Tue, Aug 08, 2006 - Page 9 News List

Did the US crush the Doha talks?

While the US has taken most of the blame, it remains one of the world's most open markets

By Kenneth Rogoff

It is appalling that the world has decided to blame the US for the crushing end to five years of global trade talks last month (the so-called "Doha round"). I am the first to admit that the US under President George W. Bush has not covered itself with multilateral glory in recent years. But accuse the US of sabotaging the trade talks? Give me a break.

Has anybody noticed that for more than a decade now, US imports have been averaging several hundred billion (thousand million) dollars more than exports? Do people seriously believe that the US has accomplished its majestic trade deficit by shutting its doors to foreign goods?

On the contrary, through its low tariffs and general lack of import restrictions, the US has turned itself into an international shopping theme park. Americans buy more foreign-made refrigerators, cars, clothing, computers -- you name it -- than anyone else. Happily for world exporters, the same binge mentality that makes a whopping two-thirds of Americans either overweight or obese seems to extend to all their purchasing habits. Since the start of this decade, neither recession nor hurricanes nor sky-high oil prices have seemed to dent their appetites.

The simple fact is that even if US trade negotiator Susan Schwab had refused to make a single "concession," and if Europe, Japan and the big emerging markets had kept their best offers on the table, the US would still remain more open than all but a few small countries.

True, in the endgame of the talks, the US caved in to its wealthy and powerful agribusiness lobby. But that was only after five years of intransigence by Europe's even more powerful farm lobbies. And this is not to mention emerging market politicians' failure to grasp that unilaterally reducing their excessive import restrictions would be a good idea even if rich countries sat on their hands.

What does last month's trade fiasco mean? Old hands know that global trade deals often rise out of the ashes of failed talks. Unfortunately, such an outcome seems improbable now, especially since the US is unlikely to rejoin the talks anytime soon.

The US' opposition Democratic Party seems poised to take up growing wage inequality as a central issue in this year's mid-term US congressional elections and in the 2008 presidential election. To be sure, we economists have found that globalization appears to have played a far lesser role in growing wage inequality than have technological advances. Even so, the explosion of exports coming out of low-wage regions like China and India is at least a piece of the puzzle.

The last thing that Bush's Republicans want is to appear indifferent to the plight of the middle classes. So, unfortunately, even if Europe came to its senses and emerging markets showed greater enthusiasm for liberal trade, we may not see a big global deal until the next decade.

How bad would that be? After all, many Asian countries have achieved impressive export-led growth under the current system. And bilateral or regional trade deals can chip away at some of the barriers in the current global system. For example, a fundamental problem is that the nature of global trade is constantly evolving, and existing agreements have only limited capacity to adapt. Services like education, banking, accounting and insurance account for an ever larger share of global output (now roughly two-thirds), and further expansion requires significant changes in existing agreements.

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