June 21, 2006

US needs to “relax” in WTO talks: economist

By Doug Palmer

WASHINGTON (Reuters) - The United States should "be more
relaxed" and do whatever it can to reach a new world trade deal
this year, even if it does not get everything it wants, a top
trade economist said on Wednesday.

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

"Rather than try to collect as much as possible and being
maximalist in our demands, ... (the United States 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 United States has offered to make deep cuts
in its domestic farm subsidies, but only if other countries
slash their tariffs on farm and manufactured goods and also
open their markets to more international services companies.

The European Union supports U.S. 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 United States for deeper farm subsidy cuts.

Bhagwati said he was concerned new U.S. 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'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 United States should not give
up on trade liberalization but "go it alone" by unilaterally
lowering tariffs and subsidies, Ikenson said.

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 said.

Unilateral U.S. tariff and subsidy cuts would also help the
United States internationally by eliminating a perceived source
of hardship in the developing world, he said.