Expert Explains Collapse of Global Free Trade Talks

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

SHERMAN KATZ: Since the New Deal in the United States, Roosevelt began farm subsidies to help poor, small farmers survive in the Great Depression. But over time, those subsidies now go in 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 to produce 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 more supply. And when there's more supply, prices goes down. And besides that, the subsidies themselves have the result of lowering world prices, so it hurts other countries.

JEFFREY BROWN: So our farmers are afraid of losing their subsidies even though there is the potential gain for them, I suppose, of new markets?

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

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

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

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

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

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

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

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

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

SHERMAN KATZ: Absolutely. Initially, the Constitution gives Congress the power in the commerce clause to negotiate trade agreements. And Congress, if and when it chooses to do so, delegates that authority under so-called fast track authority to the president.

The current authority expires June 30, 2007. And so that means, after that time, the president will not be able to promise just a yes-or-no, up-or-down vote from Congress. Congress will be able to amend and undercut 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?

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

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

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

SHERMAN KATZ: The good news is, there is precedent. In cases in the past when these talks have broken down, countries have gone away and thought very hard about the opportunity that might be lost to expand exports significantly and, in some cases, 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 is lost.

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

SHERMAN KATZ: Thank you.