USTR - More Trade, Less Poverty
                 
The Office of the United States Trade Representative

More Trade, Less Poverty
Op/ed by USTR Susan Schwab in the Wall Street Journal 06/29/06
More Trade, Less Poverty

By SUSAN SCHWAB

Wall Street Journal

GENEVA -- The atmosphere is charged with political pressure and historical significance as trade ministers and negotiators representing World Trade Organization members gather this week. With time running out for a successful conclusion of the Doha Development Round, speculation has intensified about what the U.S. and other WTO members will be willing to do to achieve success. I reaffirm here that the U.S. is committed to an ambitious and comprehensive outcome by the end of the year. As President Bush declared last week at the U.S.-EU summit, the Doha Round is too important to fail.

We regard it as our generation's opportunity to attack the scourge of poverty by opening trade flows between all nations in agricultural goods, industrial products and services. Half-measures that would leave millions in poverty -- people who might otherwise have been helped -- and that would dampen potential economic opportunities for people in all countries, should not be acceptable.

Economists have determined over and over again that the more ambitious the opening of trade flows, the greater the results. The data also make it clear that the most effective way for developed countries to assist developing countries through trade is to lower agricultural tariffs.

Earlier this month, the Organization for Economic Cooperation and Development issued a study that looked at the impact of 50% cuts in tariffs, agricultural export subsidies, and domestic support programs of OECD countries. The study concluded that this degree of trade liberalization in agricultural goods alone would account for 59% of the total potential global economic gains from expanded trade in all types of goods.

But more importantly, the OECD study, like a comparable World Bank study, concluded that market access -- meaning tariff cuts -- accounted for the lion's share, or nearly 79%, of the potential benefits of agricultural trade liberalization. These and other studies have buttressed U.S. determination to keep WTO members focused on making meaningful improvements in agricultural market access. Simply stated, that is where the gains are for developing countries.

Of course, expanded market access is not solely the burden of developed countries. Developing countries, particularly the more advanced developing countries, must also muster the political will to bring down barriers. This applies across all sectors as well. As important as agriculture is to the Doha Round negotiations, we must remember that 75% of annual global trade is in manufactured goods.

The record on how trade can spur development is compelling. The World Bank has estimated that, in the 1990s, per capita real income grew three times faster for developing countries that significantly lowered trade barriers (5%) than for other developing countries that lowered barriers less (1.4%). Just as important, the income gains were enjoyed by people at all income levels.

The World Bank also estimates that eliminating trade barriers in goods alone (not including trade in the rapidly growing services sector), could boost incomes in developing countries by at least $142 billion a year. That figure exceeds the combined total of $80 billion in foreign economic assistance by G-7 countries last year and a current G-7 proposal for $42 billion for developing country debt relief. Right now, around 70% of the duties on goods that developing countries pay go to other developing countries. The only way for the development potential so clearly evidenced by the World Bank studies to be realized is for these tariffs to come down to promote further South-South trade.

The United States put forward an offer last fall to make meaningful cuts in trade-distorting domestic agricultural supports if other countries would reciprocate with deep cuts in tariffs and trade-distorting domestic support. So far, our trading partners have not matched our ambition -- but it is not too late.

Multilateral trade rounds over the last 60 years have led us to this week. The need for meaningful trade liberalization has never been greater and the potential benefits of expanded trade have never been more compelling.

Ms. Schwab is U.S. trade representative.

 

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