The United States trade negotiators have been urging China to play a larger role in the Doha round, but I doubt this was what they were looking for:

The main stumbling block in the Doha Round of global trade talks is the failure of the United States and European Union to make substantial concessions on agriculture, China’s commerce minister said on Monday… ”The European Union and the United States, as the world’s two largest traders, have yet to make substantial concessions in terms of high import tariffs on agricultural products, export subsidies for agriculture and the huge domestic support for their agricultural products,” Mr Bo said.

Mr Bo, speaking on the sidelines of the annual session of the National People’s Congress, the largely ceremonial parliament, also urged Japan to do more to reduce its tariffs on farm goods, which he said were nearly three times higher than China’s.

WTO Director-General Pascal Lamy claims that the Doha negotiations have fully resumed.

[Hat tip: Erixon]

The Bush administration put forth its farm bill proposal last week. Alan Beattie reports:

But as far as Doha was concerned, as one experienced agricultural policymaker in Washington put it: “There is less to this than meets the eye”.

The headline totals were compatible with, but did not go beyond, the cut in annual allowable trade-distorting farm subsidies from around $22bn to around $17bn (€13bn, £8.6bn) that the Bush administration has already informally offered in the Doha round.

Subsidy programmes that support prices, because they encourage farmers to produce more and hence push down world prices, are classified as “trade-distorting” under WTO rules and are subject to stricter limits. Despite the administration’s rhetoric that it was moving from supporting farmgate prices to protecting farmers’ incomes – the so-called “revenue assurance” principle – the proposed move was modest. The “marketing loan” programme, which subsidises farmers when the prices of their produce fall below a set level, altered the calculation of the price a little to take account of actual market prices, but the change will not be dramatic.

Similarly, a controversial programme called “counter-cyclical payments”, which compensates farmers when prices are low, was adjusted to take account of national crop yields as well as prices, but the change was incremental. The US has sought to classify the counter-cyclical payments as being only somewhat distorting of trade and hence enable them to continue under a Doha deal.

Mr Johanns has repeatedly warned US farmers that the alternative to agreeing reform is to see US agricultural subsidies litigated away piece by piece under the WTO’s dispute resolution mechanism. The US is seeking a renewal of the so-called “peace clause”, under which countries agree not to bring cases against each other over farm subsidies, in the Doha negotiations, but has run into stiff opposition from Brazil, which won a landmark victory against the US cotton subsidy programme in 2005.

Former USTR Charlene Barshefsky makes the case for emphasizing sectoral agreements rather than trade rounds at the WTO:

The longer the time-spread between global developments and WTO agreements, the less relevant the WTO will become. That, to me, suggests a policy, as we pursued in the 1990’s under President Clinton, under which parties use the WTO the way it was meant to be used – and that is as a forum for continuing negotiations among the members on issues of growing concern, so as to handle these issues in a rapid and effective manner. In the 1990’s, we concluded global agreements on telecommunications market opening, financial services market opening, information technology (which brought to zero tariffs on all information technology products), and duty-free cyberspace. These were all done under WTO auspices in a sectoral fashion, in a timely way.

The last global round of trade talks was launched in 1986. This round will not conclude until year-end 2007, at the earliest. Had we not pursued these critical sectoral agreements when we did, global telecom and financial services markets would not be nearly as open to the United States as today. Would that have made make any sense, when financial services and telecom are perhaps the most critical aspects of wealth creation?

If we keep waiting for meaningful trade liberalization in large rounds, which can be held up by any issue countries wish to interpose, then we risk the future of the WTO. I believe Doha will conclude. Once it concludes, the WTO must take a hard look at its own responsiveness, and its own role as a regulator, if you will, of global economic behavior, and move toward the negotiation of agreements with the greatest salience.

The most relevant academic piece I’ve found on this topic is a chapter in Economic Development and Multilateral Trade Cooperation by Philip Levy (PDF available online). In his introduction, he writes:

What is the appropriate scope of a negotiating round? Is it generally possible to reach agreements sector by sector? If it is possible, is it advisable?

This paper will attempt to bring existing economic theory to bear on these questions. In the next section, we will review the traditional case for package deals in trade rounds, bolster that case with some theory and then challenge it with the apparent success of sectoral negotiations. We will argue that track record of the sector-by-sector approach is less attractive than it seems and that its successes may well have had negative effects on future negotiations beyond the unfortunate procedural precedent.

Pointers to additional literature on this topic would be much appreciated.

Former USTR Charlene Barshefsky makes the case for emphasizing sectoral agreements rather than trade rounds at the WTO:

The longer the time-spread between global developments and WTO agreements, the less relevant the WTO will become. That, to me, suggests a policy, as we pursued in the 1990’s under President Clinton, under which parties use the WTO the way it was meant to be used – and that is as a forum for continuing negotiations among the members on issues of growing concern, so as to handle these issues in a rapid and effective manner. In the 1990’s, we concluded global agreements on telecommunications market opening, financial services market opening, information technology (which brought to zero tariffs on all information technology products), and duty-free cyberspace. These were all done under WTO auspices in a sectoral fashion, in a timely way.

The last global round of trade talks was launched in 1986. This round will not conclude until year-end 2007, at the earliest. Had we not pursued these critical sectoral agreements when we did, global telecom and financial services markets would not be nearly as open to the United States as today. Would that have made make any sense, when financial services and telecom are perhaps the most critical aspects of wealth creation?

If we keep waiting for meaningful trade liberalization in large rounds, which can be held up by any issue countries wish to interpose, then we risk the future of the WTO. I believe Doha will conclude. Once it concludes, the WTO must take a hard look at its own responsiveness, and its own role as a regulator, if you will, of global economic behavior, and move toward the negotiation of agreements with the greatest salience.

The most relevant academic piece I’ve found on this topic is a chapter in Economic Development and Multilateral Trade Cooperation by Philip Levy (PDF available online). In his introduction, he writes:

What is the appropriate scope of a negotiating round? Is it generally possible to reach agreements sector by sector? If it is possible, is it advisable?

This paper will attempt to bring existing economic theory to bear on these questions. In the next section, we will review the traditional case for package deals in trade rounds, bolster that case with some theory and then challenge it with the apparent success of sectoral negotiations. We will argue that track record of the sector-by-sector approach is less attractive than it seems and that its successes may well have had negative effects on future negotiations beyond the unfortunate procedural precedent.

Pointers to additional literature on this topic would be much appreciated.

Cato’s Dan Ikenson thinks that the US defense of its use of zeroing in anti-dumping calculations is a greater threat to global trade than the Doha round’s collapse.

Plenty of detail in this FT piece on the hurdles Doha faces – US-EU negotiations, Representative Collin Peterson, India, Brazil, France, domestic lobbies, etc.

If this portrayal of the Bush administration’s approach is accurate, then I’d think TPA renewal is unlikely:

“I don’t think the urgency [of Lamy, Mandelson, and analysts] is well-placed. The content is going to drive the pace of this negotiation,” the U.S. official, asking to remain anonymous due to the sensitivity of the Doha talks, told Reuters…

U.S. officials argue that the round will not drift into oblivion if a Doha deal remains elusive through 2007 or beyond, and more importantly today’s multilateral trading system will not unravel, no matter what the critics warn.

It’s rare that you have to convince a business to defend its interests. But Fredrik Erixon and Andreas Freytag try to coax exporters to care about the Doha Round in The Wall Street Journal Europe:

The World Trade Organization has often been portrayed by antitrade groups as a corporate puppet. But one key problem in this round has been the relative silence on industry’s part. Business has been the dog that didn’t bark…

Business leaders’ absence from the game is understandable. All the global-governance hubris, windy rhetoric and political grandstanding invariably displayed at big WTO meetings offer ample reasons for outsiders to take a rain check…

Yet the Doha agenda still has serious appeal for businesses interested in freer trade. Business opportunities in goods and industrial products will be significantly improved, particularly when it comes to exports to major developing countries. And binding countries to their currently applied tariffs — which are lower than the ones agreed in the last multilateral talks, the Uruguay Round — can increase stability and certainty in world trade. The Doha Round will not substantially liberalize trade in services, but it can lock in already achieved liberalizations, especially for investment, as well as dismantle some of the worst nontariff barriers to trade. What’s more, the vast majority of the business community has a lot to gain from a WTO deal that puts limits on antidumping measures, today the weapon of choice for protectionist governments, and prohibits egregious abuses of other trade-defense instruments.

So why aren’t businesses interested in the Doha round? Perhaps it’s the focus on agriculture and development that has turned them off. Maybe the lack of services liberalization is problematic. Or have businesses already obtained the trade liberalization most important to them, as Anne Krueger suggests?

It is not often asserted that the existence of preferential arrangements is a reason for failure to support, or opposition to, further multilateral liberalization. But the fact is that producers already exporting to PTA markets are either efficient and have already achieved the benefits (to them) of trade liberalization or they are inefficient and do not want multilateral competition. Either way, support for further multilateral liberalization has eroded. Many in the policy community have noted the absence of strong support from the US business community for the Doha Round, as compared to support for the earlier rounds of trade negotiations. It is not possible to prove that the absence of support for Doha is the result of PTAs (or the prospect of further PTAs) but it is certainly possible and even, I would argue, likely.

Erixon and Freytag aren’t much interested in that hypothesis, however:

One can argue at length over bilateralism versus multilateralism, but this is a superficial exercise that only clouds the real issues. They are neither opposites nor substitutes for each other. There is room for both of them.

What other hypotheses might be offered to explain the absence of support from business lobbies?

Update: Meanwhile, the FT says: “US business leaders on Thursday threw their weight behind the Bush administration’s last-ditch drive to revive its trade agenda before the president’s fast-track trade promotion authority expires later this year.”

Joseph Francois is optimistic about agricultural liberalization, despite the failing WTO negotiations:

In recent years, the new dispute settlement body… has led to successful cases against the U.S. and EU (led by Brazil) on cotton and sugar. At the same time, under different dispute mechanisms in the WTO, developing Latin American countries recently won a high-profile case against the EU on bananas. The most difficult issues are being handled through the legal machinery in Geneva, and developing countries are even winning. As it turned out, none of this really hinged on the agriculture negotiations themselves…

The current set of agricultural policies in the U.S. and EU is not sustainable. In the case of the EU, the combination of (i) aging populations and (ii) an Eastern Enlargement that has taken in poor, agricultural economies means that the CAP as we know it is doomed. The European Commission knows this, and EU Members have already launched on a policy reform process that recognizes that future agricultural policy will have to be very different (and much cheaper) if it is to survive the budget constraints brought on by aging populations, and the demands for structural funds from new members. The EU has made a commitment to reform (necessary regardless of how events unfold in Geneva), and we can expect the process to continue. So, why not just wait? We can probably get the same results we would from active negotiation. In the case of the U.S., the budget hole is now so deep, and the looming costs for Medicaid and Medicare with retiring baby boomers is so large, that large farm outlays are likely to be a victim of the storm of budget rationalization that will arrive with the next White House team. So again, why not just wait? We will get rationalization anyway, regardless of whether or not we push this through Geneva.

The EU scenario seems reasonable, but I don’t buy the US story, at least at first glance. Agricultural subsidies run around $20 billion, while federal spending is in the neighborhood of $2.5 trillion and the deficit is more than $300 billion, so although the subsidy payments are foolish, slashing them won’t significantly improve the budget situation. Meanwhile, farm lobbyists are a well-organized and influential constituency.

Analysts more familiar with the entitlement programs and the federal budget process are better equipped to discuss this topic than I am, but I’m skeptical that farm subsidies are likely to be first on the chopping block.