Niall FitzGerald: The US and EU must show trade leadership

Enlightened and bold leadership from the US and Europe is needed urgently to rescue the Doha trade round, re-energize the global economy, spread the benefits of trade for all and eradicate the poor conditions in which terrorism thrives, says Niall FitzGerald.

The US and the EU will put the success of the Doha trade round at risk unless they show they are serious about opening their markets to imports from poorer countries. There are no meaningful trade negotiations if the US and the EU are not committed to trade liberalization.

The actual launch of the Doha Round negotiations last November was a critical first step. It was a strong signal that the defence of prosperity must begin with an attack on poverty. The US grasped, in the immediate aftermath of September 11, that the multilateral launch of a development-focused trade round was clearly in its own interest and the global interest. So did the EU, helping to secure the elusive compromise on the balance between new market access and new rules in the negotiating agenda.

Now negotiators need to deliver and meet a series of deadlines in March 2003 for agreement on the detailed frameworks for negotiations to cut subsidies and import barriers in agriculture, tariffs in manufactured products and market access for services. The task is to work on a balanced and realistic agenda for global trade liberalization in which all parties, including the developing countries, feel they have much to gain – and which benefits our whole planet.

And there is much to gain. The case for ambitious trade liberalization via the Doha Agenda is clear. The World Bank has shown that trade barriers harm the poorest. Removing trade barriers helps to alleviate poverty when accompanied by sound domestic macroeconomic policy and the rule of law.

Furthermore, the World Bank has calculated that abolishing all trade barriers could boost global income over a 10-year period by $2.8 trillion, of which developing countries would gain more than half despite accounting for a third of world trade. This would reduce global poverty by an additional 320 million people by 2015.

In agriculture alone, the World Bank estimates that phasing out trade restrictions could lead to higher incomes in developing countries of some $400 billion by 2015. This is equivalent to all annual development assistance and is several times greater than all the debt relief granted so far. This would not require the OECD countries to end all farm support, just the trade-distorting aspects.

I do not know why these arguments are not more compelling to the European and American people. On both continents people are deeply worried about their future security and about poverty and instability in the south. Surely it is in the self-interest of western political leaders to articulate the case for reducing its trade restrictions, clearly and forcefully.

Making a success of the Doha Development Agenda is a project of great importance to the entire world. Open trade spreads prosperity, extends opportunity and raises standards of living across the planet. It creates new markets for business.

It creates jobs. It encourages fair competition, improving the quality of products and services. It has underpinned and must continue to underpin prosperity and freedom for all our citizens.

Enlightened leadership required

There are legitimate concerns about spreading the benefits of increased trade. But it is doubtful that many of our shared social and environmental objectives can be obtained without an increase in trade and international economic integration .

Yet progress since Doha has not been as encouraging as one would have hoped. The new dawn that Doha promised has vanished behind a grey mist of argument and dispute – over steel, over farm subsidies, over global warming.

Bold leadership from the developed world and much wider participation of developing countries is now essential. We need to see this leadership in action – through resolution rather than escalation of current disputes, through an inclusive and effective negotiating process, and through timely preparation of offers of concrete trade liberalization.

If our leadership were to be truly bold, they would acknowledge the immensely beneficial effect from serious early offers of trade liberalization – on agriculture and textiles, for instance – and put down their offers at an earlier stage of the process instead of in the last days of negotiations. This would encourage other trading partners to come up with their own liberalization commitments.

So far, enlightened leadership seems broadly to be prevailing over national self-interest except in the areas of agriculture and textiles.

Agriculture matters to almost all World Trade Organization members and the EU and US have the paramount role in advancing reform. For developing countries it is synonymous with success or failure by the WTO system in responding to their trade and development needs.

Therefore, the US cannot seek to remove foreign trade barriers while retaining its own, while the EU cannot polarize negotiations on opening agricultural markets by tying them to issues such as food safety, labelling and “geographical indications”.

The EU cannot hold the Doha Round hostage as it held the Uruguay Round hostage for nearly seven years. It needs to commit itself to the elimination of export subsidies, the substantial reduction of trade-distorting domestic subsidies and significant opening up of markets for beef, sugar, grain, and so on.

Although the US made ambitious agricultural proposals within WTO, it has lost its moral high ground with the US Farm bill, which introduces a trend towards increasing the protection of US farmers. Instead of requesting reform from the EU and Japan, the US should also be making the case for further US agricultural reform.

We must also be vigilant on the broader sustainable development front. It is imperative that the negotiators reach a settlement to enable access to essential medicines by developing countries facing public health crises such as HIV/AIDS and malaria epidemics.

It is also imperative that the trade and environment negotiations focus on the narrow and practical mandate set by ministers at Doha rather than – as European governments are seeking – leading to new forms of non-tariff barriers in agriculture and manufacturing.

In case all this sounds too dry and arcane, let me reinforce it in words that put it in a contemporary context and are not prone to misunderstanding.

If we are to re-energize the global economy it can only be done sustainably if we stimulate developing economies through easier access to developed economies. The developed world needs the engine of the 85% of consumers who live in the developing world.

And if we are to defend the current prosperity enjoyed by the developed world, we must attack the symptoms of instability and its causes – poverty, deprivation and hopelessness. This can only be done through a liberal trade regime that truly spreads the benefit of trade.

We live in a world in which terrorism abounds. As the historian William O’Neill recently said so clearly: “Poverty of resources, combined with poverty of prospects, choices and respect, help enable terrorism to thrive.”

Niall FitzGerald
Niall FitzGerald is chairman of Unilever plc and vice-chairman of Unilever NV.