The Stakes of Doha

Carla A. Hills

From Foreign Affairs, December 2005 -- WTO Special Edition

Summary:  Americans should care deeply about the Doha Round, but many do not understand what it means for them and the rest of the world. With the talks barely moving, it is time for supporters of free trade to educate the American people in order to give Washington the backing it needs to break the deadlock.

CARLA A. HILLS, CEO of Hills & Company, was U.S. Trade Representative during the administration of President George H. W. Bush.

JUMP-STARTING A STALLED PROCESS

At the UN General Assembly last September, President Bush declared: "The United States is ready to eliminate all tariffs, subsidies and other barriers to the free flow of goods and services as other nations do the same." The Doha Round of multilateral trade negotiations aims to do just that. These negotiations hold the promise of raising standards of living worldwide, alleviating global poverty, removing inequities in the trade regime, and enhancing international stability. Yet there is a significant risk that they could collapse or achieve only a fraction of their potential.

Americans should care deeply about the Doha Round and what it means for them and the rest of the world. Yet the lack of concern about these negotiations among members of Congress and the media suggests Americans are unaware of what is at stake. For Americans, a successful conclusion of the trade negotiations would bring higher living standards. For the rest of the world, success would deliver not only higher economic growth but also greater political stability. With the talks barely moving forward, the world needs the United States to lead these negotiations as it has led past trade negotiations.

But anti-trade political pressures at home not only hinder the ability of the U.S. government to lead, they put at risk its ability to secure congressional approval of any agreement it brings home. Only by building a solid base of political support for new trade agreements can the United States capture the very substantial benefits that a Doha agreement could provide. Americans should be better informed about the gains possible from a broad Doha agreement, the status of the negotiations, and the political challenges involved.

WHY DOHA MATTERS

The U.S. experience since World War II proves that increased economic interdependence boosts economic growth and encourages political stability. For more than 50 years, under both Democratic and Republican administrations, the United States has led the world in opening markets. To that end, the United States worked to establish a series of international organizations, including the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). In 1947, only 23 nations participated in the first round of trade negotiations. Today, 148 nations are participating in the ninth round, the Doha Round.

The results to date have been spectacular. World trade has exploded and standards of living have soared at home and abroad. Economist Gary Hufbauer, in a comprehensive study published this year by the Institute of International Economics, calculates that 50 years of globalization has made the United States richer by $1 trillion per year (measured in 2003 dollars), or about $9,000 added wealth per year for the average U.S. household. Developing countries have also gained from globalization. On average, poor countries that have opened their markets to trade and investment have grown five times faster than those that kept their markets closed. Studies conducted by World Bank economist David Dollar show that globalization has raised 375 million people out of extreme poverty over the past 20 years.

And the benefits have not been only economic. As governments liberalize their trade regimes, they often liberalize their political regimes. Adherence to a set of trade rules encourages transparency, the rule of law, and a respect for property that contribute to increased stability. Without U.S. leadership in the eight previous rounds of multilateral trade negotiations, the world would look very different today. The Doha Round provides another opportunity to open global markets in ways that will further stimulate economic growth, reduce poverty worldwide, and encourage international stability.

Self-interest alone should persuade Americans to urge their government to push the Doha negotiations to a successful conclusion. Hufbauer's studies calculate that, going forward, open global trade would raise U.S. income by $500 billion per year, making the average U.S. household richer by an additional $4,500 per year. No other policy decision could come close to having such a positive impact on the United States' economic well-being.

In addition to boosting growth, a broad agreement in the Doha Round could help reduce poverty worldwide. The Doha Round is uniquely focused on the need to alleviate poverty by integrating poor nations into the global trading system. Two factors drove this emphasis on poverty reduction. first, trade ministers launched this round of multilateral trade negotiations in Doha, Qatar, two months after the attacks of September 11, 2001, a time when there was widespread agreement that poverty creates conditions hostile to peace. Second, by focusing on poverty alleviation, ministers were able to persuade leaders of developing countries who were skeptical about the benefits of a new trade round to join the negotiations.