The choice on trade

Posted: Aug 09, 2004 12:00 AM

 Amid all the coverage of the Democratic National Convention, and of the fact that John Kerry seems to have gotten little or no bounce from it, slight attention has been given to the most important development in trade policy over the past four years. That is the Aug. 1 agreement at the World Trade Organization talks in Geneva on a framework for advancing the Doha Round of negotiations.

 The Doha Round was launched in November 2001 but seemed at an impasse at last September's WTO meeting in Cancun when Latin American, African and Asian nations rejected the approach of the United States and the European Union. The WTO rules require consensus, which seemed to be impossible.

 But in Geneva a consensus emerged. The United States and the EU agreed to eliminate agricultural export subsidies and to make a "substantial reduction," starting with a 20 percent cut, in domestic farm supports. Developing countries, led by Brazil and India, agreed to lower barriers to manufactured goods and to services. This is not a final agreement, which everyone agrees cannot be reached by the original deadline of this December. But there is a good chance of a deal by the December 2005 meetings in Hong Kong.

 This is a potential win-win situation. Consumers and taxpayers in the United States, the EU and Japan would be relieved of the cost of farm subsidies. Manufacturers and service providers in those countries would get access to markets from which they are barred. Big agricultural producers like Brazil and India would get access to First World markets, and the struggling poor nations of the Caribbean, Latin America and Africa would be able to sell their farm products and thus get a jump-start in economic growth. The major losers, relatively few in number, would be subsidized farmers in the developed countries, who may have other opportunities in advanced economies.

 But the shape of a final deal depends on further negotiations over a host of details -- and on the American presidential election. France is already squawking that the EU is selling out its lavishly subsidized farmers, and some U.S. farm state politicians are also voicing objections. Japanese politicians love to protect their rice farmers. U.S. Trade Representative Robert Zoellick, working with the EU's Pascal Lamy, has skillfully put together the pieces after the debacle at Cancun, and at the same time he has negotiated bilateral trade agreements with Australia, Morocco, Thailand, Colombia and other nations -- a clear reminder to developing countries that the United States could concentrate on such deals and render the WTO irrelevant.

 If George W. Bush is re-elected, Zoellick would presumably continue on his course. One problem is the 2002 farm bill, which increased subsidies. That bill was signed by Bush, reluctantly, as the best he could get at a time when the agriculture committees were headed by Republican Rep. Larry Combest, from a cotton-farming Texas district, and Democratic Sen. Tom Harkin, from corn-growing Iowa.

 But Combest has retired and been replaced by Bob Goodlatte, a free-marketeer from a non- subsidy-crop district in Virginia. The Senate committee remains pro-subsidy, but Bush, if re-elected, will have more leverage in conference committee deliberations when the farm bill comes up in 2006 than he did in 2002.

 John Kerry seems likely to take a different approach. He had no immediate comment on the Geneva agreement, which is fair enough -- this is a complex issue, and he hasn't had much chance to ponder it on the campaign trail. But at the Boston convention he reiterated his support for "fair trade." That's code for the approach favored by labor unions, which insist that trade agreements must have labor and environmental protections that go beyond what most developing countries will agree to. Details matter: Zoellick says that he has negotiated for labor and environmental standards, but not for those as stringent as the unions want.

 Of course it is possible that a President Kerry may take the approach taken by Senator Kerry before his campaign, when he voted for all trade agreements to come before him. More likely is that a Kerry-appointed trade representative would have a harder time reaching agreement than Zoellick, because he would be seeking more concessions. And it's possible that Kerry would simply downplay the negotiations if only to preserve farm subsidies at roughly current levels.

 There was little difference on trade between the major party candidates in the 1992 and 1996 elections, and not very much in 2000. But this time the nation has a pretty clear choice on trade.