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World free trade talks

Stephen Beard Jun 28, 2006

TESS VIGELAND: You’ve heard us talk on and off on this program about something called the Doha round. The on and off has been going on for the last five years. It’s a series of talks about free trade.

Government ministers from 50 countries will gather in Geneva tomorrow for the next round. Doha, India, by the way, is where this effort launched five years ago. The goal is to cut farm subsidies and cut tariffs on imports of produce and manufactured goods. But the clock is running down on the Doha round. From the European Desk in London, Stephen Beard tells us failure is an option, but a grim one for the world economy.

STEPHEN BEARD: The details are mind-numbingly complex. But the bottom line is clear. A deal, according to the World Trade Organization, could generate an extra $300 billion worth of global trade. So what is the problem? Why have the talks run into the ground? Economist Sean Rickard:

SEAN RICKARD: America has been a little unrealistic, I think, in making its demands on Europe. Europe can’t deliver much more than it’s done at this stage.

Liz Stuart, campaigner with the British charity Oxfam, takes a different view:

LIZ STUART: The problem lies with the EU and the US . . . squarely and pretty much equally.

But some developing countries may also be partly to blame for baulking at the prospect of more free trade. Peter Hardstaff of the World Development Movement:

PETER HARDSTAFF: I think there is already a degree of caution in many developing countries about the onward march of liberalization.

What we have here is an eternal triangle. The US wants Europe to lower its tariffs on farm imports further. Europe wants the Americans to make deeper cuts in their farm subsidies. And this agricultural impasse, says Martin Wolf of the Financial Times, makes developing countries less keen to open their markets to more manufactured goods:

MARTIN WOLF: Some of the larger developing countries — particularly those with large farm interests, like Brazil — are arguing that they can only liberalize in manufactures if they get more in agriculture.

Agriculture is the pivotal issue, which is rather odd, says Sean Rickard:

RICKARD: Agriculture accounts for less than 4 percent of the European economy and probably less than 3 percent of the American economy, which, of course, makes it only more ridiculous that the whole thing is likely to be held up because of agriculture.

But the farmers’ lobby is powerful, both in the EU and the US. The chance of a breakthrough in Geneva is not looking good, says Martin Wolf:

WOLF: It’s not completely inconceivable that there will be a breakthrough but it is clearly not likely.

The timetable for agreement looks tight. Many fear that if the talks in Geneva fail, the negotiaters will miss the year-end deadline for the Doha round. The round may fail. And that could fatally undermine the World Trade Organization and the whole system of multinational trade agreements, says Razeem Sally of the London School of Economics:

RAZEEM SALLY: If they do fail, then the WTO will be seen to be marginalized. There will be more flouting of the rules. And the major powers will go and do their deals elsewhere.

Bilateral or two-nation deals, says Martin Wolf, would lead to a more fragmented and anarchic system of trade. The world would not be better off:

WOLF: It’s quite difficult to believe that the world economy will do as well under systems of this kind with hundreds and hundreds of different bilateral agreements as they could do under a single, multilateral, liberal system.

He says that in the short term rich countries might gain more leverage over the developing world. But in the long term the global economy would be poorer, and that includes the farmers.

In London, this is Stephen Beard for Marketplace.

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