Leadership, Trade Talks & Resilience

Stephen DeAngelis

August 09, 2006

In an opinion piece published in the Washington Post, Rep. Jim Kolbe (R-AZ) discussed the potential consequences of the collapse of the Doha Round of trade talks [“How Will The Poor Trade Up?” 8 August 2006] Kolbe is chairman of the House Appropriations Subcommittee on Foreign Operations and his article reflects insights gleaned from an intimate knowledge of foreign policy. He calls the collapse of the the Doha Round talks an “unqualified disaster that casts a shadow over the economic future for millions of people around the world.” Kolbe notes that the Doha Round was launched in the aftermath of 11 September 2001 and its objectives were more about enlightened self-interest than altruism.

The reasoning: Destitute autarkies such as Afghanistan were exporting little more than conflict. Encouraging wealth and interdependence for these countries just might protect rich countries from future attacks.

Kolbe then writes:

Doha’s greatest significance was as a tool against global poverty, pure and simple. It was driven by the idea that trade, in conjunction with responsible foreign aid, could lead to prosperity in the developing world. This is an idea that must not die with Doha.

He then tempers his idealism with frank realism by writing:

If [the idea] does [die], we will end up placing unrealistic expectations on America’s foreign aid budget, even as we give poor countries an excuse to avoid economic openness.

As a public official, Kolbe should be interested in how best to use the public treasury but I’m impressed that he understands the arguments that Tom Barnett and I have been promoting about the importance of connectivity and standards. Kolbe goes on to write:

According to World Bank economists David Dollar and Aart Kraay, developing countries that have opened themselves the most to trade have outperformed all other economies. In the 1990s alone — and this excludes the East Asian tigers — the gross domestic product of poor but open countries rose twice as fast as that of rich nations. Thanks to the economic growth brought on by trade, millions were spared the misery of abject poverty.

Kolbe’s arguments bolster those I made about the need for Global Leadership in an earlier blog. His prescription for moving forward, however, is fraught with danger. He writes:

With Doha negotiations in the deep freeze, the United States needs to embrace an ambitious bilateral trade agenda. Of course, bilateral agreements are no substitute for multilateral ones; multilateral agreements propel the world toward economic openness faster. But without a multilateral round on the horizon, the United States cannot afford to remain idle.

He then discusses a number of bilateral trade agreements he believes the U.S. should conclude as quickly as possible. While I agree that remaining idle is unacceptable, embracing “an ambitious bilateral trade agenda” is not a good substitute for leadership that pushes multinational agreements. In an earlier post on the collapse of the Doha Round [“Doha Trade Talks & Globalization’s Future“], I discussed an article in the the Economist on that subject. I wrote:

The Economist laments the fact that because regional and bilateral agreements are easier to negotiate, but they are crowding out imperatives to negotiate on an international basis. Those negotiating such agreements, however, are forgetting that one of the peace dividends of the end of the cold war was the hope that the global economy could begin to operate by a single set of rules. Regional and bilateral agreements may be easier to negotiate, but they risk fracturing the global economy in new ways. The article notes that global economy is still fragile enough to be disrupted.

The United States should exert leadership in negotiating international agreements, but Kolbe’s recommendation would undermine America’s leadership role. It looks like Kolbe’s recommendation is born more of frustration than reasoned horizontal thinking. While his objective of advancing free trade is on target, I don’t believe that “the future of free trade hinges on writing these agreements one by one.” It hinges on getting the entire global trading community to use the same rule set. Kolbe gets back on track, however, when he discusses the paradox of allowing agricultural subsidies to undermine foreign assistance spending:

In the end, however, no trade agenda will succeed if we don’t address agricultural subsidies in the United States. We cannot afford to let Doha’s failure become an excuse to reauthorize subsidy programs in next year’s farm bill. Subsidies and quotas shift more costs to American consumers and put us at a disadvantage when negotiating trade deals. The worst thing about farm subsidies is not that they’re wasteful — though they are — it’s that they devastate the export sectors, the engines of growth, in developing nations. It makes zero sense to wipe out the benefits of U.S. foreign assistance in order to keep paying our farmers to be inefficient.

Kolbe ends his opinion piece on a very solemn note, further demonstrating his frustration and fears about the future of globalization:

The trade landscape before us is terra incognita. Not since the General Agreement on Tariffs and Trade was established in 1947 has a multilateral round such as Doha collapsed. If the United States does not advance an ambitious bilateral trade agenda, there’s little hope that trade will spread to less developed countries. And no amount of foreign aid will lift these countries out of poverty if they have no prospect of joining the global economy.

I have a hard time throwing up my hands and surrendering, which, in essence, is what Kolbe has done. Kolbe indicated that businesses and advocates for the world’s poor need to speak out and support efforts to keep the global economy moving forward so that millions more can be brought out of poverty. That should be a clarion call for global leadership, not a call for bilateral negotiations. Few poor countries believe they are going to get the better of the deal when negotiating with an economic powerhouse. Now is the time for global vision and global leadership. We can’t allow that to get sidetracked by an ambitious bilateral series of talks.

—–