Seeker Blog

Re the WTO negotiations, Paul Wolfowitz writes that the Doha deal is “not merely at the 11th hour, but at two minutes to midnight.”

…Avoiding this requires leadership from everyone — or what WTO Director-General Pascal Lamy calls the “triangle.” The U.S. would accept further cuts in its actual levels of trade-distorting agricultural subsidies, moving to a limit that is lower, not higher, than its current spending. Its current offer would mean a ceiling of around $22.6 billion per year, but it spent “only” $19.5 billion in 2005. The EU would accept further cuts in its actually applied farm tariffs, moving from its offer of a 39% average cut to accepting an average cut closer to the 54% proposed by Brazil, India and others. And developing countries such as India, China and Brazil, in turn, would accept cuts in their actual tariffs on manufactures. That is, everyone moves, and everyone takes some pain.

But this “pain” is really gain — not just for developing country exporters, but for the countries making the cuts. Countries gain most from their own trade reforms, as they are the first to benefit from lower prices and improved efficiency. The biggest winners from lower EU farm tariffs are EU consumers, especially the poorest among them who are hurt the most by higher food prices. In developing countries, cutting high tariffs not only helps consumers, but also lowers prices for producers, making their exports more competitive on world markets and creating jobs across the economy.

In the U.S., resources freed up from trade-distorting farm subsidies could be put to other uses, including better ways of helping family farms without harming other farmers in poor countries. Family farms are not the big winners from the present system; 80% of U.S. farm subsidies go to only 20% of recipients, often large enterprises.

Facing down special interests is not easy for any government, but that is one reason why trade negotiations exist — to allow countries to trade off cuts and gains, and to set the gains to the many against the pain for a few. And the nature of trade negotiations — or any negotiation, for that matter — is that while everyone does not get everything they want, all are better off from the deal in the end.