Trade Scene: Trade bill's test yet to come

Trade Scene: Trade bill's test yet to come

If you found Congress' enacting of the new trade bill a dizzying game of political give-and-take, brace yourself for what comes next: the 144-nation trade negotiation the bill is to meant to support.

The approval by Congress' of the so-called Trade Promotion Authority Act, enables the United States to "move on all fronts to advance the American trade agenda," enthuses U.S. Trade Representative Robert Zoellick.

At the top of the Bush agenda is the Doha Development Round, that 144-nation negotiation at the Geneva-based World Trade Organization.

But is America's trade agenda shared by other nations? While basic goals may be quite similar - paring trade and investment barriers worldwide to foster greater global prosperity - exactly how to go about this, it is increasingly evident, differs from country to country.

There is no more glaring example than the U.S.-European Union split over how to negotiate on agriculture, widely regarded as being at the heart of the Doha Round. The round, says a senior U.S. official, is about three things: "agriculture, agriculture, agriculture."

But, say EU officials, the U.S. proposals to liberalize world farm trade, including a five-year phase-out of export subsidies, dramatic cuts in tariffs and trade-distorting domestic supports, among other things, are simply "incoherent" or at best "unbalanced."

"I don't see these proposals as a basis for compromise," declares Franz Fischler, the EU's Agricultural Commissioner, who notes that the United States is demanding deeper concessions from the EU than it is prepared to make itself.

Meanwhile, U.S. officials bemoan the EU's failing to flesh out its farm trade proposals. For example, says one negotiator, the EU has offered no timelines for reducing export subsidies. Instead, it has focused on calls for new food safety rules and greater legal protection for numerous products bearing geographic names, which the United States is resisting.

In fact, the Doha Round comes at an awkward time for the EU. It is in the midst of an internal reform of its farm policies, marked by deep splits among its 15 members. A further complication: the EU's coming admission of 10 more member states.

Question of third-world countries

Also hanging over the Doha negotiations is the role of the less developed countries, which comprise the majority of the WTO's members. They are clamoring for "special and differential" treatment; they don't want to be held to the same liberalization commitments as the developed countries and they seek extra generous market access concessions. If they don't get their way, the whole round could stall.

The Doha services trade negotiations are a case in point. So far, only a few dozen developing countries have filed services negotiating requests, far from the "critical mass" of participants needed for a meaningful agreement. Not helping is a failure so far to agree on how much "credit" developing countries should get for their past "voluntary" services trade concessions.

More dismaying, WTO members remain unable to pin down how much more time to give developing countries to conform with such well-established WTO accords as intellectual property protection, subsidies and food safety. If they can't agree after years of talks, what's the prospect of reaching "special and differential" treatment pacts in the new round?

Meanwhile, the outlook for concluding substantive Doha Round agreements on investment, the environment and anti-trust cooperation is far from clear.

Again, developing countries are a big question mark. For example, they suspect that an investment agreement could erode their controls over capital flows, leading to, among other things, foreign takeovers of domestic industries. U.S. negotiators foresee only a relatively modest investment pact emerging. "We don't want to do too much too soon," says one. A consensus still lacks even on the kind of investment that should be subject to an agreement.

Many developing nations are similarly wary of a proposed WTO accord on competition or antitrust policies. There is no consensus yet on the kind of cartels that should be addressed, some countries proposing, contrary to U.S. recommendations, that export as well as domestic cartels be covered.

Anti-dumping and market access

The United States in the meantime will be strongly tested on its commitment to Congress not to weaken U.S. antidumping and other laws protecting U.S. industries from foreign unfair trade practices. Japan and a dozen countries are tabling proposals that would, among other things, make it harder to initiate antidumping investigations.

And then there's the question of how to negotiate greater market access for industrial goods, with agriculture and services, one of Doha's three basic pillars. The National Association of Manufacturers and other U.S. business groups are urging U.S. negotiators to push for "zero tariff" initiatives in such sectors as medical and scientific devices, energy and environmental equipment and forestry products.

But how much negotiating leverage does the United States have? Its average tariff is less than 2 per cent. How do you persuade countries with tariffs of 50 per cent or more to make deep cuts? Educate them, suggests Frank Vargo, NAM's vice president for international economic affairs. By eliminating duties, product inputs become cheaper and economies of scale created, he reasons. But will enough developing countries listen?

And can the Doha Round be wrapped up by January 2005, the target set by the U.S. and the other WTO members?

C. Fred Bergsten, director of the Institute for International Economics, says probably not. The "real deadline, " he suggests , is mid-2007. That, he points out, is how much time the Congress, in the new trade promotion authority legislation, has given the president to wrap up new trade agreements. In global negotiations past, notes Bergsten, the U.S. president's mandate has been the key to when the negotiations are concluded.

And the Doha Round, for all its unanswered questions, will need every minute of it.

Richard Lawrence was a long-time trade reporter for the Journal of Commerce