New Trade Talks May Hinge on Protections

As world leaders consider launching a new round of trade liberalization talks, developing countries are demanding that the United States and other rich nations cut back the thicket of tariffs, quotas and subsidies protecting their farmers and apparel makers.

Developing countries say the trade barriers shielding agriculture, textiles and clothing in the “Quad” economies--the United States, Europe, Japan and Canada--are among the biggest obstacles to Third World export growth and economic advancement.

Their complaints are complicating the task of U.S. and European officials trying to marshal support for a new round of trade talks when representatives of the World Trade Organization’s 142 member nations gather Nov. 9-13 in the Persian Gulf emirate of Qatar.

The negotiations would take years. But experts say they won’t stand a chance unless the rich countries respond to demands that they stop sheltering politically powerful but economically inefficient industries from competition.

It will be difficult for the U.S. to accomplish its goals without additional concessions in textiles and agricultural products, said Peter Morici, senior fellow at the Economic Strategy Institute in Washington. “That’s where the high tariffs and the high subsidies are,” he said.

U.S. Trade Representative Robert Zoellick has pushed for a new round of negotiations, arguing that trade liberalization is the best antidote to the poverty and resentment that give rise to terrorism.

But the developing nations and their advocates say the agriculture and apparel protections maintained by the Quad countries have precisely the opposite effect, widening the gap between the world’s rich and poor.

Change won’t come easily. Agriculture and apparel are among the final fortresses of trade protection in the industrialized world. Europe and Japan have long resisted efforts to reduce the generous subsidies they give their farmers. The United States protects its remaining textile and apparel makers with a combination of tariffs and quotas, and the House recently passed legislation authorizing $170 billion in farm subsidies over 10 years.

Barriers to Third World exports of agricultural commodities such as wheat and sugar and labor-intensive clothing and footwear are at the top of a list of grievances presented to WTO officials by the least-developed countries, which account for 11% of the world’s population but only 0.4% of its exports.

The developing nations say they are reluctant to enter into a new round of trade negotiations because they have yet to realize the benefits they were promised in the last global trade accord.

That agreement, approved in 1993 after seven years of negotiations, called for gradual reductions in agriculture and apparel trade barriers. But the big countries have taken advantage of loopholes to limit or delay some reforms.

The developed nations provide their farmers with price supports, export subsidies and other forms of trade protection worth more than $300 billion a year, WTO officials say. Government support accounts for about 40% of total farm income in the wealthy countries.

The biggest trade barriers apply to grains and other staples produced by farmers in Europe and Japan. In the United States, sugar, peanut, citrus and dairy producers receive special protection.

The trade barriers hurt developing countries in several ways. They limit exports of the goods those countries are best suited to produce. They encourage overproduction in developed nations, contributing to global surpluses and low prices. They magnify the effects of economic downturns by insulating First World farmers from market forces that otherwise might prompt them to reduce production.

If industrial countries discarded their trade protections, developing countries would realize $43 billion in annual benefits, according to World Bank economists.

The problem is particularly acute for the 49 “least-developed countries.” Oxfam International, a global relief organization, says high tariffs and quotas deprive those countries of $2.5 billion in annual export revenues.

Agriculture and apparel are not the only issues troubling developing countries as WTO delegations prepare for next week’s talks. Other sore spots include the United States’ use of anti-dumping policies to protect its steelmakers and the enforcement of patents protecting high-cost AIDS drugs and other pharmaceuticals. They also want more time and leeway to implement provisions of the last big trade pact.

But they want the wealthy nations to agree in advance to engage in serious negotiations to open their agriculture and apparel markets, and trade experts say it is unlikely that a new round can succeed if those issues are not addressed.

“Developing countries will continue to push very, very hard for more rapid liberalization of the textile and apparel market and greater liberalization of agriculture,” said Lael Brainard, a Brookings Institution economist and former White House trade official. “It is very important for them to get those things included in the initial terms of the negotiations.”

Some developing countries are not even waiting for a new round. Pakistan is pressing the U.S. to lower its textile and apparel barriers immediately in return for its participation in the anti-terrorism coalition. The Bush administration appears amenable, but the request has stirred opposition from the U.S. apparel industry and its congressional allies.

To be sure, wealthy nations are not the only offenders when it comes to trade: Some of the most restrictive barriers are maintained by the developing countries themselves.

The Quad countries have already taken some steps to lower agriculture and apparel barriers, and they are not uniformly opposed to additional reforms. For example, the White House supports further efforts to open agriculture markets because the United States is a big exporter of wheat and other grains.

Agricultural market reform is “a top priority for the United States,” and “arguably the single greatest contribution that new negotiations can make to poverty alleviation in the developing world,” Zoellick said Tuesday in remarks to the Council on Foreign Relations in Washington.

He cited an Agriculture Department estimate that exports of food products by developing countries would increase 27% if all forms of protection and support for agriculture were eliminated.

Even so, the United States has shown little inclination to tear down the walls protecting sugar and peanut producers. And the administration’s enthusiasm for sweeping reforms has been muted by the campaign in Congress to keep the farm aid flowing.

“We are less interested in a pure free trade deal in agriculture than we used to be because we have been giving, and want to continue to give, substantial subsidies to our farmers,” said Jeffrey Schott, a trade expert at the Institute for International Economics in Washington.