The Australian, Canberra

Bilateral deals ’mock’ Doha

Tom Switzer, Trade

31 July 2006

The Doha round of world trade talks may have collapsed in Geneva last week — denying the world’s developing countries their promised access to global markets — but leading trade expert Jagdish Bhagwati remains optimistic about the cause of multilateral trade liberalisation.
Although trade diplomats have been quick to point fingers at Europe and the US for the collapse of last week’s global trade talks, Professor Bhagwati, a Columbia University economist and member of the Council of Foreign Relations in New York, directs much of the blame at the preferential trade arrangements (PTAs) — such as the US-Australia deal of 2004.

Bilateral deals, he warns, are much worse than multilateral deals in several ways, notably in the "spaghetti bowl" of rules that companies have to deal with when they do business in multiple countries.

Far from strengthening multilateral trade, he says, PTAs have made a "mockery" of the World Trade Organisation system, which was relatively free from preferences, genuinely devoted to even-handed or most favoured nation treatment of all trading partners.

But the US, he says, also deserves to receive much of the criticism for the suspension of Doha. "The reason is that the US, because it is so responsive to domestic politics and so insensitive to foreign politics, often is a maximalist in its demands for concessions and a minimalist in its own concessions."

Washington has effectively decided that the political clout of US farm lobbies outweighs any promise to do more to end global poverty.

But Professor Bhagwati, a former chief economist with the General Agreement on Tariffs & Trade (the predecessor to the World Trade Organisation), suggests that it is the US, not the rest of the world, that might be the biggest loser if the Doha round does not finish before President George W. Bush’s so-called "fast track", or trade promotion, authority expires mid-2007.

The US has signed nine of its 12 free trade agreements (FTAs) since Mr Bush took office in 2001. Another six accords are pending approval in Congress and 11 more are being negotiated. This push will continue until the fast track expires on July 1 next year.

Trade deals become almost impossible to negotiate after that because Congress will be able to address specific provisions, rather than casting an up-and-down vote.

"No other country needs (a) fast track to sign trade treaties. But the US does, and this applies equally to PTAs. So, while everyone else will continue to negotiate the PTAs, the US will not be able to manage unless fast track is renewed only for PTAs (and not for Doha) which would make the Americans look once again like a bunch of anti-multilateralist morons," he says.

"We should all point this out to Washington, since they have been badly misled by the likes of (former trade representative Bob) Zoellick, and the support extended to Zoellick’s erroneous doctrines by Fred Bergsten at the Institute for International Economics — they just came out with a study recommending a US-Pakistan FTA, prompting me to say: now they should propose FTAs with Iran, Syria and North Korea as well!"

Professor Bhagwati is widely regarded as one of the intellectual giants of the modern era, frequently receiving plaudits from bureaucrats in Brussels and Washington as well as leading economists such as Keynesian (and former student) Paul Krugman and free marketeer Ross Garnaut of the Australian National University.

Jagdish Bhagwati delivers the fourth H.W. Arndt Memorial lecture at the Visions Theatre, National Museum of Australia, Action Peninsula, in Canberra at 6pm today.