Trade Negotiations Tossed onto the Trash Heap

Ronald Bailey | July 29, 2008

In May, the Copenhagen Consensus identified freer trade as the chief policy change that could bring the biggest immediate benefits to the humanity, especially to the developing countries. As I reported:

Number 2 on the list of Copenhagen Consensus 2008 priorities is to widen free trade by means of the Doha Development Agenda. The benefits from trade are enormous. Success at Doha trade negotiations could boost global income by $3 trillion per year, of which $2.5 trillion would go to the developing countries. At the Copenhagen Consensus Center press conference, University of Chicago economist Nancy Stokey explained, "Trade reform is not just for the long run, it would make people in developing countries better off right now. There are large benefits in the short run and the long run benefits are enormous."

Nobelist and University of California, Santa Barbara economist Finn Kydland noted that unless the economies of developing countries grow, they will still be mired in the same problems of poverty ten years from now as they are today. "By reducing trade barriers, income per capita will grow, enabling more people in developing countries to take care of some of these problems for themselves."

The really bad news today is the Doha Development Round of World Trade Organization negotiations in Geneva have collapsed. Trade negotiations always turn on figuring out how to bribe producers who hate competition into allowing consumers to have access to a wider and cheaper array of goods and services.

In this case, freer trade ran aground on the idiotic farm policies of both rich and poor countries. As the Associated Press reported:

After coming tantalizingly close to a historic trade deal, World Trade Organization talks collapsed Tuesday in a dismaying blow to seven years of efforts to open up the global economy.

Once promised as a recipe for lifting millions of people out of poverty, the end to nine days of high-level talks left no new trade openings for farmers and manufacturers, no global economic boost and no grand deal for Third World development.

It was by all accounts a disaster.

"This is a very painful failure and a real setback for the global economy when we really needed some good news," said Peter Mandelson, the European Union's trade commissioner....

It was all the more disappointing because the talks made greater progress than they had in years on issues such as farm subsidies and manufacturing tariffs — which were responsible for scuttling previous high-level trade efforts. The talks hit a snag over an obscure "safeguard" for protecting agricultural producers in the developing world from a sudden surge in imports or drop in commodity prices.

While farm import safeguards currently exist in rich and poor countries, they are rarely used and reflect only a minute portion of the billions of dollars in manufacturing, farm and services gains the WTO's Doha trade round was supposed to create.

"In the face of global food price crisis, it is ironic that the debate came down to how much and how fast could nations raise their barriers to imports of food," said U.S. Trade Representative Susan Schwab, who resisted attempts by China and India to ensure a loophole for developing countries allowing them to increase farm tariffs as part of an agreement.

It is always bad news when the win/win wealth-creating dynamic of free trade is stymied--especially so when the global economy is experiencing financial, food, and energy crises.

Whole AP story here.

Comments

Naga Sadow|7.29.08 @ 7:36PM|#

Is this gonna raise the cost of my cornflakes . . . again?

|7.29.08 @ 8:23PM|#

LOL, chalk another one up to the Bush Regime! LOL

JT
www.FireMe.To/udi

|7.29.08 @ 9:08PM|#

What a bunch of self-serving assholes.

"It's unfortunate in a development round we couldn't run the last mile because of an issue concerning livelihood security," Kamal Nath told reporters.

Have nice poverty-ridden life pal. We'll be taking those nice, cushy customer service jobs back inside our borders now.

JB|7.29.08 @ 10:04PM|#

It's because Democrats and their follow travelers in Europe hate poor people. It wouldn't surprise me to learn that Al Gore and Obama each did a jig when they learned their precious ethanol mandates helped starve children in Africa. They probably get off on it.

P1t|7.29.08 @ 10:58PM|#

And as always, free market capitalism (implictly, free trade) gets blamed for the evil in this world. The truth is Doha wouldn't have resulted in free trade as in free trade inside the countries. No, no, no, no. It would have been a deal that would pleased governments. Now, it is possible free trade might have happened in the following years. But it is most likely that governments would renegotiate. Plus, the majority in all the negotiating countries would rather vote for protectionism, especially considering commodities' prices are rising.

|7.29.08 @ 11:09PM|#

"Trade negotiations always turn on figuring out how to bribe producers who hate competition into allowing consumers to have access to a wider and cheaper array of goods and services."

But free trade is simply, willing seller in country A has no impediments to finding and dealing with willing buyer in country B. People who argue for "fair" or "managed" trade, or who acknowledge governments' "legitimate and necessary role" in regulating (controlling) trade between those willing sellers and buyers, demonstrate their lack of faith in free trade and capitalism. I guess it's like Crips and Bloods: some of their members might want to wear bandanas of the other color, but they have to profess to be true to their gang's hue. Our hue is capitalism, it seems. All the made members wear it, but only a few of them really like it.

h-dawg|7.29.08 @ 11:28PM|#

What message does this send to the world's poor?

|7.30.08 @ 12:17AM|#

The US constitution establishes free trade between the several states with just a few SENTENCES, and look how well that works for us. Any international "free trade" agreement that can't do the same in no more than a handful of PAGES is just a pretender to the name, and we should be more than a little suspicious of it, and the unintended consequences that are hidden in the voluminous details.

Darth Smoot|7.30.08 @ 1:33AM|#

At last, we will reveal ourselves to the New World Order. At last we will have revenge.

rocketman|7.30.08 @ 3:30AM|#

If it was really a "win/win" situation you wouldn't think the talks would have collapsed. My guess is that prospective losers (even if they would be 'winners' in an overall improved economy they could see themselves as losing out more if their protected industries are no longer protected) had the pull to pull this thing down.

Alan Vanneman|7.30.08 @ 7:30AM|#

Ron might have noted that India and China have achieved parity in parochialism with the "developed" nations. That is, they refused to give up the authority to impose tariffs whenever "necessary" to protect their farmers.

The "creative destruction" of capitalism inevitably creates obstacles to the constant progress that might occur in an ideal world. The people whose way of life is destroyed by progress don't like it and find ways to push back.

In the U.S., rural areas have been in a long-term economic decline stretching back into the seventies. With rising fuel prices, they're likely to become even more desperate. If only they'd sell their homes, break up their families, move to the 'burbs, work hard and shut up!

|7.30.08 @ 8:59AM|#

LOL, if it stands to benefit humanity, rest assured it will be tossed out. Welcoem to the new regime.

JT
www.Ultimate-Anonymity.com

|7.30.08 @ 9:02AM|#

Good thing the Haitian government didn't do anything to interfere with the temporarily cheap food imports that drove their domestic production out of business.

So they're eating mud now that prices went back up and they don't have the capacity to produce what they need domestically? Hey, for a couple years there, they weren't!

|7.30.08 @ 9:08AM|#

It takes a really sick fuck to think that the reason people disagree with you about politics is because they like to see hungry children, JB.

BTW, dipshit, Al Gore supported this deal.

|7.30.08 @ 9:09AM|#

"The "creative destruction" of capitalism inevitably creates obstacles to the constant progress that might occur in an ideal world. The people whose way of life is destroyed by progress don't like it and find ways to push back."

You ignorant little man. Schwab is refusing to back down, apparently, because it's a "matter of principle". And that's nothing to do, I presume, with the pressure from Capitol Hill to find fresh markets for your rust-belt manufacturers?

In all seriousness, how much fatter can the US get?

Nigel Watt|7.30.08 @ 9:15AM|#

joe, should Michigan impose tariffs, since it's in a depression? No; its residents have the freedom to move elsewhere (like Houston - tons of Michigan plates here). Haitians should have the same freedom.

Also, managed trade is almost as bad as no trade. Free trade means no restrictions and no tariffs.

|7.30.08 @ 9:28AM|#

I doubt the collapse of domestic farm production in Haiti is in any way a product of a lack of protection from food imports. I would be more likely to blame roving territorial gangs of murderers and thieves, because there are plenty of places in this world that get by importing the bulk of their nutrition. Those places are peaceful enough that other livelihoods are practical.

Beyond that, you may as well say "Can't let food get too cheap...people'll starve!"

The most frustrating thing about farm protection is that its argumentation is like a hydra. Lop the head off of one argument, and two arguments rise to take its place:

Food security in case of war! What, the fruits of specialization make a richer society better able to resist sanctions? OK...food safety in case of lax foreign standards and...protection from price spikes! What, safety standards are no easier to enforce abroad than at home, and protection leads to higher average prices and relative poverty? OK...two new arguments plus an old one recycled!

Intelligent people have been fighting agricultural protectionism since at least Adam Smith. Even V.I. Lenin denounced it in his tract on imperialism!

After the more than two hundred years of the same arguments being recycled and refuted, I start to doubt the virtuous motives of my opponents on this issue.

stuartl|7.30.08 @ 9:45AM|#

After the more than two hundred years of the same arguments being recycled and refuted, I start to doubt the virtuous motives of my opponents on this issue.

Don't you understand? They "know" stuff. And they care more than you do. [/sarcasm]

In most cases they are not disingenuous (politicians being a frequent exception), instead they meet the Dawkin's criteria for creationists, either poorly educated or unintelligent.

|7.30.08 @ 9:52AM|#

Nigel,

I'm all for reducing barriers to immigration, but the entire population of Haiti is not going to emigrate. There's going to be a Haiti, even if it only consists of people too poor to chip in for a rowboat.

some fed,

I would be more likely to blame roving territorial gangs of murderers and thieves, because there are plenty of places in this world that get by importing the bulk of their nutrition. As if there weren't murderers and thieves prior to a couple years ago?

Beyond that, you may as well say "Can't let food get too cheap...people'll starve!" That's a cute aphorism, but it doesn't really address the point. One would almost think it's more a way to make yourself "feel right" than to seriously consider the situation.

Guy Montag|7.30.08 @ 9:56AM|#

Of course, if all of the citizens of the world were given equal amounts of food, then they would all be equal.

|7.30.08 @ 9:56AM|#

Anyway, congratulations to great, principled free trade negotiators.

In their passionate determination that Haiti and similar countries not be able to implement measures of microscopic significance, they made sure that billions of dollars in tariffs related to major industries will not be torn down.

After seeing the people who keep proclaiming how much more they care about development improving the situation of people in poor countries make that calculation, I start to doubt the virtuous motives they claim for themselves.

stuartl|7.30.08 @ 10:07AM|#

After seeing the people who keep proclaiming how much more they care about development improving the situation of people in poor countries make that calculation, I start to doubt the virtuous motives they claim for themselves.

joe, I'm sure you understand that some fed's being in favor of zero tariffs or barriers does not equate to supporting the positions taken by any of the negotiators.

|7.30.08 @ 10:19AM|#

This all has to do with the political realities, of which I see two.

First, it is not, for whatever reason, politically feasible for the US to unilaterally drop all trade barriers. Argue the merits of this all you want, it ain't gonna happen. Even if the Chimpler was willing to make this leap, the Senate would have a (subsidized) cow and block the deal.

Second, other countries are not willing to drop their trade restrictions for nothing. Again, point out the stupidity of this all you want, but it ain't gonna happen.

Getting to free(r) trade is an incremental process in the real world. Could our negotiators have given up a little more in bribes to other countries, and/or dropped our barriers a little more, and still put together a deal that would survive the Senate? Probably, but who the hell knows?

|7.30.08 @ 10:31AM|#

joe,

On my point about violence, thank you for not falling into the trap of positing the violence to be caused by any sort of fluctuations in agricultural markets. Obviously, most people in Haiti have been hungry, poor, and subject to violence for decades now, if not since it was colonized.

I still stand by my summary of your assessment of the Haitian food crisis, "Can't let food get too cheap...people'll starve!" Making anything more expensive through import protection does not make it cheaper in the long run, or even the medium run where capital can be shifted to meet the demand. All protection would do is force Haitians to spend more wealth and effort on food instead of something else: shelter, protection from violence, sanitation, clothes--there are a lot of other things crucial to survival besides food.

Furthermore, it is the fragmentation of markets that promotes volatility in prices, because isolated markets fall more easily victim to isolated disasters.

|7.30.08 @ 10:32AM|#

stuartl,

joe, I'm sure you understand that some fed's being in favor of zero tariffs or barriers does not equate to supporting the positions taken by any of the negotiators.

I do, and was talking about the negotiators. Which is why I mentioned them.

|7.30.08 @ 10:35AM|#

some fed,

Making anything more expensive through import protection does not make it cheaper in the long run, or even the medium run where capital can be shifted to meet the demand. We'll see.

What we know for certain, because we're seeing it before our eyes in Haiti and elsewhere, is that a flood of cheap food which drives local producers out of business can cause greater hunger once it dries up and leaves the country without its own capacity.

Nobody questions this point when it's made in regard to food aid to Africa driving local farmers our of business, but somehow, that lesson is forgotten when the temporary flood of cheap food has its origins in a business plan rather than a charitable one.

|7.30.08 @ 10:44AM|#

some fed,

In other words, your statement about long and medium term doesn't contradict what I'm saying about acute shortages.

Acute shortages of TVs and rugs means we buy our rugs and TVs a little later, or pay a little more. Acute shortages of food mean that people starve to death or eat mud.

Now, no one is questioning that both matter - it's best for food to be cheaper over the long run AND to have no periods of acute shortage. There is a difference between the longstanding tariffs the Japanese used to have on all imported rice, or our protections for Big Sugar - implemented to keep producers earning more over the long-term, basically permanent wage supports funded by consumers - and the temporary safeguards intended to smooth our dramatic peaks and valleys in food prices.

|7.30.08 @ 11:08AM|#

I question the point that food aid is some sort of net evil for its recipients. I can't believe that the recipient of a handout is the one that is harmed.

The notion that people suffer for getting free stuff is absurd. It takes an impossibly weak character in an individual to receive a bit of charity and make themselves a slave to it. People may come to expect charity and seek to exploit it, but that is not enslavement, nor is that the modus operandi of the average person struggling in a poor country.

Again, making things more expensive through artificial means like trade restriction, only makes people poorer than they would have been otherwise. Countries that receive food aid during famines don't stop having famines if they reject food aid, just as countries that refuse food imports don't stop having famines. All it can accomplish is the movement of people and resources into farming that would have been more profitably employed otherwise, which may as well be the definition underdevelopment.

And as for the food security argument that you reiterate with your point on shortages, there is no worldwide shortage of food. There is still food enough to be had, stockpiled, and speculated upon by the citizens of any country without trade restrictions. Food's just more expensive. Would having more domestic food-producing capacity in Haiti make food cheaper in Haiti? Not if the cheapest producers of food can still export. In that case, food in Haiti becomes just as expensive as it is everywhere else.

PFJ|7.30.08 @ 11:18AM|#

"What we know for certain, because we're seeing it before our eyes in Haiti and elsewhere, is that a flood of cheap food which drives local producers out of business can cause greater hunger once it dries up and leaves the country without its own capacity."

Why do you think the cheap food left the country?

|7.30.08 @ 11:23AM|#

some fed,

I question the point that food aid is some sort of net evil for its recipients. I can't believe that the recipient of a handout is the one that is harmed. Not the recipient. The farmers in that recipient's country, or region, or continent.

We send food aid grown in the American midwest, and give it away for free, thereby driving out of business local farmers who could have been meeting at least some of the need during a famine. In doing so, we set up the country for the next famine, because the cheap food turns the local farmers into that many more paupers.

There was a bill to allow the State Dept. to start buying African grains for African food aid efforts a couple months ago, but it failed.

Again, making things more expensive through artificial means like trade restriction, only makes people poorer than they would have been otherwise. You keep invoking this, in place of formulating some thought to refute my argument. Just saying, it's becoming really obvious.

Would having more domestic food-producing capacity in Haiti make food cheaper in Haiti? Not if the cheapest producers of food can still export. Haitian farmers don't tend to be agribusiness giants. Most food produced there is consumed there.

|7.30.08 @ 11:27AM|#

PFJ,

Why do you think the cheap food left the country?

It didn't, it was consumed. You misunderstood that sentence. I meant "leaves" not as "exits" but as part of the phrase "leaves the country without its own capacity." The consequences of the cheap food is to drive farmers out of business, leaving the country without agricultural capacity it needs when the flood of cheap food ends. Clear?

|7.30.08 @ 12:21PM|#

I'm sorry, some fed, that was uncivil.

I understand, and agree with, your observation that trade barriers can be an impediment to overall economic growth, including in the country that enacts them to protect its industries. I count myself on the freer-trade side of the debate, for exactly that reason.

But there are special cases where that goal, as important as it is, is not the only consideration. Food security in an impoversished country like Haiti is one of them, because "in the long term" doesn't cut it, when we're talking about famine.

|7.30.08 @ 12:33PM|#

Thanks for being civil. I had a whole paragraph about that which I already anticipated to otherwise be falling on deaf ears.

Yes, food aid does harm producers who are undersold--even to the point of rendering them paupers, but I don't care about the business prospects of producers. I wouldn't shut down charities so that some producer has some sort of monopoly over a subset of people.

Furthermore, free food does not cause famines. Poverty and disaster causes famines. Free food also does not cause poverty, and "manna from heaven" would not be classed as a natural disaster. Poverty is a complex phenomena with many potential, but none of those causes is charity.

Regarding small farmers in Haiti, I said "cheapest producers". I'm certain small farmers in Haiti are not sufficiently efficient to compete with world wholesale prices for raw foodstuffs, and if Haitians don't have access to world wholsale prices, it's due to violence and oppression and their attendant destruction of infrastructure.

|7.30.08 @ 12:36PM|#

Would you agree that violence and oppression are the only true causes of mass poverty, and that free stuff--charity--is neither violence nor oppression?

JB|7.30.08 @ 2:48PM|#

joe, they are called Democrats. If you don't know that by now, you haven't been paying attention.

Either they are doing it on purpose or they are so monumentally stupid that it's the same thing.

I don't pay attention to AlGore. It wouldn't surprise me to learn he has flip-flopped now that he got his rocks off. "Woo-hoo! Dead children! If we can't abort them, at least we can starve them!"

|7.30.08 @ 2:54PM|#

Poverty and disaster causes famines.

Unfortunately, it seems the chief cause of famine today is politics. Diversion of food to an "enemy" population is now a weapon.