Lowering barriers part of trade, not sign of weakness

The expectations for the ministerial meetings of the World Trade Organization in Hong Kong last week were fairly low, and by and large those expectations were met.

The meeting was not disrupted by the “anti-globalization” protesters who haunt such affairs, and it didn’t end with absolutely nothing to show in terms of an agreement, as have previous meetings in the so-called “Doha Round” of WTO negotiations. But the agreement it got was on secondary issues that will affect the flow of world trade very little. And the meeting highlighted the stubbornness of both developed and less-developed countries who — for different reasons — want to keep counterproductive trade barriers in place.

The Doha Round was supposed to be about helping poorer countries through increased trade and access to larger markets. As Dan Griswold, director of the Cato Institute’s Center for Trade Policy Studies, who attended the Hong Kong meetings, said, however, “for an organization supposedly devoted to freer trade, there was very little discussion or appreciation of the benefits of more open trade, especially for poorer countries.”

Most countries’ governments — including the United States, to a lesser but still alarming degree — see barriers to imports as protections against something insidious. What such tariff and nontariff barriers do in practice, however, is to protect a few politically influential industries from foreign competition. It shields them from pressure to become more competitive, while punishing the vastly more numerous but politically less-influential consumers of that country by keeping prices high and quality low or marginal.

In a world obsessed with “reciprocity” in international trade negotiations, however, policies that harm most of a country’s consumers will only be given up — doing so is viewed as a “concession” rather than simply common sense — if another country agrees first to stop punishing its own consumers.

The issues at the fore in Hong Kong were agricultural trade barriers and service-sector trade barriers. The European Union is the worst offender in the agricultural sector, punishing its consumers with high food prices while increasing the incomes of a few larger domestic farmers through extremely high tariffs on agricultural imports. Meanwhile, many less-developed countries maintain barriers to foreign service providers (banking, financial, accounting and the like), which protects inefficient domestic providers at the expense of prolonging economic backwardness and poverty.

The EU didn’t budge an inch on agricultural barriers, so the poorer countries wouldn’t budge on service barriers. The EU did agree to end export subsidies to its farmers — not insignificant but nowhere near as big a contributor to market distortion as outright barriers — so the WTO could claim a small piece of progress.

The WTO does plan to meet again before the end of April to see if an agreement can be reached on agricultural import barriers. Unless members become more determined to open up trade rather than getting caught up in the political point-scoring encouraged by the focus on reciprocity, however, it’s hard to predict much progress.