WTO talks fail after seven years of negotiations with mixed reception. Photo: Strauber (flickr)

World Trade Organization (WTO) negotiations in Geneva collapsed last week, ending the hope of many for a new global deal to open markets, reduce farm subsidies and strengthen the international trading system.

This meeting was the latest attempt at talks, which began at Doha, Qatar, in 2001. Supporters of the Doha round, including the World Bank and European Commission, say that a deal would have been a defense against the protectionist strategies they fear will occur as economies struggle globally.

Now they worry that Doha’s failure hurts the credibility of the WTO, which has traditionally determined and enforced the rules of international commerce. The current failure may also damage other international agreements, including those related to global warming. Some economists predict that after the failure of these negotiations, hopes of small countries for gaining better access to consumers in the developed world may be dashed — another deal won’t come for years, if ever.

But others say a Doha conclusion would have been terrible for developing countries.

From the beginning of the Doha Round, through Cancun, Hong Kong to Geneva, the definition of "successful" negotiations has depended on where you sat at the trade table. Of course the USA and EU have some of the largest farm subsidies in the world, and refused further farm subsidy cuts, despite developing countries insistence on protecting their countries' food self-sufficiency from foreign dumping of subsidized agricultural surpluses during a time of rising food prices and global food shortages.

Deborah James, Director of the International Programs for the Center for Economic and Policy Research (CEPR) says of Doha, “The tariff cuts demanded of developing countries would have caused massive job loss, and countries would have lost the ability to protect farmers from dumping, further impoverishing millions on the verge of survival.”

The United Nations Conference on Trade and Development estimates that only corporations in developed countries would have profited from the Doha Round, leaving developing nations with most of the cost and none of the benefits. Bolivian president Evo Morales warned, "The WTO negotiations have turned into a fight by developed countries to open markets in developing countries to favor their big companies."

Morales' fears were not unfounded as the U.S., India and China reached an impasse in the failed talks over measures to protect farmers in developing countries from competition from imports.

The global press has responded by exaggerating the conflict and attempting to assign blame for the failed talks. Representatives from the countries involved have joined the fray, trying to spin the outcome to paint themselves in a favorable light.

In some articles, China and India are being blamed for their overconfidence in their new development and therefore too aggressive in advancing their interests to reach a compromise. In others articles, rich industrial powers like the United States and the EU are being blamed for refusing to share with the new powerhouses and refusing to compromise, even though they no longer have the power to push deals through unilaterally.

What is clear is that what is needed now is a new approach for global trade agreements that fairly promote both sustainable commerce and communities worldwide.

In last week's New Yorker, James Surowiecki makes a point made previously on this site: "Free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers [in America] — a much bigger impact than it does on the buying power of wealthier consumers."

The anti-trade rhetoric from the Democratic presidential contenders may play well in the Rust Belt, but pursuing protectionist policies not only will hurt our standing abroad, but also will erode the buying power of working class Americans. As Surowiecki puts it, "Obama and Clinton, in their desire to help working Americans — and gain their votes — are pushing for policies that will also hurt them."

Photo: Hattie Page (flickr)

Conventional wisdom says that America's standing in the world will go up — maybe even way up — if either Barack Obama or Hillary Clinton is elected president. We'd sign multilateral global-warming treaties, seek advice from allies once again … maybe even accept an invitation to tea from Iran.

But the world is likely to respond to a Clinton or Obama presidency with only tepid applause if the two contenders continue spouting "dangerous and ill-informed" trade rhetoric, argues Newsweek's Fareed Zakaria.

In the magazine's March 10th issue, the influential columnist slapped the wrists of both Democratic contenders for promoting protectionist policies. All the talk about renegotiating Nafta, he says, has people in Latin America and India worried that one of their favored paths to greater economic growth — free trade and open markets — is about to close down.

"For a struggling farmer in Kenya," says Zakaria, in a not-so-subtle reference to Obama's roots, "access to world markets is far more important than foreign aid or U.N. programs."

The concern from abroad is real. The Economist, for example, recently warned readers to get ready for "grumpy isolationism."

But Zakaria, a left-of-center globalist, represents the concern emanating from what you might call the free-trade wing of the Democratic Party. (Online comments on his Newsweek piece include: "I'm an Obama supporter, but his crazy anti-trade talk is worrisome.") These were the New Democrats who cheered when Bill Clinton's 1993 push for Nafta seemed to finally rid the party of its longheld protectionist plank — and who hung their heads when his wife repudiated the pact in Ohio. (Obama largely followed suit, leading The New Republic's Josh Patanick to bemoan Obama's "disappointing" shift on trade. Matt Cooper of Portfolio.com labeled both Obama and Clinton "phony populists.")

Perhaps it's not surprising to see the candidates try to nuance — or, in Clinton's case, outright disown — their previous pro-trade statements. But it's worth watching how the eventual winner chooses to frame the issue this fall, and whether they can find, as Zakaria recommends, "a way to speak about the pain of globalization" while acknowledging its benefits.

One way may be to emphasize how trade can reliably advance America's stated aim to lift millions abroad out of extreme poverty. Surely the candidates can argue that America can both create good jobs and open our markets to products like cotton from Mali. Such a move would not only lend a hand to poor African farmers, but also help us climb back into the world's good graces.

Higher food prices aren’t all bad, according to the Council on Foreign Relations. Rather, continued increases in the price of foods, especially basic staples like corn and wheat, could provide the pressure needed to break the international deadlock on agricultural policy. In an effort to prevent food shortages, many countries have already begun to reduce agricultural import tariffs as a means of increasing production.

Countries scrambling to fill grocery shelves may be willing to bend where they haven’t previously. If major exporters start exporting less, this in turn could make farm industries in developed countries like the United States feel less threatened by imports… Peter Mandelson, the EU trade minister, notes a shift already afoot: “There’s much less of a need for protectionism than when we started [the Doha Round of global trade talks] in 2001.”

The Council on Foreign Relations takes a look at the possibility of a global recession.

As many indices mark the worst stock market losses since 9/11, India suspends trading and Japan marks the worst two-day losses in 17 years, analysts are talking global recession (and its implications for the US).

The Council on Foreign Relations' Lee Hudson Teslik says that this recession (or mild economic turn down) could have implications for a number of US policies, ranging from immigration to possibly increasingly protectionist economic policies as US job losses cause citizens to feel the squeeze-- and subsequently pressure politicians.

However, can emerging markets counterbalance the fear and uncertainty present in the US and across Asia?

Globally, economists see a silver lining in the developing world. Emerging markets in East Asia, the Middle East, Latin America, Eastern Europe, and even Africa have seen rapid recent growth (Economist),
and analysts hope growing consumption in these regions might offset declines in the United States. Either way, analyst Zakaria and others argue, a downturn need not bring a permanent loss of power for Washington, if policymakers reclaim the “open and expansive” attitude with which they once embraced the world.

Steven E. Landsburg outlines a few simple ways to wrap your mind around the concept of free trade and outsourcing in the New York Times op-ed, What to Expect When You're Free Trading.

Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

Internally torn about free trade vs. protectionism? Well worth the read.