Wednesday, July 30, 2008

Doha Round Collapses: Everybody Loses

The Doha Round of trade talks have officially collapsed. These negotiations, which have been going on for what feels like forever, would have reduced or eliminated odious agriculture subsidies and tariffs and make trading of agricultural products simpler and cheaper. Who to blame for this failure? Depends on whom you ask. Here's an editorial from the The Daily Star, a Bangladeshi newspaper, who is blaming the developed world, specifically the United States and the European Union:

The final impasse was the demand from the G-33 which wanted special safeguard mechanisms to protect farmers in the developing world against temporary surges in cut-price imports of cotton and rice. When one considers that these safeguards would be the only thing standing between hundreds of millions of subsistence farmers and penury, to say nothing of the stability of billions throughout the developing world, it is hard to fathom the opposition.

What is really outrageous about opposition to this from the West is that it insist not only on its own tariffs but also on massive agricultural subsidies that protect its handful of farmers and massively distort the international price of goods, causing further hardship to farmers in the developing world.
But the developed world, in turn, and led by the West, is blaming the developing world for trying to have its cake and eat it too; all at the expense of their farmers. The Washington Post is leading the charge on this score:
Still, as last-ditch talks moved into last weekend, the United States and European Union had made some concessions on farm supports, and WTO Director-General Pascal Lamy had submitted a compromise plan that seemed to draw at least tentative approval from most participants. It was at that point that India and China essentially torpedoed the talks, asserting a broad right to raise tariffs to protect their poor farmers from "import surges," price drops and other vicissitudes of the world market. China, which had been relatively quiet throughout most of the talks, was particularly vituperative, blasting U.S. arguments as "absurd," even though Brazil and several other developing countries agreed with Washington.

China's role in the demise of the Doha Round is particularly dismaying, considering China has reaped huge benefits from global trade in the seven years since it joined the organization -- with strong U.S. support. Chinese exports have quadrupled from $300 billion in 2002 to $1.2 trillion in 2007, thanks in large part to free access to the U.S. market. U.S. supporters of Chinese inclusion in the WTO argued that drawing China into a system of multilateral give-and-take would mute its nationalistic tendencies. Evidently, the Chinese see the matter differently. They, and the world, will be poorer because of it.
It's safe to say that obstinacy on both sides led to the demise of the Doha Round. The developed world insists on paying subsidies to farmers, which in this era of high food prices is absurd. The developed world then demands open access to the developing world markets for their "cheap" food, giving local farmers an economic disadvantage. I believe the developing world has the right to protect its farmers as the developed world protect theirs.

At the same time, the developing world, led by China and India, insist on keeping mechanisms protecting its farmers against the onslaught on "cheap" food, even if the developed world ends its subsidies and tariffs. This will give developed world an advantage while penalizing western farmers for being more efficient and productive. This is a non-starter as well.

But ultimate loser in this fiasco are the consumers in both the developing and developed world, who will continue to pay high prices for agricultural products. It is also a defeat for free-trade, and a disturbing win for protectionism, which will only punish the entire world.