WorldCity Business Magazine

The day the music died

by Jeffrey Sparshott

Each day that passes there’s another sign that WTO trade negotiations have failed.

Doha is all but dead.

The World Trade Organization’s round of trade negotiations started in Doha, Qatar, while the Sept. 11, 2001, terrorist attacks were still a raw wound. Today they are falling apart because the two biggest members cannot agree.

“The U.S. and E.U. have irreconcilable differences on trade, and when you have irreconcilable differences the best thing you can do is call it off,” said U.S. Rep.

Bill Thomas, a California Republican and chairman of the powerful Ways and Means Committee.

“I don’t know the exact day the music stopped, but it stopped, and we need to get off the merry-go-round,” he added.

Thomas’ dire warning came in April about the time the situation was obvious but well before most pro-trade political leaders would mouth the words. The situation has since become worse, with the WTO’s149 members missing an April 30 deadline to reach some type of broad consensus on a trade package.

President George Bush, tacitly acknowledging the impasse, all but pulled the plug on the talks when he yanked Rob Portman out of the U.S. Trade Representative’s office and sent him to the Office of Management and Budget. Portman’s successor as lead negotiator, Susan Schwab, is more than capable of representing U.S. interests. But Portman, a former congressman and a confidante of the president, was an expert at getting deals through the House and Senate. Abroad, he brought a certain authority to the international scene.

Of course, Thomas and others in the United States are inclined to blame the Europeans, especially the French, for the breakdown. In this case, that argument is not wrong. France will not budge on efforts to liberalize farm trade, and it is preventing the other 24 E.U. members from doing the same.

Still, regardless of who is at fault, the consequences are manifold for the international trade system and U.S. trade policy.

No trade round since World War II has ever truly died. That means Doha may go into a coma but come back to life down the road. However, the round will not be completed in time for lawmakers to vote under existing Trade Promotion Authority the legislation that allows President Bush to negotiate trade deals and submit them to Congress for a simple yes-or-no vote.

The authority expires in mid-2007 but practically requires negotiators to have already reached a broad agreement, finalize details by December 2006 and start the legislative process by January 2007. That is unlikely. At best, then, the round will languish.

Thomas recommended the United States focus on bilateral deals, and the administration already has made clear that it will turn to bilateral and regional trade deals if Doha stalls. But while deals with small Middle Eastern countries like Oman and the United Arab Emirates are possible, pacts with Peru, Panama, Colombia and large Latin American nations face stiff congressional opposition. Portman was a master of congressional relations, but he will no longer be the administration’s face for trade. Agreements with Thailand, Malaysia and South Korea are having a hard time in negotiations and also would face some congressional opposition.

“It makes right now for a fairly dim trade agenda. That is a major problem for the administration,” said Gary Hufbauer, a senior fellow at the Institute for International Economics, a Washington think tank.

Also of consequence is the impact on the WTO itself. The Geneva-based organization is the forum for settling trade disputes and for further liberalizing world trade. In the event of a failure at Doha, Hufbauer predicted that the WTO would be able to maintain the former role but would lose the latter. Such a development would be a blow to world trade and diminish the WTO, although it would not kill the multilateral body.

Portman, holding out some hope, in May said that the remainder of that month and the early days of June would be the “moment of truth” for the Doha round. He emphasized U.S. commitment to the talks, but also told the WTO’s other members to get moving on negotiations.

“No one player, however large the economy, can deliver success. It must be an inclusive process. All of us must do our part if we are to achieve what we all hope for, which is meeting the promise of Doha,” he said.

It was likely one of Portman’s last public comments on the round. And it was the one that struck a discordant note in Europe.

Jeffrey sparshott writes about trade-related issues for The Washington Times. He can be reached at jsparshott.com.