“Foundations” is an occasional series of informal question-and-answer sessions with employees of The William and Flora Hewlett Foundation to let them explain their work. Ann Tutwiler is a Program Officer and the Managing Director for Trade and Development with the Foundation’s Global Development Program. In that capacity, she works to reform international trade. Trade reform has greater potential to improve the lives of the world’s poor than all international aid efforts. And the key to reform is the current round of international trade talks known as the Doha Round.
Unfortunately, as these talks have entered their final phases, common ground has become harder to find. In February, the Hewlett Foundation, in partnership with the German Marshall Fund of the United States and the Salzburg Seminar, took the unusual step of convening a retreat in Salzburg, Austria, gathering policymakers and others in positions to influence the trade negotiators in hopes of finding ways to move the talks forward. Here, Tutwiler talks about the international trade talks and the recent retreat.
Before joining the Foundation, Tutwiler was founder and former head of the International Food & Agriculture Trade Policy Council. She holds a B.A. from Davidson College and a Master in Public Policy from the John F. Kennedy School of Government at Harvard University.
Before we discuss the newly resumed world trade talks, let’s get a bit of context. Can you tell us what’s wrong with current international trade practices and why?
The biggest single problem is that after the Second World War, agriculture was left out of trade negotiations. But most people in the developing countries make their living in agriculture. So the one part of international trade that was important to the developing world was the part no one wanted to discuss. The result was that the rich countries protected their farmers with subsidies that disadvantaged farmers in the developing countries.
When the subsidies began, they made more sense. American farmers often were poorer than their urban counterparts. Today, as a group, the opposite is true, but farmers in the United States and Europe have developed the political clout to hang on to the subsidies.
Of course, agriculture is only one part of the trade negotiations. Manufactured goods and services are others. But if you talk about what has the greatest impact on poverty, agriculture is first, then manufacturing, then services. In terms of overall economic impact, the service reforms will have the biggest effect because they are the biggest part of the global economy.
Is trade an issue that generally finds the developed and developing worlds on opposite sides of the table?
What’s interesting about the Doha Round of talks is that it is the first one in which developing countries really have played a significant role. The first time agriculture was addressed was about fifteen years ago. Brazil and Argentina played a bit of a role, but it still was mostly the developed world: the United States, Japan, Canada, Europe, and Australia. This time the developing countries said, “We’re not going get fooled again. We want to be part of the process.” So you have a lot of different groups. There’s the so-called Group of 20, a bloc of developing nations led by Brazil, China, India, and South Africa. But there also are other groupings. There’s a Group of 33, there’s a Group of 90, and there are the small and vulnerable economies.
How they divide very much depends on the issue at hand. Brazil and the United States both want to reduce tariffs on the European Union for farm products. But Europe and Brazil want the United States to reduce farm subsidies.
India and Brazil agree on reducing U.S. subsidies, but they have different views on tariffs. India wants high tariffs on agricultural products, but Brazil wants open markets. Brazil wants the tariffs down because it’s hugely competitive in everything it does. India, on the other hand, has a lot of poor farmers, and it doesn’t want to give up that tariff tool because it will have political problems. So there are two developing countries with very different views. It goes on and on. It’s one reason this is so complicated.
How can negotiators ever hope to address all these crosscurrents?
Prevailing wisdom is that the United States and India are the big problems right now. It’s an “Alfonse and Gaston” sort of problem: who will go first in making some concessions?
A lot of the disagreements come down to how much flexibility a country needs. And there is a debate about “aid for trade”: how much money does a country need to make the transition to opener markets?
In India’s case, what really needs to happen over time is what has happened in the United States when it industrialized. People need to move off the farm and into the cities and get jobs in factories or comparable jobs. If you have an orderly process that happens over decades, as it did here, it’s not a problem. But the process of economic transformation is becoming more rapid, and countries have less time to transition from agricultural to industrial to information economies. India is at the point where it doesn’t know if it can manage the process.
On the other hand, India sees itself as very competitive in services, very able to do back-office services for U.S. companies. And it wants to attract medical tourists, but the Indians need Americans to be able to bring their medical insurance with them.
Speaking broadly, what are the key reforms that are needed and why?
In agriculture, the United States needs to commit to reducing trade-distorting domestic subsides to farmers from the current level of $19 billion down to about $15 billion. The European Union needs to reduce agricultural tariffs by 55 percent. And the developing countries need to be realistic about the level of flexibility they need to handle the adjustments. Right now, they are asking for the moon and stars and sun, and they probably don’t need all three.
Why did the Doha Round stall last July?
There are lots of reasons. For one thing, in any negotiation, particularly toward the end, all parties get entrenched in positions and forget why they are there.
Another reason is the changed circumstances of the post-Cold War world. During the Great Depression, the United States realized we needed to play a leadership role in the international trading system if we wanted to thrive. Even if we needed to give up on some things, it was worth it in the long term. We used to see trade in much more strategic terms, as a way to spread democracy.
But when the Berlin Wall fell and the Cold War ended, we didn’t need to act as leader of the Free World in quite the same way anymore, and we started to treat trade as just a financial transaction.
We and the other countries need to get back to thinking about the greater picture. We talk about terrorism because it’s on our minds, but if you look at the list of threats to the global economy, income disparity within and between countries is one of the greatest. Health pandemics and global warming are others. The trade regime is one of the ways to get countries to agree to work together to solve global problems. And the hope is that this will transfer to other types of agreements.
What did you do in Salzburg to try to move the talks forward now that they have resumed?
In Salzburg we were trying to get people to focus on the longer term and on the way toward a multilateral trading system that works. It was a chance to step back and think about what we want the world to look like in ten years. Do we want a world where countries try to solve problems cooperatively, or one where countries try to solve problems unilaterally? Do we want broad-based and equitable economic growth, or do we want some countries excluded from economic growth because they are less powerful?
We didn’t invite the actual negotiators because we didn’t want just to replicate what was going on at the talks themselves. We invited people who were in positions to influence the negotiators: some government officials, some ex-diplomats, some nongovernmental international organizations, some businesspeople and religious leaders. It was a real mix.
One of our efforts at Salzburg was to get people to focus on these broader issues rather than on specific concerns. For example, you can’t just liberalize soybean trade because someone who wants that also needs roads and ports and telecommunications with it, and that’s another piece of the negotiation. One of the ways we did this was with a facilitator who helped people explore different scenarios and outcomes depending on whether the trade talks succeed. It broke people out of their mind-sets. We also set up rotating groups, so people could understand the issues in each part of the negotiations-not just in the area of their own expertise.
What’s the next step?
For the Foundation, the next step is to keep fanning these emerging efforts-in the United States, which is easier for us because we’re here, but also in India and Europe. We need to make sure people remain in a network. Emerging out of Salzburg were ideas about policy analysis that still needs to be done or about getting that work into the public domain. There may be roles for some of the Foundation’s grantees in doing some of that.
The problem now is that the time frame is short. The key thing is to get everyone moving quickly, before the U.S. president loses his fast-track negotiating authority in July. That’s the legislation that entitles him to a simple up-or-down vote on any trade agreement, without Congress picking it apart with amendments.
If fast track gets renewed, it will probably be for twelve to eighteen months. I think you could get a good deal in that time on all three trade sectors. The outline is there. It’s just getting over the political hump to get to the agreements.
If fast track doesn’t get renewed, then these negotiations are stalled until 2009, when the next president is inaugurated. If the negotiations stall again, it’s not at all clear that they can be restarted, and it’s not at all clear that the offers currently on the negotiating table will be available. And, it’s very unlikely that the United States and the European Union will reduce their harmful subsidies and tariffs.