With or Without Doha

Charlene Barshefsky

From Foreign Affairs, December 2005 -- WTO Special Edition

Summary:  Today, the United States confronts four urgent challenges: imbalances in global trade and capital flows, South America's drift, Asia's economic integration, and the Muslim world's decline. International trade policy alone cannot solve these complex concerns, but it can play a pivotal role in dealing with each.

CHARLENE BARSHEFSKY is Senior International Partner at Wilmer Cutler Pickering Hale and Dorr LLP in Washington, D.C. She was United States Trade Representative from 1997 to 2001. EDWARD GRESSER, a policy adviser at the Office of the U.S. Trade Representative from 1998 to 2001 who is now at the Progressive Policy Institute in Washington, D.C., assisted in the preparation of this article.

FOUR U.S. PRIORITIES

In the spring of 1945, Franklin Roosevelt's last message to Congress set out his vision of the postwar economic challenge the United States would face. Predicting that "the world will either move toward unity and widely shared prosperity, or it will move apart," Roosevelt called global trade talks the chance "to lay the economic basis for the secure and peaceful world we all desire."

Sixty years later, this global vision remains at the heart of U.S. economic policy. But the international trading system has its flaws and inadequacies. The common framework established by the World Trade Organization -- a cornerstone of global growth -- is a limited one. Political inertia, slow reaction time, a tendency to produce least-common-denominator agreements, a desire for more selective trading privileges, and the system's understandable inability to address the pressing concerns of each individual member have led countries around the world to pursue additional agreements and understandings.

The Doha Round's focus on agricultural reform and manufacturing tariffs is an admirable attempt to align the treatment of industries and products that are important to the poor with that afforded the high-tech and heavy industries. But today, the United States confronts a series of challenges that are at least as urgent as Doha and which the Doha negotiations are not going to solve. Some are beyond the scope of the talks. Others, such as U.S. economic engagement with India and Russia, are bilateral in nature. Still others are fundamentally regional or may require involvement by wealthier nations in concert with the United States. Whatever the outcome of the Doha Round, four issues in particular will remain pressing for the United States.

First, global trade and capital flows are dangerously unbalanced. With a current account deficit nearing 7 percent of GDP, the United States is effectively relying on Asia's willingness to cover the U.S. budget deficit and Americans' shopping bills. Conditions in Asian countries and some other big economies mirror U.S. vulnerabilities, as these states rely on U.S. shoppers for jobs and growth. Doha is the wrong forum to negotiate the short-term reduction of such imbalances, and it is unlikely to help contribute significantly to the long-term rebalancing that could emerge from ambitious agreements among selected countries.

Second, South America is drifting. From Colombia and Venezuela to Argentina, the continent has entered its eighth year of political and economic uncertainty. This has strained the consensus of the 1990s on democracy and open markets: four elected presidents have been forced from office since 2000, and authoritarian populism is a renewed phenomenon.

Third, Asia's economic integration is a powerful challenge to U.S. leadership of the global economy, and it could unsettle international politics and diplomacy. The East Asian economies are integrating at blinding speed, and China has joined the United States, Europe, and Japan as one of the world's great economic powers.

Fourth, the Muslim world's economic decline, unnoticed in the West for more than a quarter century, has helped create the largest security problem in the world today. The greater Middle East, from Morocco to the Central Asian republics, remains the region least integrated into the trading system, the one most isolated from export markets and foreign direct investment, and the most volatile.

Each of these concerns is complex and multifaceted, and cannot be tackled by international trade policy alone. But with clearly articulated goals, trade policy and international economic agreements can play a pivotal role.