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Expert Explains Collapse of Global Free Trade Talks

July 25, 2006 at 6:40 PM EDT
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JEFFREY BROWN: In November 2001, 149 member countries of the
World Trade Organization began talks in Doha,
Qatar, with an
ambitious goal: to create a global free trade agreement that would boost
economic growth and reduce poverty in developing countries.

Five years later, the talks have collapsed. Yesterday, the
director of the World Trade Organization suspended negotiations after a meeting
in Geneva
failed to make any progress.

To help us look at the who, what, and some of the why, I’m
joined by Sherman Katz, a senior associate in the Trade, Equity and Development
Project at the Carnegie Endowment for International Peace.

Welcome to you.

SHERMAN KATZ, Senior Associate, Carnegie Endowment for
International Peace: Thank you. Happy to be here.

JEFFREY BROWN: Why don’t we start by just saying who was at
the table. Who are the players here?

SHERMAN KATZ: There are 149 countries who are members of the
WTO: the United States and all of the industrial countries are members; the
OECD countries; the newly-emerged economies, such as Brazil, India, Egypt,
South Africa; and all of the developing countries.

JEFFREY BROWN: Now, in general terms, how do you define the
goal? What was at stake here?

SHERMAN
KATZ: The goal was to give everyone a chance to participate more actively in
the global economy by lowering trade barriers.

JEFFREY BROWN: And how would that — I mean, specifically,
lowering them on what kinds of trade?

SHERMAN
KATZ: On goods and services. Until the previous trade round, the so-called
Uruguay Round, this organization, the WTO, only covered goods, but in that
round the United States
insisted that services be included. As you know, 70 percent of our gross
domestic product is now in services, and we now have rules that cover export
and import of services, and that’s very much to our benefit.

JEFFREY BROWN: OK, so what happened? Why did they break
down?

SHERMAN
KATZ: Well, agriculture is the big problem.

JEFFREY BROWN: And it has been for many, many years, right?

SHERMAN KATZ: Absolutely. Indeed, when the WTO was created,
then the GATT, the United States insisted that agriculture not be included. This
was after World War II. We stood to be the world’s breadbasket. We didn’t want
to be inhibited in any way.

In the Uruguay Round, in the late ’80s, early ’90s, we
agreed to include agriculture. And we promised the poor countries and the
emerging countries that, in return for their accepting rules on services, on
intellectual property, that they would get to sell more farm goods to the rich
countries. Well, it didn’t happen in the 10 years after the Uruguay Round.

Then, we had Doha,
beginning in 2001, and we promised them again: access is coming to our farm
markets. And, finally, 2005, after five years of promises, 2006, we said,
“We can’t do any more than we’ve done. We can’t lower our tariff barriers
anymore.”

Everybody's got to play

JEFFREY BROWN: Well, explain how the subsidies, the farmsubsidies, work in a way that people understand. Who's being protected, andwhat is being protected?

SHERMAN KATZ: Since the NewDeal in the United States, Roosevelt began farm subsidies to help poor, smallfarmers survive in the Great Depression. But over time, those subsidies now goin the area of cotton, for example, to roughly 25,000 -- and only 25,000 --cotton farms in the United States.

These subsidies help shield farmers from natural disasters,from fluctuation in prices, and in the worst case, they encourage them toproduce more, because the more they produce, the more subsidy they get.

This hurts poor countries in Africa,for example, because, a, it calls forth more production, and there's moresupply. And when there's more supply, prices goes down. And besides that, thesubsidies themselves have the result of lowering world prices, so it hurtsother countries.

JEFFREY BROWN: So our farmers are afraid of losing theirsubsidies even though there is the potential gain for them, I suppose, of newmarkets?

SHERMANKATZ: That's the tradeoff that Secretary Johanns, our secretary of agriculture,and our trade reps have said is the necessary condition. We won't makeconcessions to let more farm goods in unless we know that we're going toourselves be able to export more farm goods.

And that's where we ran into problems with the EuropeanUnion and also other countries. They say they've lowered as much as they can. Theysay, "We can't lower any more."

JEFFREY BROWN: The European Union, of course, has its ownpolitical groups to protect or sustain?

SHERMANKATZ: Absolutely. Jacques Chirac, the president of France, has been most strident insaying, "We've already made major reductions in our farm subsidies,"and they have.

But dramatically, last October, the United Statessaid, "We're prepared to cut our domestic support by 60 percent," thetrade-distorting ones. "And we can't move any further on that until we seethat we can get more access to other countries' markets."

JEFFREY BROWN: There was some blunt talk today. We heard itin our news summary, the U.S. versus the E.U.

SHERMAN KATZ: Absolutely. The United States is convincedthat the E.U. has been relying on loopholes. For example, they would like toprotect 8 percent of all tariff lines by saying that these are special orsensitive products, and we say, "That's not good enough. We can't makethese concessions until you can do better."

It's also true that India,and Brazil, and Egypt havesaid, "This is about development," this round, "and if you'rereally intent on helping poor countries, you shouldn't be asking us to makeadditional concessions." The United States has said everybody'sgot to play.

Making the deadline

JEFFREY BROWN: Part of the time pressure, as I understand ithere, is American politics. It's the president's ability to negotiate tradeagreements, correct?

SHERMANKATZ: Absolutely. Initially, the Constitution gives Congress the power in thecommerce clause to negotiate trade agreements. And Congress, if and when itchooses to do so, delegates that authority under so-called fast track authorityto the president.

The current authority expires June 30, 2007. And so thatmeans, after that time, the president will not be able to promise just ayes-or-no, up-or-down vote from Congress. Congress will be able to amend andundercut what the president has done.

JEFFREY BROWN: And other countries aren't happy about that,because they're not going to be sure what they're getting, I guess?

SHERMANKATZ: Exactly. They're not going to be able to rely on what's offered at thetable. And, of course, there's a 90-day notice provision. That brings us backto March. That is, the president must tell Congress 90 days before theauthority is up what he's doing.

And even if they reach a deal in September, there are stillso many complex aspects to be worked out -- a deal at the highest levels -- atthe lower levels, among all other WTO countries, that it would be impossible tomeet the deadline.

JEFFREY BROWN: So we only have about 30 seconds. I mean,where do things stand? Is it possible, is there precedent for puttingHumpty-Dumpty back together again in time?

SHERMANKATZ: The good news is, there is precedent. In cases in the past when thesetalks have broken down, countries have gone away and thought very hard aboutthe opportunity that might be lost to expand exports significantly and, in somecases, have led them to talk to their domestic constituencies and say,"We've got to try one more time." So all is not lost until all islost.

JEFFREY BROWN: All right, we'll see what happens this time. ShermanKatz, thanks very much.

SHERMANKATZ: Thank you.