Monday, November 21, 2005

Free trade losing steam | csmonitor.com

Free trade losing steam
President Bush and others will try to revive a global trade pact at APEC summit starting Friday.
By Mark Trumbull | Staff writer of The Christian Science Monitor



When leaders of Asian and American nations meet Friday at an economic summit in South Korea, they have an ambitious goal: revive negotiations on a new global agreement to reduce trade barriers - a move that experts say could add some $300 billion a year to the global economy and help lift millions of people out of poverty.

But to do so, they'll have to counter faltering worldwide momentum for free trade.

Trade liberalization has never made easy politics. It inspires no natural upwelling of popular support, and in recent years opponents have become increasingly vocal.

Signs of stalling support for greater economic openness abound, from the angry throngs who greeted President Bush recently in Argentina, to Europeans reluctant to slash agricultural price supports. Even a majority of Americans, in one poll, say they aren't satisfied with the way trade policies affect US jobs, global poverty, and the environment.

Yet behind the doubt and rancor, the foes of globalization are not necessarily gaining ground. The clearer signal is that the center of gravity in the global economy is shifting.

Developing nations, for the first time, are exerting significant influence on a major round of trade talks. That makes the dealing more complex, but analysts say it also puts pressure on the United States and Europe to craft a pact that benefits more of the world's people.

"The real stumbling block ... is a widespread perception that the US and other industrialized countries don't really want a fair trade deal," says Joseph Stiglitz, an economist at Columbia University in New York. With rising economic power - and livelier democracies - in places such as India and Brazil, "it is much more difficult for these countries to sign another unfair trade deal, as they have in the past."

Less-advanced nations, he notes, have been burned by a failure of rich countries to follow through on past pledges to reduce agricultural price supports.

This time around, it is harder for the US and European nations to set the trade agenda largely on their own.

Many developing nations want to see world agriculture become less distorted by government protection. They don't want to agree to liberalized trade in services - a key goal of the US and Europe - without major concessions on farm policy.

[...]

In addition to the rising clout of developing nations, several factors cast doubt over prospects for a breakthrough next month in Hong Kong:

• The contentious farm issue. Agriculture represents a small and shrinking share of the world economy, but it is jealously protected by many nations - it absorbs $1 billion a day in global subsidies, by one tally. Since many other trade barriers have already fallen, farming and services are the big issues remaining.

• The US trade deficit. A record imbalance may hinder US support for further trade liberalization. Some experts say the dollar may need to fall to correct the imbalance.

• The China factor. While many economists say the fears are overblown, the rise of Asian manufacturing - and Chinese factories in particular - has raised concerns in the US and Europe about the impact of globalization on wages and jobs.

Still, it's too early to declare the end of the free-trade era. Many workers around the world pin their hopes on export industries, and nations continue to work out bilateral deals to promote commerce.

History suggests that trade helps much more than it hurts. The world economy would be smaller by 10 percent or more, according to one analysis by the Institute for International Economics, without the growing global integration of the past 60 years. High tariffs, by contrast, were a hallmark of the Great Depression.

For now, global integration is a powerful trend. But so is the penchant of governments to subsidize their farmers.

That may mean that the benefits of any new trade accord would be much smaller than the potential $300 billion annual estimated by the World Bank.

I think it's vital for developed nations to stop subsidizing agriculture. It doesn't make any sense to give farmers free money! And then the price of food goes up, and that hurts poor people as well! This is a product that develping nations are also in a good position to sell. It all comes down to some romantic notion of farmers being the bedrock of our society, when in fact less than one percent of our population farms.

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