VoxEU Column International trade Politics and economics

The US, the London summit and trade

The US is doing little to further the Doha round of WTO negotiations. Has the Obama administration merely had its hands full with other issues in its early days? This column says that the neglect is intentional – US politics have shifted against trade and the administration has acted in ways that might jettison the current negotiations.

In his April 4 contribution on the London Summit and trade, Richard Baldwin called the commitment on the Doha Round “pitiful” and graded it “very sad.” He attributed this result in part to the “current disarray” in US trade policymaking. Actually, US “disarray” is the most hopeful explanation. An alternate interpretation is that the Obama administration has, indeed, made up its mind about the immediate future of the Doha talks – and it has decided to raise the stakes and increase US demands for acceptable compromises, even at the risk of jettisoning the negotiations.

To understand the Obama administration’s current stance, one must go back to the shifting balance of political forces during the latter months of the Bush administration. During autumn 2008, major US private interest groups turned increasingly negative about the negotiations suspended in July 2008. Reflecting this hardened opposition, on 24 February three leading trade associations in the manufacturing, agriculture and services sectors (the National Association of Manufacturers, the American Farm Bureau Federation, and the Coalition of Services Industries) asserted in a letter to President Obama that:

“The Doha Round cannot proceed, let alone succeed, until the negotiating texts are revised to provide balance and greater ambition from the advanced developing nations… The negotiations cannot simply be picked up where they were left off. Until all major participants recognise the Round must provide reciprocity, balance, and ambition, we do not see how there can be meaningful progress.”

Specifically, they argued that:

“Change is need in both the agricultural and manufacturing negotiations, where major US concession have not been balanced with significant new market opportunities on the part of others…The currently tabled services offer, when combined with the signals made at the July 2008 Ministerial, will not provide meaningful new market access, or even commit countries to bind most of their existing levels of access.”

At the same time (26 February), a group of 54 “trade sceptics” from the left wing of the House of Representatives (mostly Democrats, including six committee chairs and seventeen subcommittee chairs) wrote to the president calling for a whole new direction for US trade policy and criticising the Doha agenda as “outdated” and “long-beleaguered.”

Whatever new directions the administration adopts in the future, for the moment it clearly has decided to incorporate the doubts, and even the language, of the private sector regarding the current Doha manufacturing, agriculture, and services texts.

In its first statement on trade policy, the new administration’s trade representative stated on Doha:

“It will be necessary to correct the imbalance in the current negotiations in which the value of what the US would be expected to give is well-known and easily calculable, whereas the broad flexibilities available to other leaves unclear the value of new opportunities for our workers, farmers, ranchers, and businesses.”

In his confirmation hearings, incoming US Trade Representative Ron Kirk reiterated this language and also indicated under questioning that the current Doha text could not be the basis for going forward. Moreover, the Obama administration has substantial bipartisan support for this position. Before she left office, former USTR Susan Schwab advocated a return to “low-key talks” and named India, China and other large emerging nations as obstacles to a successful conclusion of the Round. Sen. Charles Grassley, ranking Republican on the Senate Finance Committee, warned Director General Pascal Lamy and EU Trade Commissioner Catherine Ashton that what was on the table now is a “no go.”)

Finally, last week, just before the London Summit, USTR Kirk privately let it be known that the US would not be ready for high-level engagement on Doha negotiations until autumn at the earliest and possibly not until the end of the year. He also shot down the idea of an “early harvest” related to trade facilitation and capacity-building for developing countries, arguing that this would lessen pressure later for an all-encompassing deal.

What one considers the Doha state of play “pitiful” or merely a reflection of political realities, it doesn’t look as though an endgame is possible anytime soon.