Free trade as a tool for development

Via VoxEU Kimberly Elliott suggests the United States should lower tariffs on imports from small, poor economies:

... the Doha Round, under the best of circumstances, will take some time to conclude, and the US and other rich countries should move as quickly as possible to further open their markets to the world’s poorest countries. The eighth of the Millennium Development Goals adopted at a UN summit in 2000 calls on the rich countries to provide duty-free-quota-free market access for the least-developed countries (LDCs). This goal was reiterated at the WTO’s 2005 Hong Kong ministerial meeting, but US negotiators would only commit to provide access for 97% of products and only in conjunction with the conclusion of the Doha Round.

Importantly, the pledge to provide duty-free-quota-free access is not part of the round’s “single undertaking,” and the LDCs are not being asked to undertake liberalisation commitments. So President Obama would lose nothing and could gain a great deal of good will, as well as providing an economic boost to struggling developing countries, by asking Congress to act now and provide access on 100%of products, as the European Union already does, rather than just 97% as promised in Hong Kong. Three percent may not sound like much, but such liberalisation would unblock a number of items that that are of the most interest to poor countries.

Providing full market access will not reverse the decline in trade flows, but it would open opportunities for some of the poorest countries in the world. It would also address a fundamental unfairness created by the fact that US trade policy, like that of other rich countries, discriminates against poor countries and poor people. The highest US tariffs fall on agricultural products and labour-intensive light manufactures, where many developing countries have a comparative advantage.

I have generally found such an argument to be quite compelling, and tend to agree with Ms. Elliott's assessment of the matter.

Currency manipulation and world trade

On the coattails of the Geithner/China currency manipulation flap, Staiger and Sykes have an interesting piece in today's VoxEU cautioning against likening Chinese currency undervaluation to export subsidies and import tariffs responsible for global trade imbalances, as well as against many of the proposed countermeasures under discussion in the political arena. A most interesting read. 

Goodbye Doha, Hello China!

The Doha round of trade talks has ended without producing anything in the way of an agreement. Talks finally broke down after failing to reach a compromise over agricultural import rules. The FT provides details.

Yet unlike those who are now beginning to speak of "collapse," this writer wouldn't go so far as to claim that nothing productive has resulted from the week-long affair. Conversely, I'd argue that the WTO's failure signals important shifts in the international power structure, with some countries - China in particular - quickly rising in the ranks as a  powerful force in global trade wrangling. Indeed, much to everyone's surprise China, together with India, took a prominent part in pressing for import safeguards to shield poor farmers. As Joseph Cheng, chairman of the Contemporary China Research Center at City University of Hong Kong, observes: "China intends to play a more active role as a Third World leader."

The question of China's rise prompts numerous questions, among them that of what this means for Africa. Indeed, many Africans walked away from the Doha talks frustrated that most of the key issues of interest to the African continent were not even discussed, especially the issue of cotton. With Chinese interests so deeply rooted in African soil, it will be interesting to observe the changing face of the international trade debate. I defer to the experts here to speculate on what we might expect.

Regardless, while Doha produced no formal agreements, I would like to proffer two:

1. It's time to reevaluate the effectiveness of the WTO as a trade negotiation and dispute mechanism. A tried and tested critique, to be sure, but this most recent failure gives us more reason to pause.

2. China is becoming an international force to be reckoned with. And, by the look of things, perhaps faster than we thought.