Alan Beattie had a thoughtful piece on trading ritual and reality in the FT yesterday:

The reality is that the great wave of globalisation since the end of the cold war has had a lot less to do with ministers signing paper trade agreements – most of which are anaemic – and a lot more to do with innovative businesses getting on and doing things…

The 10-member Association of South-East Asian Nations, for example, signed a free trade agreement in 1991. But although trade within the region has grown rapidly, less than 10 per cent of exports use the special tariff rates available under the pact, partly because the rules are so complex. Digitisation, lower transport costs and improved supply chain management have had far more impact on the region than lower tariffs…

The most protected sectors now are either – as in much of agriculture – ferociously defended by the beneficiaries or – as in services – sufficiently complex that writing binding agreements is hard. Witness the lack of progress in official attempts further to liberalise transatlantic trade, one of the biggest and most vibrant trading relationships on earth…

The evidence so far is that with world commerce itself doing fine, there is little contribution to greater globalisation being made by negotiated reductions in official barriers to trade.

It’s worthwhile to read the full column.

What (present or future) political economy forces would make a WTO round infeasible but not block a free trade deal with China?

Moisés Naím says there’s a free trade paradox: trade is booming while negotiations bust.

In many countries, free trade agreements are now politically radioactive, with imports routinely blamed for job losses, lower salaries, heightened inequality, and more recently, even poisoned toothpaste and deadly medicines. The domestic politics of trade reforms are inherently skewed against trade deals…

In 2006, the volume of global merchandise exports grew 15 percent, while the world economy grew roughly 4 percent. In 2007, the growth in world trade is again expected to outstrip the growth rate of the global economy… An unprecedented number of countries, rich and poor alike, are seeing their overall economic performance boosted by strong export growth…

So, what explains the paradox of gridlocked trade agreements and surging trade flows? The short answer is technology and politics. In the past quarter century, technological innovations—from the Internet to cargo containers—lowered the costs of trading. And, in the same period, an international political environment more tolerant of openness created opportunities to lower barriers to imports and exports. China, India, the former Soviet Union, and many other countries launched major reforms that deepened their integration into the world’s economy. In developing countries alone, import tariffs dropped from an average of around 30 percent in the 1980s to less than 10 percent today. Indeed, one of the surprises of the past 20 or so years is how much governments have lowered obstacles to trade—unilaterally. Between 1983 and 2003, 66 percent of tariff reductions in the world took place because governments decided it was in their own interests to lower their import duties, 25 percent as a result of agreements reached in multilateral trade negotiations, and 10 percent through regional trade agreements with neighboring countries…

As the volume of trade continues to grow, the need for clearer and more effective rules becomes more critical. In this century, the quality of what is traded will be as important as the need to lower tariffs was in the last… Moreover, a rules-based system accepted by a majority of nations can protect smaller countries and companies from the abusive practices of bigger nations or large conglomerates. The rule of law is always better than the law of the jungle, even in resolving trade conflicts.

[Hat tip: WaPo]

Two seemingly important events in trade negotiations take place this week: an APEC summit and the resumption of Doha talks.

The FT says the Bush administration “will seek to breathe fresh life” into the Doha agenda, but their only evidence for that effort is an administration statement that it “is prepared to make the tough choices if others are likewise prepared to make those tough choices to create new trade flows.” That just means nothing new is happening.

The deputy US national security advisor for economic affairs also said that the US will push the creation of a Pacific region PTA – the so-called FTAAP – but that won’t happen. Given Congressional sentiments, how could Bush ever push a big trade deal that included China?

This week will be merely continue what the Bush administration has been doing for a few years on trade – lots of talk, little action.

Two seemingly important events in trade negotiations take place this week: an APEC summit and the resumption of Doha talks.

The FT says the Bush administration “will seek to breathe fresh life” into the Doha agenda, but their only evidence for that effort is an administration statement that it “is prepared to make the tough choices if others are likewise prepared to make those tough choices to create new trade flows.” That just means nothing new is happening.

The deputy US national security advisor for economic affairs also said that the US will push the creation of a Pacific region PTA – the so-called FTAAP – but that won’t happen. Given Congressional sentiments, how could Bush ever push a big trade deal that included China?

This week will be merely continue what the Bush administration has been doing for a few years on trade – lots of talk, little action.

Two seemingly important events in trade negotiations take place this week: an APEC summit and the resumption of Doha talks.

The FT says the Bush administration “will seek to breathe fresh life” into the Doha agenda, but their only evidence for that effort is an administration statement that it “is prepared to make the tough choices if others are likewise prepared to make those tough choices to create new trade flows.” That just means nothing new is happening.

The deputy US national security advisor for economic affairs also said that the US will push the creation of a Pacific region PTA – the so-called FTAAP – but that won’t happen. Given Congressional sentiments, how could Bush ever push a big trade deal that included China?

This week will be merely continue what the Bush administration has been doing for a few years on trade – lots of talk, little action.

Emmanuel directs us to an unusual suggestion by TCA Srinivasa-Raghavan, who notes that India will be the world’s largest importer of foodgrains in 2011:

[W]here India’s negotiating stance at the WTO is concerned, it should alter its position. Basically, if it is going to import large amounts of food (grains and other things) it will gain if the others subsidise their agriculture. The same point was made (albeit in respect of Africa) by Joseph Stiglitz at a talk he gave at ICRIER. So I am in good company.

In effect, just as foreign savers with their countries’ huge dollar reserves are subsidising the US consumer, the US taxpayer will subsidise Indian consumers. It is from this perspective that India should alter the analytical framework that determines its food trade policy.

I was initially skeptical of this argument. Africa is different than India. It has preferential access to US and EU markets via AGOA and Everything But Arms, respectively. If the Doha round results in both preference erosion and subsidy reductions, then it would be a terms-of-trade deterioration for the African countries that are net food importers and receive those benefits. This is not the case for India, which does not have preferential access and may not a net food importer.

Moreover, the analysis is very sensitive to which crops make up India’s balance of trade, as some are subsidized by OECD countries much more than others. At first I suspected that the structure of rich country subsidization would mean that India doesn’t substantially benefit from cheaper imports, but a long article by G. Chandrashekhar in the Hindu Business Line says otherwise:

[I]n none of the four major commodities would India stand to benefit substantially if the subsidies were eliminated. It may be politically correct and perhaps expedient for India to make appropriate noises against farm subsidies at global forums such as the WTO. While reduction or elimination of subsidies would impact world commodity prices, consuming and importing nations would be the worst hit. Unlike several countries that are dependent on farm goods export, India is a large consuming country. Subsidy-induced low prices would be in Indian consumers’ interest.

India’s own emerging situation — tardy output growth, rising internal demand, supply tightness, firm prices — warrants that we prepare to remain open to imports.

Is this contrarian conclusion true?

See below the fold for analysis of oilseeds, foodgrains, cotton and sugar. It looks like cotton is a weak argument and wheat is a difficult judgment, while Chandrashekhar may have a strong case in oilseeds and sugar.

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The August issue of The World Economy has a special feature on the (foregone) potential benefits of the Doha Round. From a trio of simulation-intensive articles, we learn that the December 2005 proposals from which countries have retreated did offer real gains, cotton subsidies are indeed the most damaging agricultural protection, and countries’ own liberalization drives their predicated national income gains.

I’m merely a student, while Grant Aldonas was US undersecretary of commerce for international trade from 2001-05, but he’s crazy if he thinks this is the way to jump-start Doha:

The answer lies in creating a new structure for the Doha development agenda that would yield real gains in trade, offer real help to the least developed countries and provide a significant incentive for further liberalisation. Towards that end, I would suggest… a “plurilateral” agreement among all WTO members willing to move directly to free trade on a global basis. To participate, members would have to eliminate all barriers to trade in goods and services, including agriculture, and immediately decouple all agricultural subsidies from production. What this would do is create a free trade core within the WTO, provide significant trade benefits to its participants that would ease approval of the overall accord back home and provide a significant incentive for non-participating WTO members to join as soon as they were ready to accept these obligations.

No way.

The other prongs of his plan are also desirable but far from likely to happen. For example, you won’t see a deal to harmonize the various preference schemes for LDCs, because those programs are as much about politics as development.

Bhagwati and Panagariya blame America for Doha’s failure, citing its maximalist demands and “almost pathetic” offered concessions. Read the full piece.

In the comments section at VoxEU, Peter Gallagher objects to the authors’ argument that if India is asked to lower its bound rates sufficiently so as to lower its applied rates, then the US ought to do the same. Gallagher notes that the US bound rates on agricultural tariffs are nearly the same as its applied rates, but the relevant US policy instrument is agricultural subsidization – in which case the bound rate vastly exceeds actual payments to farmers. See this short note (pdf) by Kim Elliott for the relevant numbers – at present, the US offer wouldn’t reduce the level of total trade-distorting support.