Are world trade talks about to collapse? . . . I wish.
After seven years of on-again, off-again WTO yammering, trade is not a whit freer
ANDREW COYNE | July 23, 2008 |
They're getting down to the short strokes at the world trade talks in Geneva. It's described as the "moment of truth" for the World Trade Organization, "make or break" time, a "last-ditch effort." Should talks collapse, experts say not only will the so-called Doha round of negotiations be cast into doubt, but the WTO itself will be discredited.
Really? Well, here's hoping.
Personally, I have my doubts. Seven years after the Doha round began, the talks have crashed into any number of absolute, final, irrevocable deadlines, the last rites performed, the body prepared for burial, only to be brought miraculously back to life again. Yet after seven years of on-again, off-again yammering, trade is not a whit freer, notably in the area of agriculture, than it was when they started. Perhaps this is not accidental.
If you want a clue as to why the talks are in danger of failing, look no further than this country's declared negotiating position, which is that other countries should remove any barriers to Canada's agricultural exports forthwith, but that Canada should be allowed to keep its own web of quotas and tariffs in the dairy and poultry sectors — a crude price-fixing racket in any other industry, but what in agriculture is dignified by the name of "supply management" — in perpetuity. Going into this week's talks, Trade Minister Michael Fortier maintained the pretense that this position could somehow be sustained.
But if you want to know why Canada persists in this two-faced policy, you'd be well advised to look to the WTO process itself. If it were just a matter of finding consensus among the organization's 152 member countries, that would be difficult enough. But the whole notion of negotiating trade liberalization is built on an absurdity, one that if it does not guarantee failure, ensures that "success" is parcelled out in grudging increments.
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Negotiations, after all, suggest a reciprocal yielding of concessions, in which each party agrees to give up something of value to itself, or to remove some threat or penalty it imposes on the others. In arms talks, for example, each side agrees to reduce the number of missiles it has aimed at the other, to their mutual benefit. The process is necessarily complex and confrontational, as neither side wishes to give the other an advantage.
But trade talks aren't like that: each country's "missiles" are aimed mostly at itself. As economists have been explaining for more than two centuries, the tariff and non-tariff barriers a country uses to protect its industry from foreign competition do most harm to its own citizens, driving up prices for consumers, encouraging inefficiency and retarding specialization in areas of comparative advantage. In other words, each country would gain from dismantling its trade barriers on its own, regardless of whether other countries did likewise. The idea that free trade must be reciprocal to be of benefit has never been advanced by any reputable economist. It is entirely the invention of those opposed to the concept.
So why do we expend so much time and effort negotiating with the rest of the world that which we could do ourselves, tomorrow? Traditionally, the answer has been that this was needed to solve a problem known as the public choice dilemma. The beneficiaries of free trade — consumers — are broad and diffuse, and typically stand to gain only a small amount individually from a given reduction in trade barriers. Those who stand to lose, on the other hand — protected industries, and their employees — are concentrated, and have every incentive to organize against any such reductions. Politicians, even if they support free trade, are understandably reluctant to take them on.
But negotiate an agreement to liberalize trade with other countries, and you give political leaders the cover they need. My hands are tied, they can then tell aggrieved interests, we have a treaty. Some even predict this is how supply management will eventually be killed off — that the government of Canada's intransigence is all an act, designed to extract concessions from other countries, even as it mutes opposition at home.
That's all very well. But there's a very real cost to this charade, inasmuch as it encourages the general public to believe that trade barriers, far from costly assaults on consumers, are in fact a benefit, which should only be surrendered after a tremendous fight, if at all. Arguing for free trade from protectionist premises would seem a dubious enterprise at best. Yet that has been the strategy for 60 years, under first the General Agreement on Tariffs and Trade and then the WTO.

















