Trade Negotiations Tossed onto the Trash Heap

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.