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.

What has caused this erosion? The explanation lies in Americans' growing anxiety about job security and ignorance about the broad and substantial benefits that flow from opening global markets. Americans' worries about job security may seem surprising. Unemployment hovers around five percent, low by historic standards. But the low unemployment figures need to be read in light of the remarkably flexible U.S. labor market in which on average one in five workers lose or gain a job every year. According to economists Lori Kletzer and Robert E. Litan at the Institute of International Economics, even with reemployment, many displaced workers suffer substantial earnings losses. The perception that trade agreements alter the status quo in the labor market ignites genuine worker anxiety. That anxiety is exacerbated by the media's current focus on the export of high-technology jobs to places such as China and India.

THE POLITICAL CHALLENGE

To enable the U.S. government to lead the Doha negotiations to a successful conclusion, America needs to develop a much broader understanding among its citizens -- and their elected representatives -- of the fact that jobs connected to trade pay better wages, provide greater benefits, and offer more security on average than jobs in the overall economy. But those facts, however well presented, will not by themselves change minds. To be credible, trade supporters must admit up-front that open trade does not benefit every citizen. The studies by economists at the Institute of International Economics that show the United States has gained $1 trillion per year from past market openings and could gain an additional $500 billion per year from new market openings also show the lifetime costs of worker displacement to be roughly $50 billion per year.

To win support for freer trade, the U.S. government will need to allocate more of the gains derived from trade to help those who lose their jobs because of change driven by globalization and new technologies. Surveys show that when Americans are asked to respond yes or no to the question "Do you support free trade?," they split 50-50. However, they give a two to one affirmative response when they are told that their government has programs to help workers who lose their jobs.

Currently, the U.S. government spends about $1 billion annually on trade adjustment assistance (TAA), a sum that is expected to increase to $2 billion annually when the reforms Congress passed in 2002 are implemented. TAA as currently structured has a number of limitations. For example, it does not aid service workers (who constitute a majority of the U.S. work force) or workers displaced by manufacturing-plant relocations to countries with which the United States does not have a free-trade agreement.

Expanding the Trade Adjustment Assistance Program of 2002 and the Health Care Tax Program to cover dislocated workers who are now excluded would help build public support for trade. Doing so would be surprisingly affordable. The Institute of International Economics estimates the costs to be $3 to $12 billion annually depending on the amount of benefits and breadth of coverage -- far less than the $1 trillion yearly gains the United States now reaps from open trade and the $500 billion potential gain from further liberalization.

America must also devote more attention and resources to education and skill building. For years, Washington has given tax credits to encourage capital investment. To compete in the knowledge age, policymakers need to find effective ways to encourage similar investment in human capital.

The second obstacle to Washington's taking bold positions in the Doha negotiations is the silence of those who could speak about the benefits that could come from the negotiations. Since the 1999 WTO trade ministerial in Seattle, Washington, protesters against globalization, international capitalism, and open trade have attended every meeting of the WTO, the World Bank, the IMF, and the G-8. We can agree with the antiglobalists that trade liberalization is not a panacea for the world's ills. More trade alone will not educate children or eradicate disease. To address these issues, governments must use some of the gains that trade and investment generate. But trade stimulates the economic growth that creates the resources needed to deal with these social problems, and adherence to the rules of a broad trade agreement encourages rule of law, transparency, and respect for property. That message needs to get out.

A PATH FORWARD

The administration has a key role to play in explaining to members of Congress and the American people why the Doha Round is critical to U.S. national interests. But government cannot, and should not, be expected to do it alone. Universities, think tanks, and particularly the business sector could do so much more. Because businesses have much to gain if the Doha Round succeeds and a great deal to lose if the negotiations collapse, the CEO of every U.S. company with international activities, however small, should invest the time to explain to company employees -- whether they number five, 5,000, or 50,000 -- how globalization expands the company's opportunities, how open markets affect the company's revenues, and how much of the employee's paycheck comes from the company's international activities.