Trade liberalization in trouble

If, as many observers argued, the Doha round on trade liberalization was on life support before highly regarded U.S. Trade Representative Rob Portman left last week to become White House budget director, it is hard to imagine what can be done to resuscitate trade negotiations now. Although not a direct consequence of Mr. Portman’s departure, the World Trade Organization , which is overseeing the talks, cancelled a ministerial meeting scheduled for this week. That means negotiators will miss their April 30 deadline, by which time they were to have reached agreement on farm subsidies and agricultural and industrial tariffs. The April 30 deadline was set after December’s ministerial meeting in Hong Kong failed to achieve its goals. Before that disappointment, there was the fiasco in Cancun in 2003. And, of course, before the Doha round was ambitiously launched in 2001 shortly after September 11, there was the Seattle meltdown of 1999.

The WTO expects negotiations to resume in May and June. In the unlikely event that negotiators reach agreement on matters relating to agriculture and goods, the talks would then move on to trade liberalization in services, such as banking and insurance. While the issues both on and off the table remain bunched up, the time to solve them is becoming shorter. Trade Promotion Authority, which requires Congress to vote up or down on trade agreements without amending them, will expire in June 2007. Without TPA, the chances of America approving such a wide-ranging trade agreement are slim to none. Moreover, with protectionist pressures increasing on both sides of the aisle in both chambers of Congress, it is unlikely that TPA will be promptly reinstated after it expires. There is also the matter of midterm elections. There are a lot of taxpayer subsidies that flow to farmers in red states, and an international agreement to drastically reduce farm-state welfare might not be welcomed on the prairie or in the cotton fields.

The political obstacles lined up to block an agreement in the United States pale compared to what confronts European negotiators and politicians in their homelands. If French President Jacques Chirac caved into the pressure from unions and student protesters over relatively minor reforms in France’s labor law, imagine how quickly French nerve would collapse when Mr. Chirac or his successor is confronted by French farmers taken off the dole. Italy’s political problems are equally daunting.

With his political capital reduced, President Bush has apparently decided to cut his losses and toss the Doha failure on the heap next to Social Security reform and tax reform. There is still, however, a bare chance that the talented Mr. Portman may bring some fiscal restraint to the uncompleted federal budget from his new post as director of the Office of Management and Budget.