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By Philippe Legrain ADD COMMENTS

From September 1st, the shaky prospects for freer world trade will rest
on the shoulders of a French socialist. With the World Trade
Organisation’s Doha round deadlocked and little time left to reach
agreement, the new man in charge of the WTO, Pascal Lamy, faces a
daunting challenge. Unless the former European Union trade commissioner
can help break the deadlock and hammer out the outlines of a deal
before trade ministers meet in Hong Kong in December, hopes for a
successful outcome to the Doha round will fade. That would be a
disaster for the world economy and for export-reliant developing
countries in particular.

The omens are not good. The potential gains to poor countries from freer world trade dwarf those from debt relief and increased aid. But at the Group of Eight summit in Gleneagles in July, when public pressure for progress in "making poverty history" was intense, the leaders could not even bring themselves to set a date for eliminating rich countries’ agricultural export subsidies, a relatively minor but pernicious weapon in the protectionist armoury. If farming lobbies are powerful enough to outgun the Live8 campaign under the global media spotlight and refuse to make even token concessions towards helping the world’s poor, the chances of them giving up their subsidies at the WTO look slim.

Talks on freeing up farm trade have reached an impasse. The end-of-July deadline ministers set last year for reaching the outlines of a deal has been missed. The Group of 20 agriculture-exporting developing countries is demanding big cuts in rich-country subsidies and tariffs, but the EU and the US are stalling by quibbling over details. Developing countries are refusing to agree to big cuts in tariffs on industrial goods. Offers to open up to international competition markets for services remain paltry. The lack of progress is partly due to posturing and brinkmanship. But time is running out. Unless Mr Lamy can work some magic when negotiators return later this month, Hong Kong will be a rerun of the Cancún fiasco two years ago.

Optimists argue that President George W. Bush’s success in convincing a recalcitrant Congress to approve the Central American Free Trade Agreement (Cafta) augurs well for the WTO talks. They say it demonstrates the Bush administration’s commitment to freeing trade, its willingness to face down powerful protectionist lobbies for the greater good and its ability to win over a sceptical Congress.

Perhaps. More likely, Cafta highlights the limits of what the administration can hope to achieve. The prospect of being cut out of export markets such as the Dominican Republic and Nicaragua, to which Cafta will give the US preferential access, is hardly likely to strike fear in Brussels and force the EU’s hand at the WTO. And even though the Cafta countries are so small that they pose little threat to American farmers and manufacturers, the Cafta deal scraped through the House of Representatives by only two votes. What chance is there that the administration will seek an ambitious Doha agreement that would increase competition from China? What hope is there that Congress would approve such a deal? And if not now, when? Mr Bush’s fast-track authority, which allows him to negotiate trade deals that Congress must approve or reject unamended, expires in 2007 and is unlikely to be renewed.

Weak and unpopular leaders in America and Europe are ill-placed to face down protectionist lobbies and persuade anxious voters to embrace freer trade. Americans are worried about their ballooning trade deficit, with China in particular. They prefer to blame the deficit on foreign foul play rather than on their own weaknesses, not least the urge to splurge on all things foreign. Many Europeans fear that globalisation threatens their comfortable way of life. They have lost confidence in political elites, who appear to have no answers to high un employment and feeble growth, but are not convinced that economic reform can be married with security and social justice. If the Doha round is to succeed, it will take more than a mercantilist bargain between the likes of Brazilian farmers, Chinese manufacturers, European insurers and American retailers. Political leaders also have to persuade voters that globalisation is an opportunity not a threat, that booming China’s cheap exports are a boon and that free trade is not a race to the bottom but a ladder up for all.

Mr Lamy should lead by example. Although he has few formal powers, this longtime friend of French farmers can disprove the doubters and become a forceful advocate of freer trade.

Posted 01 Sep 2005 in Financial Times, Published articles, Trade

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