The mobilization towards an agreement reflects the changing landscape of global trade. If a deal emerges, it will allow the U.S. and EU more leeway to set the rules of the road for the industries that matter most to them....
This potential trade deal is also a further sign of the collapse of the movement toward global free trade. The new round of WTO negotiations is effectively dead, and a major deal between two of the world’s largest economies would be a further signal that bilateral negotiations are once again becoming the norm.
Finally, this deal shows us that the BRICs are not quite as influential as many think. A U.S.-EU trade deal is essentially a way to ignore countries like Brazil and India while crafting rules that will govern some of the high-tech industries and information-based services that play a growing role in US-EU trade.
Mead is correct to point out the advantages of the US and EU trying to craft an FTA template, particularly for the sectors they care about a lot. Still, a few quibbles and disagreements.
First, a transatlantic deal doesn't signal a "collapse of the movement toward global free trade" -- it signals a different pathway towards that goal. The collapse of Doha suggests that the traditional multilateral round negotiaions are dead, but it's worth remembering that the global economy got very close to zero barriers in the late 19th century and there was nary a multilateral institution to be found. True, the trade agreements of the 19th century had most-favored nations clauses and their 21st century counterparts do not. Nevertheless, the political economy of trade diversion still generates competitive incentives for a growth in FTAs, thereby leading to a similar end outcome -- a world blanketed in free-trade agreements.
Second, contra Mead, I'd suggest that a transatlantic trade deal is not a sign of US-EU strength, but rather its weakness. There have been rumblings and trial balloons to do something like this for the past fifteen yewars, but it never really got off the ground. The reason it never got off the ground was simple -- both Americans and Europeans were worried that any trade deal this massive would scupper the WTO system. It would seem like a developed country effort to completely rewrite the rules of the global trading game. Since everyone had a lot of skin in the WTO game, it didn't seem like it would be worth it.
Two things have changed. First, the traditional method of multilateral trade liberalization has died. Second, while both the US and EU are major trading states, they're not quite as pivotal as they used to be. Ironically, it's their declining (though still appreciable) importance in global trade that makes a US-EU agreement feasible now. The BRIC economies are now sufficiently large that a transatlantic trade deal doesn't seem like an existential threat.
Your humble blogger is in Brussels
recovering from jet lag to discuss Very Important Questions about the future of global trade. Since I'm thinking about this topic, it's worth noting that former U.S. Trade Representative Susan Schwab wrote, by trade policy standards, a rather provocative Foreign Affairs essay on the Doha round. The first paragraph:
It is time for the international community to recognize that the Doha Round is doomed. Started in November 2001 as the ninth multilateral trade negotiation under the auspices of the General Agreement on Tariffs and Trade and its successor, the World Trade Organization (WTO), the talks have sought to promote economic growth and improve living standards across the globe -- especially in developing countries -- through trade liberalization and reforms. Yet after countless attempts to achieve a resolution, the talks have dragged on into their tenth year, with no end in sight.
Schwab suggests that negotiatiors admit defeat on Doha, agree on whatever has been agreed, and ditch the bargaining round template that's governed most GATT/WTO trade talks in favor of more plurilateral approaches.
I confess to mixed feelings about this argument. On the one haand, Schwab is correct that Doha is deader than a doornail, and the G-20 loses just a little credibility every time it pledges to finish the round in a communique. That said, I'm dubious of what plurilateral measures can do on their own, and in the absence of forward momentum at the WTO, more and more trade action will take place outside WTO auspices.
What do you think? Should Doha just be declared dead?
Gideon Rachman notes that the WTO has been denuded of controversy, and wonders why:
It’s strange to recall that - just a decade ago - the World Trade Organisation was a deeply controversial organisation. It was the WTO that was fingered by the anti-globalisation movement as the handmaiden of ruthless western capitalism and oppressor-in-chief of the poor. The WTO summit in Seattle in 1999 degenerated into a street riot.
On Wednesday morning, however, the WTO staged a public forum in Geneva, without the need for riot police - and indeed without much public fuss at all. I chaired the opening session at the organisation’s modest headquarters on the banks of Lac Leman.
I think that one of the main reasons why the WTO is no longer in the line of fire is that the change in the pattern of world trade over the last decade - combined with a slump in the West and a boom in China and India - makes the idea that global free trade is a tool of western domination look increasingly absurd. The world has got a lot more complicated than that; and even the anti-globalisation movement has had to acknowledge that complexity, if only tacitly. These days, it is the developing nations that are pressing for completion of the Doha Round and the rich countries that are dragging their feet.
Hmmmm..... well, let's call Rachman's explanation the optimistic interpretation for why the WTO doesn't attract demonstrators anymore. Let me offer a more pessimistic explanation, which consists of two parts:
1) Finance is the new bogeyman. The 2008 financial crisis and the subsequent Great Recession were caused by bubbles in financial markets -- trade, at best, played a marginal role. Perhaps it's not that trade has become less controversial so much as finance and capital flows have become way more controversial.
2) The WTO is no longer liberalizing. The WTO does an impressive job of ensuring that the status quo of a (largely) open trading system keeps functioning. What has exercised protestors in the past however, was the notion that further liberalization was going to take place. Since the Doha round is deader than a doornail. why bother with protesting?
Now imagine a world where there was forward progress on the Doha round -- do you seriously think there would be no protests associated with the WTO? Oddly enough, in this case, a lack of protest is a bad sign for trade.
I would much prefer Gideon to be right -- but I'm pretty sure he's wrong.
A few months ago I was at a panel on the April G-20 summit, when someone asked why there was a pledge to complete the Doha round when no one expected that to happen?
The answer given by the trade experts in the room was that, as toothless as such a statement might sound, it was worse not to say anything. The signal of not mentioning Doha was ostensibly worse than the cynicism of claiming that two plus two equals five.
Bear this in mind when reading the following:
The world’s biggest economies agreed on Thursday to conclude a comprehensive trade deal in 2010, in the latest attempt to revive the stalled Doha round and give a shot in the arm to the world economy.
Rich countries gathered for the G8 summit agreed with ten other large economies – including India, China and Brazil – that trade talks must resume urgently, with a deadline set for completion next year.
The agreement in the Italian town of L’Aquila will be hailed by world leaders as a decisive moment in reviving the global economy and a statement of intent to conclude a trade round which began in Doha in 2001.
But there will be widespread cynicism over whether such commitments are credible. Every G8 summit – not to mention other international summits – ends with leaders paying lip service to finalising a trade round.
If Obama actually tries a "Nixon goes to China" moment on trade, I might be more optimistic. But with global warming and health care on the horizon, I have zero confidence that Doha will be completed within the next eighteen months.
At this week’s World Trade Organisation ministerial meeting, the teargas and riots of past ministerial meetings like the disastrous Seattle conference of 1999 have been a distant memory. Not all attendees think this a good thing. As one business representative notes darkly: “At least people were paying attention back then.” The twists and turns in this week’s meeting have played to a small audience. The days have long gone when any WTO meeting was attended by a travelling caravan of lobbyists, protesters and journalists. Protracted stasis in the talks has driven away all but the most hardcore. Not one demonstrator is keeping vigil outside the gates. Seminars held by think-tanks draw a handful of attendees. Oxfam, who have doggedly stuck with campaigning on the Doha round, are present and staging one of their trademark photo-stunts – on this occasion four campaigners, dressed up as the main players, “gambling with the future of the poor” at a poker table set up nearby in a park.... After the talks were reduced first to a few dozen selected countries and then to an inner core of just seven to try to make progress, many of the surplus ministers present find themselves unoccupied and somewhat embarrassed. “Frankly, a lot of ministers are sitting around with no idea what they should be doing,” one lobbyist says. “The smarter ones have gone shopping.”Of course, the absence of media and civil society interest could make it easier to reach an agreement. Has that happened? According to the WTO:
Director-General Pascal Lamy reported to an informal meeting of the Trade Negotiations Committee on 26 July 2008 that after a week of hard work by Ministers, there was now “a basis for possible convergence”. He welcomed the “package of elements” from his consultations as “an important contribution” to progress towards establishment of modalities in agriculture and non-agricultural market access, adding that intensive consultations would continue on the outstanding issues.Um... not to be too pessimistic, but there's been a "basis for possible convergence" for a few years now. There just hasn't been any actual convergence. This Wall Street Journal story by John W. Miller suggests that no one should be holding their breath too long for actual convergence anytime soon:
A final resolution remains far from certain. China, India, South Africa, Argentina and many others remain opposed to the compromise proposal, drawn up by WTO chief Pascal Lamy Friday in a last-ditch attempt to save the talks. And there are still dozens of unresolved issues on the table....
Brazil's foreign minister, Celso Amorim, sounded a note of optimism on leaving the meeting of delegates from some 30 countries. "There is now a 65% chance of doing a deal, where before there was a 50% chance," he said.
When the protestors reappear, then I'll start paying attention.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.