Commentary

The Miami Fizzle — What Else but Cancun Redux?

Reprinted from the Wall Street Journal � 2003 Dow Jones & Company, Inc. All rights reserved.
Back in September, World Trade Organization talks in Cancun ended in acrimonious, finger-pointing failure. Nobody wanted a replay of Cancun at last week’s ministerial meeting in Miami to discuss the proposed Free Trade Area of the Americas, a hemispheric agreement targeted for completion by 2005. So this time, trade ministers dug deep — and produced a cheery, all-smiles failure instead.

Formally launched nine years ago, the initiative to create an FTAA aims at nothing less than uniting the 800 million people of the Western Hemisphere in a gigantic, duty-free zone. A worthy objective, but one toward which precious little progress has been made because of intractable differences — in particular, between the U.S. and Brazil — over what issues should be on the negotiating table. With barely a year to go until the talks are scheduled to conclude, the Miami meeting needed to achieve a major breakthrough.

It didn’t. The official declaration that came out of the conference was a study in vacuity. Beforehand, U.S. and Brazilian negotiators concluded that they couldn’t break their deadlock, so they settled on a fudge that resolves precisely nothing. The other 32 parties to the negotiations signed off, everybody declared victory, and the meeting ended a day early.

According to the Miami declaration, some FTAA commitments will be binding on everybody, while others will be “plurilateral” — in other words, accepted by only a subset of FTAA members. What will be in the package deal, and what will get relegated to the a la carte menu? The trade ministers in Miami didn’t even try to figure it out. Instead, they left the mess for their subordinates to clean up in future, lower-level meetings. Don’t hold your breath.

It was another high-profile convocation of trade ministers, another golden opportunity to promote trade and growth sadly wasted — and another failure of U.S. leadership. Both global and hemispheric trade talks have bogged down in large part because the Bush administration refuses to put its money where its mouth is. It talks about achieving ambitious results in the World Trade Organization and FTAA but lacks the stomach to confront the domestic anti-trade lobbies that stand in the way of such results. In particular, both sets of negotiations have suffered from an unwillingness to rein in America’s profligate farm subsidies.

Let’s review first what went wrong in Cancun, since that debacle and the Miami fizzle are inextricably linked. When the current round of WTO talks was launched in Doha, Qatar, back in November 2001, negotiators agreed that cutting farm subsidies in the United States, European Union, and Japan was a top priority — and with good reason, since those special-interest handouts, in excess of $300 billion a year, fleece rich-country consumers while inflicting grievous harm on poor-country farmers.

How did the Bush administration show leadership on this vital issue? Just a few months after the Doha Round got under way, it signed the atrocious 2002 farm bill — hardly a momentum-builder for the new round. Later, to its credit, the administration did advance a solid WTO proposal to cut agriculture subsidies and trade barriers. But a few weeks before the critical Cancun meeting, it abandoned that proposal in favor of a vague and watered-down compromise with the EU.

To developing countries, the U.S.-EU deal looked like a nonaggression pact between the two subsidy superpowers: the United States agreed to wink at EU export subsidies in exchange for the EU’s acquiescence in the 2002 farm bill’s largesse. In outraged response, Brazil cobbled together a coalition of developing nations — the so-called Group of 20 — that demanded stronger commitments from rich countries. The resulting polarization along North-South lines set the stage for Cancun’s rhetorical grandstanding and ultimate collapse.

Now back to the FTAA, where both the players (the U.S. and Brazil) and the issue (farm subsidies) remain the same. For years, Brazil has taken the position that the worst U.S. trade abuses have to be on the table if FTAA talks are to make progress. In particular, Brazil identified farm subsidies and protectionist antidumping duties as make-or-break issues. The Clinton administration, followed by the Bush team, refused to tackle either one in the FTAA context, insisting that both issues could be addressed only at the WTO. When the Doha Round and the FTAA talks were proceeding on the same schedule, the U.S. position looked like a workable compromise. But after Cancun, with the Doha Round in disarray, it became a barely disguised brush-off.

Brazil, meanwhile, responded in kind. If its top priorities don’t belong on the FTAA agenda, Brazil argued, neither do the top U.S. priorities. Thus it proposed that investment rules, intellectual property rights, and government procurement — subjects of keen interest to U.S. businesses — should be farmed out to the WTO as well.

Here, then, is where the matter stands today: the largest economy in North America and the largest economy in South America are miles apart on what the basic structure of the FTAA ought to be. The Miami meeting accomplished nothing except to get the two parties to agree to keep disagreeing. As a result, the FTAA’s future is at least as uncertain as the Doha Round’s.

In other news last week, the Bush administration announced plans to negotiate bilateral free-trade agreements with Colombia, Peru, Bolivia, Ecuador, and Panama. Add these countries to Chile (which has already signed an FTA), the five Central American nations that are currently negotiating one, and the Dominican Republic (which is about to start talks), and the result is a “coalition of the willing” alternative to the FTAA that covers almost half the U.S. trade with the region not already covered by Nafta. Needless to say, these FTAs won’t address farm subsidies — or antidumping.

After Cancun, Miami, and this latest flurry of FTA activity, the Bush trade strategy is finally coming into focus. Call it trade policy on the cheap: negotiate on multiple fronts, but sign only those deals that don’t ask too much of America’s protectionist special interests. It’s liberalization of a sort, but hardly the kind of leadership by example that the world so desperately needs.

Brink Lindsey is director of the Cato Institute’s Center for Trade Policy Studies.