Wed, Jul 10, 2013 - Page 9 News List

Free-trade agreements lock up true development potential

By Joseph Stiglitz

Though nothing has come of the WTO’s Doha Development Round of global trade negotiations since they were launched almost a dozen years ago, another round of talks is in the works. However, this time, the negotiations will not be held on a global, multilateral basis. Rather, two huge regional agreements — one transpacific and the other transatlantic — are to be negotiated. Are the coming talks likely to be more successful?

The Doha Round was torpedoed by the US’ refusal to eliminate agricultural subsidies — a sine qua non for any true development round, given that 70 percent of those in the developing world depend on agriculture directly or indirectly. The US’ position was truly breathtaking, given that the WTO had already judged that the country’s cotton subsidies — paid to fewer than 25,000 rich farmers — were illegal. The US’ response was to bribe Brazil, which had brought the complaint, not to pursue the matter further, leaving millions of poor cotton farmers in the lurch in Sub-Saharan Africa and India, who suffer from depressed prices because of Washington’s largesse to its wealthy farmers.

Given this recent history, it now seems clear that the negotiations to create a free-trade area between the US and Europe, and another between the US and much of the Pacific — except for China — are not about establishing a true free-trade system. Instead, the goal is a managed trade regime – managed, that is, to serve the special interests that have long dominated trade policy in the West.

There are a few basic principles that those entering the discussions will, one hopes, take to heart. First, any trade agreement has to be symmetrical. If, as part of the Trans-Pacific Partnership (TPP), the US demands that Japan eliminate its rice subsidies, the US should in turn offer to eliminate its production and water subsidies, not just on rice — which is relatively unimportant in the US — but on other agricultural commodities as well.

Second, no trade agreement should put commercial interests ahead of broader national interests, especially when non-trade-related issues like financial regulation and intellectual property are at stake. For example, the US’ trade agreement with Chile impedes Chile’s use of capital controls — even though the IMF now recognizes that capital controls can be an important instrument of macro-prudential policy.

Other trade agreements have insisted on financial liberalization and deregulation as well, even though the 2008 crisis should have taught the world that the absence of good regulation can jeopardize economic prosperity. The US’ pharmaceutical industry, which wields considerable clout with the Office of the US Trade Representative (USTR), has succeeded in foisting on other countries an unbalanced intellectual property regime, which as it is designed to fight generic drugs, puts profit ahead of saving lives. Even the US Supreme Court has now said that the US Patent Office went too far in granting patents on genes.

Finally, there must be a commitment to transparency, but those engaging in these trade negotiations should be forewarned: The US is committed to a lack of transparency. The USTR’s office has been reluctant to reveal its negotiating position even to members of the US Congress; on the basis of what has been leaked, one can understand why. The USTR’s office is backtracking on principles — for example, access to generic medicines — that the US Congress had inserted into earlier trade agreements, like that with Peru.

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