The Future of International Trade
AEI Newsletter

The future of international free trade was the subject of an October 3 AEI conference featuring distinguished panelists and a keynote speech by U.S. Trade Representative Susan C. Schwab. Ambassador Schwab, who was confirmed as the top U.S. trade official in June 2006, has spent her time in office so far trying to salvage the Doha Development Round of World Trade Organization (WTO) negotiations. Negotiators failed to reach agreements on lowering agriculture subsidies and import taxes at top-level talks in Geneva in July.

U.S. Trade Representative Susan C. Schwab
U.S. Trade Representative Susan C. Schwab

Ambassador Schwab remarked that the United States and its partners are fully committed to Doha: “It is easy to say that a lot of countries--most countries involved in the Doha round negotiations--really do have a sincere commitment to making the Doha round agreement come to a successful conclusion.” She added, however, that there are varying definitions of success. For the United States, success means substantial reductions in tariffs, a focus on economic development, and new market access. She said that other countries are pursuing “Doha-lite”--insufficient changes which would lock in trade barriers for decades.

According to Ambassador Schwab, the Bush administration believes that trade liberalization is good for developed and less-developed countries alike. These benefits were not universally acknowledged at the talks. Although the United States was committed to making large reductions in agriculture subsidies, she said, other parties to Doha balked. Whereas the United States used to lead in trade negotiations, such meetings are now less centralized, with increased engagement by “affinity groups” such as the G20 and the European Union.

Ambassador Schwab is still optimistic about successfully concluding the Doha round, but noted that the administration’s trade promotion authority (TPA) will expire in June 2007, and negotiations over the 2007 farm bill have begun. As trade representatives of different nations discuss agriculture subsidies, the farm bill and uncertainty about the future of TPA will affect ongoing negotiations. She said that in order for any trade agreement to pass Congress, it must be a comprehensive package capable of winning the support of diverse interests, including agriculture, industry, and services.

A panel of trade scholars addressed several issues surrounding the Doha round and the WTO. Former Clinton administration trade official Daniel K. Tarullo of the Georgetown University Law Center said that Doha will be the last of the large multilateral trade negotiations. He predicted that the big trade rounds will falter as trade rounds include more countries, as multinational corporations express less interest in increased liberalization, and as the WTO intervenes in domestic regulation with greater frequency.

Daniel W. Drezner of Tufts University evaluated the prospects for the future of free trade, describing it as being at a “standstill,” but qualifying his comment by saying that “the status quo is not really that bad,” with trade barriers at their lowest level in over a century. Free trade, however, will be an easy scapegoat for economic instability at a time when American politicians are free to be protectionist again. Drezner also predicted that the Free Trade Area of the Americas negotiations will go nowhere.

Offering a reassessment of the notion of development underscoring the Doha round, former under secretary of commerce Grant D. Aldonas argued that importation is a better driver of development than industrialization and exportation. AEI’s Claude Barfield said that the proliferation of bilateral trade agreements in the past several years will continue. Bilateral agreements may not lead to regional agreements, however, due to the increasing size and complexity of negotiations.

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