Wednesday, January 12, 2005

Time to deliver the goods

FINANCE & ECONOMICS
World trade

Jan 6th 2005 WASHINGTON, DC
From The Economist print edition

This is a big year for global trade. Progress, as ever, will depend greatly on America

MORE than any other country, America still sets the tone of the global trading system. To be sure, no one who has followed developments at the World Trade Organisation (WTO)—not least at Cancún, in Mexico, in 2003—can deny the increasing importance of developing countries, or the continuing influence of Europe. But America remains the world's biggest trading nation; and its leadership has been essential to completing every global trade round since the modern multilateral system was set up after the second world war. The current Doha round is little different. Though American effort alone cannot guarantee agreement among the WTO's 148 members, the round will not be concluded without it.

That George Bush is still president ought to help. His administration helped launch the Doha round in 2001, along with the European Union, and fought a bitter battle to win fast-track negotiating authority from Congress in 2001-02. Robert Zoellick, the president's top trade negotiator, has shown a tenacious commitment to the Doha round. After the collapse of the Cancún talks in 2003, many expected America to walk away. In fact, Mr Zoellick did much to get things going again.

It is not obvious, however, that this enthusiasm will continue in Mr Bush's second term. The president has an ambitious domestic agenda that makes scant mention of trade. He wants to overhaul the pension system and reform the tax code. Paying too much attention to trade liberalisation could make progress in these difficult areas harder to achieve. It is no time to upset reliable Republican senators from farm states, for instance, by agreeing to big cuts in agricultural subsidies. Ideally, the White House would like to keep a low political profile on trade issues until its domestic battles are over.

If only

Events may dictate otherwise. Already a big fight looms over the Central America Free Trade Agreement (CAFTA), on which talks were completed last spring but which lawmakers have yet to approve. Opponents of the agreement, from trade unions to sugar farmers, have mobilised against it. Given the broad scepticism in Congress towards trade, the vote will doubtless be a cliff-hanger—like the battle over fast-track authority, which squeaked through the House of Representatives by one vote.

Will CAFTA be passed? The growing importance of Latino voters may make politicians in both parties reluctant to reject a deal for which Central Americans are clamouring. But even pro-trade Republicans acknowledge that such considerations may not be enough. CAFTA's failure would send a grim signal to the Doha negotiators. As Dan Ikenson of the Cato Institute puts it, if America cannot pass a smallish regional trade agreement, it is clearly “ill equipped and unprepared” to negotiate seriously in the Doha round.

Nor is CAFTA the only chance for Congress to flex its muscles. In the coming months America's lawmakers may also have a noisy debate about the virtues of the WTO itself, because every five years Congress has a chance of voting to quit the trade body. Though no one expects that vote to succeed, it will offer plenty of opportunities for trade's enemies to hold forth on the evils of the WTO.

Textile safeguards are another possible flashpoint. To placate the textile industry's concern about floods of Chinese imports once the global system of textile quotas expired at the end of 2004, the Bush administration agreed to consider imposing safeguard quotas if there was a “threat” of market disruption, but before any import surge had actually occurred. A large coalition of textile importers, who would like to buy more cheaply from abroad, filed suit against the government. On December 30th a federal judge sided with the importers, preventing the administration from imposing “threat-based” safeguards. The Bush team may have quietly welcomed the verdict, but the textile lobby could have more trouble in store.

These domestic political distractions mean that America's trade negotiators will need more explicit backing from the White House than they have had hitherto. So far Mr Zoellick has been able to push the Doha round along with little assistance from Mr Bush. That may become more difficult as hard political compromises, on freeing farm trade or cutting tariffs on sensitive industrial goods, need to be made.

Equally important, Mr Zoellick himself may not be in the job much longer. America's trade representatives tend to serve only one term, and Mr Zoellick is being tipped as Condoleezza Rice's deputy at the State Department. He had been touted as a successor to James Wolfensohn, the head of the World Bank, who said this week, to no one's great surprise, that he would step down when his term expires in May.

Although Mr Zoellick has said nothing about his plans, Washington's trade types are already chattering about possible successors. High on the list is Gary Edson, who was a top economic official in the White House before working on Mr Bush's re-election campaign. He was also chief of staff to Carla Hills, trade representative under Mr Bush's father. Other possibilities include Josh Bolten, currently the head of the Office of Management and Budget, who also worked for Mrs Hills. Grant Aldonas, an undersecretary at the Department of Commerce, is also being mentioned.

Despite possible trouble in Congress and a probable change of top trade negotiator, America can still push hard for a successful Doha round, provided that Mr Bush himself cares enough about global trade to do so. Despite the good spots on his record, he has bowed to anti-traders before, notably on steel tariffs early in his first term. This year will be a stiff test of the president's credentials.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.

0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]

<< Home