A Better Chance for Free Trade
November 20, 2001
By MICHAEL M. WEINSTEIN
On some propositions, economists are nearly unanimous:
Trade promotes economic growth. Growth reduces poverty. The
agreement reached last week among the more than 140 trade
ministers gathered in Doha, Qatar, is good for rich
countries, perhaps even better for poor countries and
surprisingly protective of the environment.
The progress made last week could also prove to be a major
policy success for the Bush administration. Robert
Zoellick, the United States trade representative, deftly
handled demands to reconsider patent policy, which is
supported by the American pharmaceutical industry, as well
as antidumping laws, which are favored by Democrats and
union leaders.
The Doha negotiations took place under the shadow of the
1994 agreement that created the World Trade Organization.
Under that agreement, industrialized countries in effect
promised to buy more textiles and food from poor countries,
a promise that has been largely ignored. In return, poor
countries promised to honor copyrights and patents for
drugs and other products - a commitment that has proved to
be hideously expensive. In Doha, poor countries demanded
and got a better deal.
The ministers called for negotiations to phase out
agriculture subsidies - payments that encourage European
and Japanese farmers to produce and export more food, thus
driving down food prices to levels that make it impossible
for third world farmers to survive. Poor countries also won
a promise to revisit the enforcement of patent rules with
an eye toward making it easier to produce their own generic
drugs or buy them from other third world countries. Mr.
Zoellick made the key compromise, even though American
firms, among the largest and most profitable drug makers in
the world, stand to lose the most.
Yet the compromise makes sense even for drug firms. They
need to charge customers in rich countries high prices - in
excess of manufacturing costs - to recover the huge costs
of research and development. Once they do so, they do not
need to charge high prices in poor countries. The Doha
agreement invites such segmented pricing.
The Doha agreement should help countries become more
environmentally friendly as well. The challenge was to find
ways to protect the environment without coddling
protectionists or zealots. Toward that end, ministers asked
the trading community to take explicit account of the
environment - by, for example, calling for the
environmental review of ongoing trade negotiations. The
ministers also steered clear of calling for expensive
environmental standards, heatedly opposed by the third
world as unaffordable and as driven more by the need of
Western firms to block competition than by humanitarian or
environmental motives.
The ministers also wanted trade negotiators to find ways to
accommodate multilateral environmental treaties. To enforce
provisions, these treaties sometimes include trade
sanctions - sanctions that can violate the rules of the
World Trade Organization. The Doha agreement invited
negotiators to find ways for the organization to provide
legal cover for trade sanctions that are part of a well-
established, multilateral environmental treaty.
By allowing review of "antidumping" statutes, the Bush
administration has drawn Democratic ire. These statutes
permit countries to slap tariffs on imports that they
decide are being sold below the exporter's costs of
production, presumably for the purpose of driving domestic
firms out of business. But antidumping statutes are
routinely manipulated to punish legitimate foreign
competition, especially from the third world steel firms.
Poor countries demanded relief, and the Bush administration
wisely agreed to a review.
This was no concession. It is the United States economy
that gains from more cautious application of antidumping
laws. Tariffs can prop up a steel plant or two. But they
drive up costs in industries, like autos or construction,
that use steel, making them more vulnerable to foreign
competition and resulting in higher prices for hundreds of
millions of consumers.
The Doha agreement does not do everything right. For
example, it does not call for opening the organization's
dispute-resolution panels to public scrutiny. Nor can the
ministers guarantee that negotiators will follow their wise
counsel. But if negotiators over the next several years are
to have a chance of finishing in the right place, they
almost certainly need to know where they should be heading.
Doha points them in the right direction.
Michael M. Weinstein is director of the Geoeconomics Center
at the Council on Foreign Relations.
http://www.nytimes.com/2001/11/20/opinion/20WEIN.html?ex=1007268049&ei=1&en=f8c323b173c4bd48
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