WTO's Talks Were DOA
Toward the end of the George W. Bush administration, it became clear that the Doha round of talks at the World Trade Organization, aimed at expanding multilateral free trade in sensitive areas such as agriculture, was going to be a dud. Developing countries that had previously tended to go along with what the richer-world powers decided, in exchange for some money and concessions, started flexing their muscles.
Meanwhile, rich-world manufacturers were freaking out about the influx of cheap imports made possible by earlier deals. No one was very enthusiastic about dialing back agriculture protections, except maybe the Economist and the Bush administration’s trade negotiators. In its final years, the Bush administration made some heroic attempts to revive the process, but by then the patient was clearly not going to make it, no matter how many times you deployed the defibrillator. And if there had been any faint hope, the financial crisis pretty decisively extinguished it.
Now the WTO is attempting to revive the process in Bali, with a set of stripped-down talks. And those, too, seem doomed. “World trade talks on Wednesday hovered on the brink of collapse after India rejected a proposed compromise that would protect controversial aspects of its domestic food security program from a challenge at the World Trade Organization for four years," Politico said.
It does not please me to say this, as I am a dedicated free trader, but I do not see much hope for multilateral trade talks in the near or even distant future. Perhaps there is hope for bilateral deals, though so far, I find the progress even there to be pretty underwhelming. The political forces arrayed against true global trade liberalization seem insurmountable.
Of course, the very nature of trade deals like this is that they get progressively harder. The early rounds liberalize the stuff that everyone can agree on, such as air travel and electronics. The harder stuff, such as textiles and agriculture, gets pushed off. By the time you arrive at the future, you’ve got two problems. First, earlier rounds of liberalization will have produced losers as well as winners, and the losers provide a vivid warning to those who stand to lose from future agreements. It’s simplistic to say that Europe’s “bra wars” over surging textile imports after the phase-out of the Multi-Fibre Arrangement (which had restricted imports from a lot of developing countries) led to the demise of the Doha round. But it obviously played a role in mobilizing free-trade opponents and public sentiment against further liberalization.
The second problem is that you’re now trying to do something that is inherently harder, such as getting rid of subsidies for farming and food. These are deeply emotional disputes in almost every country, touching not only on the romantic attachment to an agrarian past, but also the fear of becoming dependent on foreigners for your most basic need. So the WTO went into the Doha round with a big handicap.
If things were hard in 2005, they’re pretty much impossible now. The world economy is suffering slower growth. And as Benjamin Friedman persuasively argued in "The Moral Consequences of Economic Growth," economic growth makes us nicer to strangers. When we feel poor -- relatively or absolutely -- we hunker down and protect what we have. When we feel richer, we’re more likely to be willing to share.
It’s one thing to liberalize trade when the displaced workers can easily find a job doing something else. But when unemployment is high and factories are slowing their hiring, a law that exposes protected sectors to competition is hard to pass.
You can try to go to the people who work in those sectors with charts and figures showing how much consumer surplus will be generated by the new regime, and how in the long run everyone will made be better off if we buy our televisions from China and sell them our enterprise software and avocados. For that matter, you can go to them with a puppet show and a mime to act out Ricardo’s Theory of Comparative Advantage. Neither is likely to change their minds about free trade, but they might at least enjoy the puppet show.
So I am pessimistic about free trade for the foreseeable future. If we want to make progress on trade, we’ll first need to make a lot of progress on the rising economic insecurity that so many people feel.