[Ip-health] Financial Time editorial: A tangled trade web

[Thiru Balasubramaniam]

<SNIP>

These agreements, then, should have been hammered out in a multilateral
setting. From a purely organisational standpoint, bilateral trade deals
are absurd because there are simply too many bilateral relationships to
address. Now the US needs to deal with China and Japan; they must deal
with each other, and with the EU. If the smaller countries were
involved too, more than 11,000 bilateral deals would need tobe signed.
What likelihood is there of any sensible progress using this approach?

Another concern is that bilateral deals are likely to be lopsided. The
Koreans can stick up for themselves, but the US and EU both have a
shopping list of conditions that have questionable economic merit and
little to do with trade. Trading minnows will not be able to resist
unfair bilateral deals.

Karan Bhatia, the deputy US trade representative, described the deal as
a "real shot in the arm" for the US trade agenda. Maybe, but it is a
shot in the kneecaps for the multilateral trading system, which remains
the only way to agree and enforce workable trade deals. Unilateral
reform always works, of course, but failing that, what we really need
instead is some kind of "World Trade Organization". There's an idea.

---------------------------

A tangled trade web

Published: April 3 2007 03:00 | Last updated: April 3 2007 03:00

The last-minute trade deal agreed between the US and South Korea is
less sweeping than the players were predicting when the talks were
launched. Still, given that the White House was warning last week that
the talks were "not going well", the result is surprisingly
substantial. Is the glass half full or the glass half empty? That
question should not distract attention away from the real issue: this
is a foolish way to mix a drink.

The deal frees some agricultural trade - although not rice, an
untouch-able area for Korea - and promises to eliminate 90 per cent of
all tariffs within three years. Many will go sooner. That, at least, is
good news. So, too, given the diversion of expert attention away from
multilateral talks, is the fact that this is a deal between serious
trading partners.

Yet the short-term benefits to US and Korean consumers need to be
weighed against long-term costs for the international trading system
that has served the world well for decades.

The narrow economic objection to such bilateral deals is that they can
be highly distorting, inviting imports not from the most efficient
producers but from the countries facing the lowest trade barriers. In
this case, that damage may be limited, because the US and Korea are
already highly efficient producers of the products they are most likely
to trade. Yet that just emphasises the political folly of the talks. If
Korea can open some markets to US agricultural exports, it should be
able to open those markets to everyone. If the US is willing to allow
imports of cars and flat-screen televisions from Korea, it might as
well allow them from everywhere else too.

These agreements, then, should have been hammered out in a multilateral
setting. From a purely organisational standpoint, bilateral trade deals
are absurd because there are simply too many bilateral relationships to
address. Now the US needs to deal with China and Japan; they must deal
with each other, and with the EU. If the smaller countries were
involved too, more than 11,000 bilateral deals would need tobe signed.
What likelihood is there of any sensible progress using this approach?

Another concern is that bilateral deals are likely to be lopsided. The
Koreans can stick up for themselves, but the US and EU both have a
shopping list of conditions that have questionable economic merit and
little to do with trade. Trading minnows will not be able to resist
unfair bilateral deals.

Karan Bhatia, the deputy US trade representative, described the deal as
a "real shot in the arm" for the US trade agenda. Maybe, but it is a
shot in the kneecaps for the multilateral trading system, which remains
the only way to agree and enforce workable trade deals. Unilateral
reform always works, of course, but failing that, what we really need
instead is some kind of "World Trade Organization". There's an idea.

---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org