Notes on the upcoming trade talks

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Trade representatives from the US, Brazil, India and Europe will meet to hammer an agreement that will resolve the 2005 deadlock in the DOHA round. In the negotiations, US and EU will be pushing India and Brazil, acknowledged leaders of the world's developing countries, to open their economies. To quote an online editor at the http://www.americaneconomicalert.org/news_home.asp?NTID=67;

"Developing nations are being pressed to open their markets wider to industrial goods and services and the United States is seeking fewer farm products on their "protected" list. But India and other developing nations says they needs their farm tariffs to protect the livelihoods of their huge farming populations. Up to 80 percent of the workforces in developing nations depend on agriculture."

I believe that the editor failed to point out that the US heavily subsidises a lot of industries, therefore creating “False competitiveness” for their local industries. I am not that much familiar with the WTO definition of “Dumping” but to my simple economic mind, subsidising commodities in order for it become competitive for export, is tantamount to dumping. It means that exported products are actually being sold at a loss. That realization came when I chanced upon some statements from the other end of the trade talks.

As quoted by Businessworld;

"All are hopeful that something will come out of this but the problem is the Americans. They are exacting a high [price] for cutting farm subsidies. The issue is how far will the Americans be willing to go," Jose Antonio S.Buencamino, Manila’s special trade representative to the WTO in Geneva, Switzerland.

The Doha talks stalled, among others, after developed countries such as the US and EU refused to cut domestic subsidies for agricultural products, a stance rejected by developing countries which could not afford to give similar support and thus were unable to compete globally.

Quoted further;

“In a recent forum, Mr. Serrano said the EU appears to be veering toward accepting a framework proposed by the G20 group of developing countries that will effectively cut farm tariffs by an average of 29%. But the US, he said, has "nothing to commit - not even indicatives" and is asking for an average 58% slash in agricultural tariffs.

Yahoo's online news also quotes India's representatives as saying;

"The EU and other WTO members have called for Washington to make a new, more radical proposal on cutting farm subsidies while the EU is being pushed for steeper reductions in farm product tariffs.

"We want real, effective reductions in huge farm subsidies by countries like the US which distort world agriculture prices," the Indian spokesman said.

"We must have a level playing field so the round's development mandate is fulfilled, the official said."

BusinessWorld also reports that the developing countries want the US to limit its farm subsidies to $12 Billion. However, the US is bent in lowering it only down to $22 Billion.

Wow, and I thought the US has a huge budget deficit!

My advice is for the US government to review the terms of Competitive Advantage and Free Trade. Adam Smith says;

"Let the market dictate!"

Lastly, let me quote one of my favorite economists, Milton Friedman, an American;

"That government governs best which governs least."