By Donald Johnston
The strengthening of global trade rules and further steps to liberalize markets are too vital for world prosperity to let talks languish. When trade representatives deadlocked in Cancún in September, they spawned ill will, mistrust and divisiveness. National capitals must now move decisively to repair the damage and get negotiations moving again. The alternative is unacceptable: a growing hodgepodge of regional free trade deals and a likely surge in disputes over disruptive agriculture subsidies.
Rekindling talks will require a willingness to compromise that has so far been insufficient. The United States, the European Union and other rich countries will have to take another hard look at their whopping $140 billion in annual agriculture subsidies, which distort trade and do serious harm to the economies of some developing countries. For their part, developing countries need to get serious about reducing their own high tariffs and abandon the idea that they can get something for nothing in these negotiations.
It's scandalous that there is still so much resistance to change to the present system of massive farm subsidies. They are expensive and ineffective. They cost each household in Europe and the United States about $1,000 a year. What do families get for their money? Not much. Subsidies have the perverse effects of driving up prices at the grocery store and lining the pockets of the wealthiest farmers.
Politicians in rich countries should also show leadership in educating their constituents about the havoc subsidies cause in poor parts of the world. Subsidies incite farmers to grow more crops than needed. The flood of subsidized exports of excess grain and other products forces down prices on the world market. For products like cotton, world prices are so low that they force poor farmers in the developing world out of business.
This has devastating consequences for millions of people in places like Ethiopia, Mali and Zambia where agriculture makes up more than 20 percent of the economy. In the most destitute countries, up to 90 percent of those in poverty live in rural areas where agriculture is the main source of income. Poverty is part of a vicious cycle of conflict, disease and weak governance that desperately needs to be broken. Few ordinary citizens in rich countries realize that their governments' agriculture policies contribute to the problem. That needs to change: Movement on agriculture remains the key to reviving this round of trade negotiations.
The outcome of the negotiations need to be balanced. Developing countries must commit to tear down their high tariffs and to reduce other barriers to trade, like corrupt and inefficient customs agencies. Tariffs on industrial products are three to four times higher in developing countries than they are in rich countries. Tariffs on agricultural products are even higher. There is a clear payoff from slashing tariffs: Countries that open their economies tend to grow faster than those that don't. Vibrant economies create jobs.
Political leaders that don't have the backbone to move negotiations forward should think of the alternative. The stalled global trade talks have created a vacuum that is already being filled by bilateral free trade deals. This will create an increasingly complex web of trade rules that is already becoming a headache for businesses. Some manufacturers, including some of the largest companies in the world, must already grapple with a dizzying array of rules of origin for the components they buy and assemble. Without a globe-girdling trade agreement to provide a framework for regional deals, the complexity of rival rules will only grow.
Renewing momentum in negotiations will be difficult, especially in countries where national elections loom. But in an increasingly fractured and fractious world, leaders should grasp at opportunities to strengthen global ties. Trade negotiations, where all countries can benefit from a well-crafted new set of rules, should be easy. All it takes is leadership.
