Monday, July 24, 2006

Doha Talks Collapse

Meanwhile, in international news that does not get the limelight, the ongoing negotiations in the World Trade Organization have been suspended. The United States felt that Europe was not giving up enough on agricultural market protections, Europe felt that the US was not surrendering enough on agricultural subsidies, and developing nations felt that the US and Europe were not giving up enough on anything.

The situation has many complicating factors. First, Europe has been negotiating by committee - with France having the loudest voice, but only in competition with England, Germany and others. Second, France has a Presidential election next year, and its leadership is unwilling to concede much before the election. Third, President Bush's authority to negotiate deals expires next year, adding to the confusion.

This outcome concerns me greatly, because trade seems to be an area where we either move forward or move backward. If we are not eliminating market barriers, the momentum shifts to those who would close markets - already a very strong constituency. All will lose, but the heavily internationalized economies of the US, Europe, and China may be among the biggest losers in the long run, of a failure to reach a deal.

On the one hand, I should not be surprised. Trade expansion has been the rule since the end of World War II, and all the easy barriers have been negotiated away. The law of diminishing marginal returns tells us that it's easy to eliminate the first 90 percent of trade barriers, but very painful to eliminate the last 10 percent.

At the same time, I can't help but wonder how it is that when the collapse of communism in the Soviet Union, Vietnam, and China (basically), demonstrates the virtues of the market system, that it is then that the pro-market side is defeated. How is it that we cannot all agree to eliminate trade barriers, reduce taxes, and reduce market interference, when we have the best lesson we could ever ask for to show us why to do these things?

Update: Daniel Drezner provides a useful look at where the talks stand and why they are important. Check it out.

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