded. In December 2001, Bush managed to get fast-track negotiating authority (now known as trade promotion authority) passed in the House of Representatives by a majority of only one and within a broader trade bill by only three votes in July 2002. Last summer, the Central American Free Trade Agreement (CAFTA) received a similarly narrow majority (of two votes).

Such rhetoric aside, opposition to free trade from within the Democratic party has had two dramatic consequences. first, the number of Democrats in Congress voting for each trade bill has steadily fallen in recent years; this summer, only 15 representatives supported CAFTA. The consequences for those who endorse such measures have also grown; in fact, after losing the CAFTA vote, Representative Nancy Pelosi (D-Calif.), the House minority leader, vowed to work to deny the CAFTA supporters a place on the Democratic ticket in the next election.