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Did America Really Kill the Trade Talks?

Kenneth RogoffAs the EU decides it isn't worth meeting Mark Vaile (we could have told them that), debate flourishes on who is at fault in the death of the Doha round - apart of course from those who are celebrating. Here is a view from the thoughtful end of the US ... Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF. His previous piece on Webdiary was G-8 Movie Night.

by Kenneth Rogoff

It is appalling that the world has decided to blame the United States for the crushing end to five years of global trade talks last month (the so-called "Doha round"). I am the first to admit that the US under President George W. Bush has not covered itself with multilateral glory in recent years. But accuse America of sabotaging the trade talks? Give me a break.

Has anybody noticed that for more than a decade now, US imports have been averaging several hundred billion (thousand million) dollars more than exports? Do people seriously believe that the US has accomplished its majestic trade deficit by shutting its doors to foreign goods?

On the contrary, through its low tariffs and general lack of import restrictions, the US has turned itself into an international shopping theme park. Americans buy more foreign-made refrigerators, cars, clothing, computers – you name it – than anyone else. Happily for world exporters, the same binge mentality that makes a whopping two-thirds of Americans either overweight or obese seems to extend to all their purchasing habits. Since the start of this decade, neither recession nor hurricanes nor sky-high oil prices have seemed to dent their appetites.

The simple fact is that even if US trade negotiator Susan Schwab had refused to make a single "concession," and if Europe, Japan, and the big emerging markets had kept their best offers on the table, the US would still remain more open than all but a few small countries.

True, in the endgame of the talks, the US caved in to its wealthy and powerful agribusiness lobby. But that was only after five years of intransigence by Europe’s even more powerful farm lobbies. And this is not to mention emerging market politicians’ failure to grasp that unilaterally reducing their excessive import restrictions would be a good idea even if rich countries sat on their hands.

What does last month’s trade fiasco mean? Old hands know that global trade deals often rise out of the ashes of failed talks. Unfortunately, such an outcome seems improbable now, especially since the US is unlikely to rejoin the talks anytime soon.

The opposition Democratic Party seems poised to take up growing wage inequality as a central issue in this year’s mid-term US congressional elections and in the 2008 presidential election. To be sure, we economists have found that globalization appears to have played a far lesser role in growing wage inequality than have technological advances. Even so, the explosion of exports coming out of low-wage regions like China and India is at least a piece of the puzzle.

The last thing that Bush’s Republicans want is to appear indifferent to the plight of the middle classes. So, unfortunately, even if Europe came to its senses and emerging markets showed greater enthusiasm for liberal trade, we may not see a big global deal until the next decade.

How bad would that be? After all, many Asian countries have achieved impressive export-led growth under the current system. And bilateral or regional trade deals can chip away at some of the barriers in the current global system. For example, a fundamental problem is that the nature of global trade is constantly evolving, and existing agreements have only limited capacity to adapt. Services like education, banking, accounting, and insurance account for an ever larger share of global output (now roughly two-thirds), and further expansion requires significant changes in existing agreements.

Even if Asia has succeeded by relentlessly exporting manufactures, today’s poorest countries, especially in Africa, can realistically export only agriculture and textiles. But these are precisely the range of goods that remain most protected under existing agreements. Bilateral deals can help, but they can also lead to higher trade barriers for everyone else.

The current state of affairs is all the more depressing because global economic growth in the past four years has been the fastest since the early 1970’s. Rapidly expanding global trade, combined with an ever-freer and faster exchange of people and ideas, has been a cornerstone of this growth, particularly of the strong productivity gains that underlie it. Absent further trade agreements, there is a big risk that the pace of globalization will slow, with profound consequences for global poverty and welfare.

Outside Africa, the people who will suffer the most are those in countries like Brazil, India, China, and Mexico, whose leaders rightly took on rich-country farm subsidies, but wrongly failed to recognize the profound costs of the developing world’s own import restrictions.

So for now, the world must hope that Americans continue gorging on foreign imports. Wallis Simpson, the controversial US-born Duchess of Windsor, once famously quipped, "You can never be too rich or too thin." Fortunately for everyone, America’s motto nowadays is "You can never be too rich or too fat." When Americans finally decide to go on an import diet, as they will someday, the world’s hypocrisy over the failed global trade talks will become apparent to all.

Copyright: Project Syndicate, 2006.


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Multinationals protection cheer quads in full bleat

Peter Mendelsohn has just criticised the Aussei delegation (Vaile et al) for backing the US in the trade talks (the latter whom have just gained 75% of grain import contract from Iraq-we had 90% of the same previously ,thanks guys). once again we are known for our cheer squad actions with the US, but was it to our benefit, tradewise as a nation?

The EU is famous for the China import debarcle that left the winter stock locked in the warehouses,again to Mr Mendelsohn's chagrin.

This article is defending,and I know all will jump on moi if i got it wrong,  the idea that the US did not prevent a Dohu WTO agreement. This can be done by taking a stance that is uncompromising or impossibly in the disinterest of other signatories. Did the US do this?

Our US Harvard writer(the same institution that helped bring us the "WorldUranium dump in Aus is a good thing"  home-grown imbecile biologist stooge from SA Haliburton land) wouldhave us believe that the US is not against huge purchases of cheap imports (China-US trade  imbalance comes to mind) or overseas sourcing of labour/services because such are still being gobbled up by US consumers. Is that right?   IS that situation benefiting the US home manufacturing and services labor force?

Over half of the US trade imports are from US companies that have moved their manufacturing off shore. Naturally the overheads are less from wages, health support,pension obligations and less government control over pollution and sourcing . This is seen in China,India, South And Central American and small island nations in the Pacific..However the product is labelled clearly in the American familar brand name for the consumer to feel confortable. why is this? Why not name a GE or Maytag washingmachine Chingfoo washingmachine? Or Guandong microwave?

Instead we have a small label Product of ...China and Huge Label saying Westinghouse.  For consumers to buy a more expensive product that has resulted in jobs and tax and health benefits and all the social stability that flow on for such for their own environment and nation they would have to idenitfy the cost benefit of such which requires a rather sophisiticated shopper population.  We see this here in out own Super Markets where Coles and Woolworths are wiping out the local producers using cheaper overseas products in canned and manufactured food items. How many Aussie buyers pay the extra dollar to keep a cannery running locally?

It is pity we don't not have the Buy Japan attitude that they had there.

And does it benefit Chinese workers? I am not so sure. it is concentrating the wealth,shutting the government operated factories and lackeying to the obsturction of decent labor conditions that is imperative to the overseas multinational for it's profit line.

Kenneth Rogoff seems to think that free trade will work,but I think such will only cause social havoc and destruction of the lower middle class in countries that consume and continue the colonial attitude of slave like conditions in third world nations and allow dreadful pollution and corrpution there..I think the disbanding of Multinationals and their tax haven status in Cayman Islands, Isle of Man of Man, .Bermuda etc and instead have an internationally agreed local  responsiblity of all companies aa to workl conditions and environmental responsiblity will go further to make long term stability rather than sepctacular growth and slumps as manipulated by multi industry and banking.

New Internationalist, that pushes a more socailly responsible attitude for devlopment and business has an eyeopener about banking this issue, and whether one is a blind uncritical ideologue for right or left wing cheer squads (and all are entitled to their passions,good we need more passions), try reading that and the article about Doha that give an alternative balancing view to Mr Harvard.and the Multinationalist protection squad that he does or does not support.make up your own mind.


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