Front Page	E-mail PagePrint Version

Economist advises that Washington scale-back its demands on subsidies, access

WASHINGTON, DC - 06/26/06 - The US should "be more relaxed" and do whatever it can to reach a comprehensive global trade agreement this year, even if it does not get everything it wants, according to a top trade economist.

"Because after all, we are the big country which can provide leadership," Jagdish Bhagwati, a Columbia University professor of economics and law, said last week during a Cato Institute discussion on the moribund Doha Round of world trade negotiations.

"Rather than try to collect as much as possible and being maximalist in our demands, [the US should] be more relaxed, be more accommodating and settle the Doha Round," said Bhagwati, a leading free trade advocate.

After four and a half years of negotiations, world trade talks are at the point where they could fail or succeed in the next six weeks.

The US has offered to make deep cuts in its domestic farm subsidies, but only if other countries reciprocate by slashing their tariffs on farm and manufactured goods, and opening their service sector markets to outside competition. 

The European Union (EU) supports US goals for opening manufacturing and services markets, but has called Washington's demand for deep farm tariff cuts "unrealistic."

Leading developing countries like Brazil and India want to get more on the agricultural front and have joined the EU in pressing the US for deeper farm subsidy cuts.

Bhagwati said he was concerned new US Trade Representative Susan Schwab was determined to push other countries farther than they may be able to go.

"Let's try to close the round, get as much as we can out of it all around, but not look for maximal concessions," Bhagwati said, arguing that many countries already are moving toward freer trade outside the confines of world trade talks.

Meanwhile, Daniel Ikenson, associate director of the Cato Institute's Center for Trade Policy Studies, said he doubted countries would be to be able to get a deal. "The bottom line is there simply isn't enough interest," he said.

When the Doha round dies, the US should not give up on trade liberalization but "go it alone" by unilaterally lowering tariffs and subsidies, said Ikenson.

Trade negotiations "are based on the false premise that a country should only give up its trade-distorting policies in exchange for similar actions by others," he said.

But subsidies and tariffs are not economic assets; instead they are a burden that increases the cost of production for companies, raises the price of goods for consumers and disproportionately hurts the poor, Ikenson added.

Unilateral US tariff and subsidy cuts, he concluded, "would also help the US internationally by eliminating a perceived source of hardship in the developing world."

Go back, or read the latest Front Page stories:

Korea, US Free Trade Pact ''Possible'' by Early 2007

WASHINGTON, DC – 10/25/06 – A free trade pact between the US and South Korea could become a reality by early 2007, says chief US negotiator Wendy Cutler at the opening of this week’s fourth round of talks between the two countries; since the two sides launched FTA negotiations in February they have reported little progress even though they postponed consideration of the most politically sensitive issues, such as US access to the Korean rice market.