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.

The Japanese said the U.S. proposal was "not a basis for negotiation." The EU countered with a much less ambitious proposal that would reduce wealthy countries' highest farm tariffs by 60 percent, with no time frame for implementation, and set the maximum tariff at 100 percent with the possibility of exempting eight percent of tariff lines. Others were more enthusiastic. The Group of 20 suggested cuts by industrial countries ranging from 75 percent to 45 percent and by developing countries from 40 to 25 percent. They argued that industrial countries should cap their farm tariffs at 75 percent but proposed that developing countries could cap theirs at 130 percent, and suggested that all members be permitted to exempt a limited but unspecified number of sensitive products from the proposed cuts.

The numbers in all of the proposals sound large, but because cuts are taken from permitted tariff ceilings, not the lower levels governments actually apply, cuts must be at or above 75 percent with strict limits on exemptions to achieve any meaningful increase in market access.

Even if the U.S. proposal becomes the framework for negotiating increased market access for farm goods, members will still face a host of tough decisions. How much are they willing to cut tariffs in their most protected sectors? If most countries insist on exemptions for their politically sensitive sectors, there will be far less market access for a long list of products: beef, dairy, poultry, rice, sugar, peanuts, vegetables, and fruits -- the very markets of greatest interest to poorer countries. And what will be asked of developing countries? Will a low-income developing country such as Bangladesh have the same obligations as those more economically advanced, such as Brazil? Today, all but 24 of the 148 nations participating in the Doha negotiations claim to be "developing countries," up to now a more or less self-proclaimed status. India and China insist that all developing countries be treated the same.

Similar decisions must be made with respect to increasing market access for non-agricultural goods. Although agriculture is regarded as key to the success of the Doha negotiations, manufactured goods still account for three-fourths of world trade in merchandise. Sadly, the negotiations covering manufactured goods lag behind those dealing with agriculture. And most WTO members have not seriously addressed the opening of markets for services, such as banking, insurance, and communications, which are key to industrialized members, including the United States. Last year, the United States ran a $50 billion surplus from its services trade, and eight out of ten U.S. jobs are now in the service sector. Negotiations to open services will require tough decisions: developing countries insist that if they are to open their markets to foreign service providers, such as banking and telecommunications, members must grant temporary entry on a more liberal basis so that their workers can offer their services in sectors like construction and farming, which is an issue of great sensitivity to Congress. The negotiations on services trail all the others; many members have failed to submit an initial offer to start the process.

Lastly, members must agree on rules that deal with dumping, subsidies, and customs that that will both govern and facilitate trade. Here again U.S. negotiators face political pressures. For example, in September, Senator Byron Dorgan (D-N. Dak.), joined by Senator Lindsey Graham (R-S.C.) and Senator Debbie Stabenow (D-Mich.), proposed an amendment to the appropriations bill for the Departments of Commerce, State, and Justice and the Office of the U.S. Trade Representative to prevent any money appropriated by the bill from being used to negotiate trade agreements that would alter U.S. trade-remedy laws, particularly rules dealing with dumping.

A CRISIS OF IMMOBILITY

A solution to these issues is not beyond members' reach, but in the words of former WTO Director-General Supachai Panitchpakdi: "The crisis that threatens is all the more menacing because it is not a crisis in dramatic divergence [in negotiating positions] ... it is a crisis of immobility." All of the eight previous global trade rounds required strong U.S. leadership to succeed.

The U.S. proposal to reform agriculture rules was a splendid step in the right direction. But U.S. negotiators face enormous domestic political pressures that limit their flexibility. A week before the United States made its agriculture proposal, the chairs of the House and Senate Agriculture Committees warned the U.S. Trade Representative not to take any positions that would pre-empt Congress' authority to write the next farm bill. Earlier, the chair of the Senate Agriculture Committee had attempted to put a four-year extension of the existing farm bill into a pending budget measure.

It is ironic that as the benefits and opportunities from globalization have accumulated for Americans over the past decade, political support in the United States for trade liberalization has waned. In 2002, President Bush secured trade promotion authority (which Congress had denied President Clinton) by three votes in the House of Representatives, and only after agreeing to impose steel tariffs and sign a bloated farm bill. [See Footnote #3] Last July, the House of Representatives approved the Central American Free Trade Agreement by a mere two-vote margin only after the president made a rare trip to the Capitol to rally the support of his own party. These struggles reflect a general decline in American voters' support for open trade.