Doha Deals With Agriculture

This week, trade ministers from about 30 countries are gathered in Geneva in a last ditch effort to salvage the Doha development round. The meeting is a test of the seriousness of major developing countries such as Brazil, China, India, and South Africa. But are these countries prepared to demonstrate the leadership necessary to sustain the international economic system from which they benefit?

Doha talks have juddered between hope, apathy, and despair since their launch in 2001. The round was meant to address agricultural trade, always the toughest knot in international trade. It also was supposed to open markets for manufactured goods and to build on the last round's rudimentary services liberalization. It has stymied largely over agriculture.

The director-general of the World Trade Organization, Pascal Lamy, has convoked this week's meeting in hopes of clearing the path for a final deal before President Bush leaves office. Ministers will seek to agree on the key parameters for deals on agriculture and manufactured goods. Tomorrow, they will indicate to each other at "signaling conference" how far they are prepared to go on services.

If the week is successful, WTO members will work toward a final comprehensive deal over the coming several months. Some calculate that even a President Obama, notwithstanding wind-vane like consistency on trade, would feel obliged to seek congressional passage of a completed global deal.

There are compelling arguments for a global trade deal. Last month the World Bank launched its World Trade Indicators, a database integrating information on countries' tariffs, the quality of trade logistics and business environments, and trade performance. This database offers telling lessons.

• The most open countries are the most prosperous. WTI data confirm what economists have long known. There is a strong correlation between openness and prosperity. The most open countries are the most prosperous, and the least open the least prosperous.

• Tariffs have been falling. There has been a trend toward tariff liberalization over the past decade, especially for manufactured goods. However, rich countries continue to maintain tariff peaks protecting specific sectors (i.e., garments) where developing countries could be competitive.

• Agriculture has liberalized less than other goods. All countries have higher trade barriers in the farm sector than for manufactured goods. Trade restrictiveness of agricultural tariffs is among the highest in the Middle East and North Africa (equating to tariffs of 21%) and South Asia (21%), followed by wealthy areas and countries such as the European Union and Japan.

• Trade has expanded substantially over the past decade, but agriculture's share of trade has fallen by 31%. High tariffs help to explain why agricultural markets are so thin. A mere 6% of rice is traded internationally, and only a few farm commodities are traded internationally above 20%. Balkanization of agricultural markets is a significant part of the reason why farmers, particularly in the developing world, have been slow to respond to rapidly growing global demand. The result is the food crisis.

• Barriers to services are high across countries, and especially in low-income countries. The wealthiest countries have made the strongest WTO commitments to open their service sectors, particularly in the financial, business, and distribution services that serve as the backbone of a modern economy. Services liberalization, as the World Bank notes, "can confer large gains to developing countries."

WTO members should join in a liberalizing Doha deal. Mr. Bush has said time and again that America is prepared to cut farm tariffs and subsidies as others do, and as all join in opening goods and services markets. The E.U. also seems committed to a deal. President Sarkozy has rattled protectionist sabers, but he also has indicated that he would embrace a deal with new market access for French manufacturers.

The greater worry is whether major developing countries will recognize their interest in a deal in which they open their markets as well. Unfortunately, India, which purports to speak for the poorest countries, has been peddling a perverse agricultural mercantilism that would leave poor country farmers destitute and their consumers underfed. The commerce minister of India, Kamal Nath, claims developing countries need a "special dispensation" allowing them to make lower or no cuts of tariffs for "sensitive" products.

China also must do its part, even though it recently had to implement numerous reforms as part of joining the WTO. China's merchandise exports have ballooned to $837 billion in 2005 from $68 billion in 1990, and are growing at between 20% and 25% a year. Chinese officials overseeing this exporting juggernaut cannot reasonably expect others to drop their barriers without China reciprocating, especially in agriculture and services where China has made few commitments.

Major developing countries need to transcend the victimhood posturing that so often infects north/south discourse and assume the leadership responsibilities befitting their economic role. As major participants in the global economy, they need to join with developed countries in seizing the opportunity of a Doha deal that expands the circle of trade and prosperity.