Boston Globe | By Pierre-Henri Laurent and David Dapice | October 23, 2001
WITH THE threat of terrorism and reality of war, the debate over new trade talks has taken a back seat. Those inclined to trade expansion continue to argue for it, while those who see the process as rigged for rich, multinational corporate interests want the entire process overhauled and the outcomes more weighted toward the interest of the poor nations, labor, and the environment. These squabbles seem tame compared to matters of life and death. However, there is a link between the World Trade Organization negotiations at Qatar in November, the sagging global economy and the tragedy of Sept. 11.
The 142 nations that are to meet in the Doha summit include 80 more states than when the Uruguay Round commenced in 1986. They include rich states, which seek more liberalization and therefore trade and investment growth, and poorer ones, which object to further "globalization injustices."
The non-Western states complain that the United States and the European Union have not opened up their markets. For example, they say, America continues to protect its farmers with hidden subsidies, only slowly cuts textile tariffs, and blocks Indian steel exports with illegal antidumping rules. The Europeans and Americans were pressing hard for cuts in tariffs on industrial products and increased free trade in agriculture and services but their opponents in WTO insist that no new round take place until the 1994 Uruguay decisions are fully implemented.
Furthermore, many Southerners argue that globalization primarily enlarges the gap between rich and poor.
The smaller economies insist they continue to be marginalized and disadvantaged in WTO with Western trade policies on textiles, farm products and intellectual property discriminating against them. The advocates of another trade round point out that the smaller developing nations need the WTO rules and system more than anyone else, particularly if the wasteful uses of resources and the environment are reversed. The fear that hostile trading blocs would emerge at a time when the world economy is slowing down and entering recession drives the US and EU to accentuate the benefits of trade-barrier removals. The more wary Southerners see more globalization as more hegemony for the already economically powerful, plus, as one critic has said, "just more pollution."
Mike Moore, the WTO director general, asserts that it is not the diesel fumes that are paramount but the stalled engine of the global economy.
He fears stagnation and the possible revival of economic tribalism, which may accompany the fragmentation and division of a no-round decision at the biennial assembly at Qatar.
However, the impact of terrorism may introduce a new factor in favor of beginning a new round. The terrorist threat, for instance, will mean an increase in the cost of shipping many goods. Trucks will face lengthy inspections and delays and ships will not meet schedules or may even be barred from ports. Airplane schedules will be curtailed, and deliveries will take longer and cost more. This will raise the cost of production, as "just-in-time" inventories are replaced by costly "just-in-case" stockpiles. The effect is that of a "negative supply shock," very much like an oil price increase. This tends to cause both inflation in prices and a contraction in real output.
A rapid reduction in tariffs and trade barriers would offset this effect, at least to some extent. This would hasten recovery from global slowdown or recession that is now upon us. Such a recovery, or even the enhanced possibility for one, adds a short-term reason to favor the talks, even if the long-term arguments seem to be finely balanced.
There are those who argue that, for example, the reduction in protection in services is simply a sop to the rich banks and insurance companies, and that past planned tariff cuts on poor-country exports that have been delayed should come first. It might be plausible to suggest a North-South trade-off that links reduction in service protectionism to real implementation of already-negotiated cuts in rich-country tariffs.
There are also clear benefits to poor nations that improve the efficiency of their financial systems. Customers would get better service and products and borrowers would find it easier to get loans.
Fewer crony companies would get money that they will not repay.
In sum, creating more roadblocks to trade amelioration will not help the poor, even if this kind of trade progress does help the rich. Repeating that 1999 Seattle no-talks decision at this time would deny both rich and poor nations an opportunity to at least start the diplomacy to better our common and shared economic future.
Pierre-Henri Laurent is professor of history and David Dapice is associate professor of economics at Tufts Univsersity.
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