Doha set for backburner as trade talks near a halt

from The Financial Times

By Alan Beattie, World Trade Editor

Congressman Charles Rangel's view that the so-called ‘Doha round’ of trade talks will have to wait until a hypothetical Clinton administration after 2009 is echoed widely across Capitol Hill and most of the rest of Washington.

There is, not for the first time, a disjunct between official expressions of optimism at the heart of the talks and attitudes within the capitals that will have to implement an agreement.

Nor is it just a matter of Doha. With the Democrats in charge of Congress and President George W. Bush's political capital dwindling weekly, there is a widespread feeling that, at least until next year's presidential elections, any progress in trade talks will be narrow, halting and weighted down with scepticism about the benefits of globalisation.

Many argue that the expiration over the summer of President Bush's fast-track trade promotion authority (TPA), which allows the White House to submit pacts to Congress without having them picked apart line-by-line, has diminished trading partners' enthusiasm for negotiations.

Charles Grassley, the senior Republican on the Senate finance committee, says: "It is a chicken-and-egg situation. We have Democratic leaders in the Congress say: 'When there is some sort of a breakthrough in Doha, we will do something on TPA.' And then you have people around the world saying: 'Why should we do something on Doha if the president doesn't get TPA?' "

The four bilateral deals in the pipeline submitted before TPA expired - Peru, Panama, Colombia and Korea - arouse mixed degrees of enthusiasm. Their importance to US trade is limited: only Korea is among the top 40 trading partners.

Peru is the first and most likely deal to be passed - not least because Mr Rangel and fellow senior Democrats have enshrined within it sufficient protection for labour rights and the environment that they can portray it as the kind of fair, balanced trade deal they want.

Panama may be of sufficient foreign policy importance to the US to get through Congress. But the election of a man wanted in the US for the 1992 killing of a US soldier in Panama as president of Panama's congress this month has been cited as a "serious obstacle" to approval by Max Baucus, chair of the Senate finance committee.

In Colombia, the murders of trade union leaders there have alarmed Democrats with strong affiliations to organised labour.

Meanwhile ongoingproblems with Seoulallowing American beef and cars into its market seem likely to give the Koreadeal at best a bumpy ride.

The administration, which remains free-trade in its rhetoric, insists that the strategy of "competitive liberalisation", or moving forward on all fronts, remains in place. Putting deals such as the Korean "free trade agreement" [FTA] on hold risks the EU, which is negotiating a bilateral pact with Seoul, stealing a march.

Susan Schwab, US trade representative, said in an interview: "A straightforward assessment of the [Korea] FTA is it is a very strong deal for any US automaker that wants to increase exports to Korea." She adds: "When other constituencies . . . start to focus on the benefits of the FTA, they will see a real level of commercial benefits."

Meanwhile, business elsewhere on Capitol Hill proceeds on the assumption that a Doha agreement is at best far-off. The House of Representatives has just passed its version of the "farm bill", which will set agricultural support for American farmers for the next five years. Even more lavish than the current one, it could require radical surgery if the US accedes to demands from its Doha negotiating partners for heavy cuts in farm subsidies.

Ms Schwab says American farmers would prefer to get more export market access than subsist on federal payouts. "This farm bill is not our Doha round offer. It never will be."

But a former administration official says American farmers will make tougher demands on developing countries to cut agricultural tariffs as a trade-off for reducing US subsidies, making a deal harder to reach.

Many observers think the outlook is bleak. Fred Bergsten, director of the Peterson Institute for International Economics, says: "Assuming the Democrats take the White House next year, there will be at least a couple of years' inaction on trade while they try to enact legislation to soften the blow of globalisation, like universal health insurance.

"Only then will the economic and foreign policy consequences of having the rest of the world sign trade deals between each other and ignore the US become sufficiently apparent for them to take action."

It may not just be a President Hillary Clinton asked to agree a difficult deal in Doha, but a President Clinton running for re-election.

Doha stalls

The future of the Doha round of world trade negotiations has been highly uncertain since the breakdown of the Potsdam talks in June this year, when the US, EU, India and Brazil failed to agree on agricultural subsidy cuts and goods tariffs. The Doha round began in 2001 with a promise to promote development through trade liberalisation, but the agenda has had problems getting off the ground at later meetings. The previous Uruguay round of talks began in 1986 but ended in 1994, four years overdue.