USTR - The Terms of Trade: Will We Make History in Hong Kong?
Office of the United States Trade Representative

 

The Terms of Trade: Will We Make History in Hong Kong?
Op-ed by USTR Rob Portman Wall Street Journal 12/12/2005

There is a lot at stake for the global economy -- especially the developing world -- in the World Trade Organization's Doha Development Round, as the Hong Kong ministerial meeting gets underway tomorrow. The United States is determined to seize this historic opportunity to bring the clear benefits of opening markets to people in every part of the globe.

Today, more than 100 developing countries are part of the 148-member WTO. This demonstrates there is a universal belief in trade's capacity to fuel economic growth and reduce poverty. It is, after all, the world's poorest countries that can benefit most from open trade, whether in agriculture, services or manufactured goods. For this reason we must aim high to successfully complete an ambitious and comprehensive Doha Round by the end of 2006.

I know our trading partners share the goal of strengthening the multilateral trading system and stimulating growth and development through reduced trade barriers. Unfortunately, we have a lot of work to do.

It has been said that agriculture holds the key to success in manufacturing and services. Developing countries, including some of the world's poorest, are particularly dependent on agriculture. This sector employs 60% of the labor force and accounts for 25% of GDP in these countries. But it is also where the highest trade barriers and trade-distorting subsidies exist.

For this reason, the U.S. offered a bold and wide-ranging agriculture proposal two months ago. We believe an ambitious and comprehensive approach in this area is the only way to achieve the broad development goals of the Doha Round and unlock progress across the board. At this point, the European Union, Japan and other developed countries must make further commitments to open their markets and reduce subsidies for the Doha Round to succeed.

The U.S. agriculture proposal would eliminate all export subsidies by 2010, cut and eventually eliminate trade-distorting domestic support programs, and also open markets as never before. The proposal was crafted in a way to give farmers in developing countries more chances to sell their output in developed countries. More advanced developing countries were asked to lower tariffs, albeit by less, while the least developed countries would make no cuts at all.

Expanded market access for agricultural goods, with tightly limited exemptions for sensitive products, is the core of the proposal. This component is particularly important to the developing world. The World Bank estimates that agricultural products face a practically insurmountable global average tariff rate of 62%. The World Bank also estimates that 93% of the benefits in agriculture will come from improving market access. For poor farmers to have a chance of competing, the tariffs maintained by wealthy and developing countries simply must come down. At the same time, developing countries must also drop barriers between each other so that so-called south-south trade can flourish.

In the areas of cutting export subsidies and price supports, no country has put forth a more ambitious proposal than the United States. But as has been clear in my dealings with dozens of U.S. lawmakers and agriculture groups, there is a willingness to make concessions on subsidies only so long as other countries act with equal boldness in all three pillars, including real tariff reductions that lead to new market access and export subsidy elimination. The United States, led by President Bush, has been willing to take a risk for success. We now call on our major trading partners to do the same.

In addition to the political imperative to act in a comprehensive way, this approach is the best way to assist farmers in developing countries. For example, the U.S. offer would raise cotton prices in global markets by cutting subsidies and tariffs in all markets. The only way to help cotton producers compete is to help all farmers compete. And the only way to help all farmers compete is for all countries to pull together at this time and make politically courageous decisions.

To underscore U.S. commitment to that effort, we recently agreed to modify our cotton export program. We have also entered into U.S. foreign aid Millennium Challenge compacts with most of the key cotton- growing countries -- Mali, Benin, Burkina Faso and Senegal -- that have the potential of injecting $1 billion in this region over the next five years. This will help people, including cotton farmers, lift themselves out of poverty by developing their infrastructure and trade capacity.

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As important as agriculture is, we must also achieve real results in trade liberalization in manufacturing and services. Industrial goods alone represent two-thirds of global trade. In this area, once again, developing countries have the most to gain in a successful Doha Round. Developing countries pay about 70% of their import duties to other developing countries. History has shown that the nations that are more open to trade are also the ones that provide their citizens with more hope -- so spurring more south-south trade is a key goal for the United States.

The U.S. is the most open major economy in the world, with low tariffs and duty-free access to goods from most of the least developed countries through various programs such as the Generalized System of Preferences and the African Growth and Opportunity Act. The U.S. will continue to play a lead role in striking the right balance to create new economic opportunities for the world's poorest countries.

The service sector is also of growing importance to the developing world. Getting rid of its barriers will better enable developing countries to gain access to modern communications, financial services, transportation and delivery systems.

The Doha Round is a chance to turn the tide against poverty and bring hope and opportunity to all of the world's people. Trade is not a zero-sum game. The United States and its trading partners have a common destiny and common purpose in promoting peace and prosperity. So let's aim high and make history.

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Mr. Portman is the U.S. trade representative. This is the first in a series on world trade to run this week.

 
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