- The Washington Times - Sunday, September 19, 2004

In a surprise move that broke a three-year deadlock, the World Trade Organization recently announced a groundbreaking new compromise to help the developing world by ending protective subsidies on agricultural products in rich countries in exchange for broad cuts in tariffs on industrial goods and greater access for services trade in poor countries.

With this deal, the WTO has not only rescued the important work of the development-focused “Doha Round” of trade negotiations, but perhaps its own reputation, legitimacy and effectiveness with it.

The deal’s benefits are real for the poor and the global economy: The Center for Global Development estimates successful Doha Round trade liberalization will lift 500 million people out of poverty and add $200 billion annually to developing nations’ economies. The University of Michigan estimates in the U.S. alone a one-third cut in global trade barriers would increase yearly income by $2,500 for the average four-member family.

Reducing and eliminating nearly $1 billion per day in agricultural subsidies that have bedeviled developing nations and their struggling farmers strengthens relations between rich and poor by making real — and delivering real benefits from — the rhetoric of competing on a level playing field.

It has been hypocritical and counterproductive for rich nations to preach the virtues of free enterprise and liberal trade as engines of development and social progress while denying poorer countries access to their markets.

Importantly, with this deal the WTO and the concept of effective multilateralism have been given a much needed boost. After years of gridlock on the development agenda, punctuated by fits and starts and half-measures, the WTO will at last be able to demonstrate concretely that the diverse global institution can compromise, make a deal and actually improve people’s lives. Moreover, achieving an agreement that requires mutual sacrifice — and delivers mutual benefit — lays the foundation of international consent essential to enforcing existing and future international agreements.

Strengthening via the trade deal an international institution that regularly resolves disputes, enforces its rulings, and if need be, punishes transgressors should clearly be favored by those who embrace international cooperation and multilateralism.

But hard bargaining lies ahead. It is a time-tested trade truism that those who are affected by free trade are more concentrated, better organized and more effective than those who stand to prosper from its more diffused benefits. The OECD estimates government subsidies provide 20 percent of gross U.S. farm income; European farmers depend even more on government aid; and Japanese cultural and political obstacles to reforming the rice trade remain formidable. Unfortunately, there are innumerable mobilized interest groups ready to scuttle this nascent deal.

The most visible aspect of the trade debate involves manufactured goods, like cars and electronics. But the American economy is far larger than this sector, and its fortunes more dependent on services. As many have noted, the service economy accounts for about 80 percent of gross domestic product (GDP) and more than 81 million jobs.

U.S. workers and companies exported $300 billion in service products in 2003, leaving the U.S. a $50 billion services surplus. This huge economic sector will benefit enormously from opening large developing markets like India and Brazil. The U.S. and world economy’s silent majority must now capitalize on the momentum for a dramatic new global trade expansion.

And there is momentum. Within the last several months, the WTO has ruled illegal European Union sugar subsidies and American cotton supports, U.S steel tariffs have expired, and the global system of textile quotas will expire at year’s end. In addition, China continues to institute — albeit imperfectly — its WTO commitments. Further liberalization would expand access even more to its 1 billion-plus market. Finally, capital flows to the developing world have recovered smartly from their 2002 low to an expected $225 billion this year, and there is little doubt opportunities will increase future capital flows.

President Bush, U.S. Trade Representative Robert B. Zoellick and the other 146 WTO members deserve enormous credit for their courage in proposing such sweeping and needed changes.

It is now up to the silent majority to speak out and provide the support necessary to finish the job.

Rick Lazio, a former Republican member of the U.S. House of Representatives from New York, is president and chief executive officer of the Financial Services Forum. The Forum was formed in early 2000 by the chief executive officers of 20 large U.S. financial services institutions to promote an open and competitive financial services marketplace.

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