In the trade talks, the US said that it would cut subsidies only if others reciprocated by opening their markets. But, as one developing country minister put it, "Our farmers can compete with America's farmers; we just can't compete with America's Treasury." Developing countries cannot, and should not, open up their markets fully to the US' agricultural goods unless US subsidies are fully eliminated. To compete on a level playing field would force these countries to subsidize their farmers, diverting scarce funds that are needed for education, health, and infrastructure.
In other areas of trade, the principle of countervailing duties has been recognized: when a country imposes a subsidy, others can impose a tax to offset the unfair advantage given to that country's producers. If markets are opened up, countries should be given the right to countervail US and European subsidies. This would be a major step forward in trying to create a fair trade regime that promotes development.
At the onset of the development round, most developing countries worried not only that the EU and the US would renege on their promises (which they have in large part), but also that the resulting agreement would once again make them worse off. As a result, much of the developing world is relieved that at least this risk has been avoided.
Still, there was a second risk: that the world would think that the agreement itself had accomplished the objectives of a development round set forth at Doha, with trade negotiators then turning once again to making the next round as unfair as previous rounds. This concern, too, now seems to have been allayed.
There remains one further concern: the US has rushed to sign a series of bilateral trade agreements that are even more one-sided and unfair to developing countries, which may prompt Europe and others to do likewise. This divide-and-conquer strategy undermines the multilateral trade system, which is based on the principle of non-discrimination. Countries that sign these agreements get preferential treatment over all others. But developing countries have little to gain and much to lose by signing these agreements, which almost never deliver the promised benefits.
Indeed, the entire world is the loser if the multilateral trade system is weakened. The rest of the world must not embrace the US' unilateral approach: the multilateral trade system is too precious to allow it to be destroyed by a US president who has repeatedly shown his contempt for global democracy and multi-lateralism.
Joseph Stiglitz is the 2001 recipient of the Nobel Prize in economics. Anton Korinek of Columbia University contributed to this piece. Copyright: Project Syndicate
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