Global Development: Views from the Center

Bergsten's argument clearly applies to the Western Hemisphere's dormant free trade negotiations. The central problem is that the two main players in this hemisphere*the United States and Brazil*are really not committed to reaching an agreement. And without that agreement, there will be no FTAA. The two governments have not been willing work through their differences, contend with powerful political and economic forces in their countries, and put their political and ideological considerations to one side. That is what it will take to piece together acceptable compromises to their sharp disagreements on several key issues*particularly concerning US agriculture support programs and anti-dumping policies (and other trade remedies), but also related to differences over intellectual property, Brazilian tariff levels, and the so-called Singapore issues regarding government procurement, trade in services, and trade facilitation.

Because it is the hemisphere's economic powerhouse (with a GDP some 15 times larger than Brazil and about six times that of all of Latin America and the Caribbean), the United States should be providing more of the leadership and demonstrate real resolve in addressing it agricultural protectionism. As it stands now, with the impasse at Doha, the Washington is letting France and India determine its trade policies in the Americas. But Brazil bears some responsibility for the paralysis of the negotiations. It seems more interested at times in demonstrating international clout (in trade talks and elsewhere) than in finding ways to solve difficult issues. At last November's Summit of the Americas, Brazil joined just four other countries (out of the 34 participating) in blocking a US proposal to set a date certain to reinitiate FTAA negotiations.

It will require a great deal*from both the United States and Brazil*to restart the FTAA talks. Given the current tensions and disagreements in hemispheric relations and the considerable opposition free trade in most countries, the original objectives of the FTAA seem far too ambitious today. Indeed, nearly three years ago, the Brazilian and US governments, against the wishes of most other nations, essentially jettisoned the idea of a comprehensive FTAA that would bind all countries to the same obligations. Instead, they created a two tier system, which became known as FTAA lite, whereby countries would only have to accept a small number of commitments and then negotiate other items bilaterally as they wished.

Realistically, this is the option that provides the best prospect for reviving the stalled negotiations. Mexican trade specialist Jaime Zabludovsky has suggested tha a minimal list of core obligations would only have to include two items--common rules of origin and a single dispute settlement mechanism. Once countries sign on to these obligations, they are free to negotiate bilateral and plurilateral agreements with whatever countries or groups of countries they wish. Even this minimal accord, would begin to unravel the "spaghetti bowl" of agreements that have proliferated in the hemisphere, and perhaps create the basis for (1) a more ambitious accord in the future and (2) greater cooperation among the countries in global trade talks.

But even to proceed on this minimalist path, the US and Brazilian governments will have to show much more willingness than they have to date to make difficult and unpopular political decisions. It is not clear that either government is up to it.

I think Mike Moore, former WTO director-general, put it perfectly today in a column in The Australian Financial Review:

Please, free us from initiatives - we have a tableful now. It's laughable to read of endeavours to pull an Asia-Pacific deal. We have already many, many times announced that deal; years ago it was to be APEC (Asia-Pacific Economic Co-operation forum ) free trade among developed countries by 2010, and developing countries by 2020. Yet what's the worth of so many bilateral and regional deals? OK, I admit I'd do them too, but it's like dancing with your sister, not much will come of it, it's just good practice.
Here's the deal: more time for developing countries to adjust to market openings and a few more years for rich countries to adjust. But we need to move on the substance of agriculture, which for the United States means domestic support, and for the European Union and Japan means market access.
We also need to nail down a tiny safeguard: the definition of sensitive products.
How to massage the message so all ministers can walk away claiming victory is the political challenge.