GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

---

Confronted by strong political winds in the aftermath of two devastating hurricanes and gusts of hot air blowing off Capitol Hill, the Bush administration still has signaled the right message on global trade negotiations: Breaking the deadlock in the WTO’s Doha round of talks begins by taking initial steps to reform U.S. farm policy.

In a remarkably well-choreographed performance, over the past week U.S. Trade Representative Robert Portman and Secretary of Agriculture Mike Johanns have presented a reform-oriented, development-friendly message. Back from a trip to America’s farmland, Mr. Johanns confirmed that few average farmers actually benefit from the current subsidies program. He is now signaling a new approach that will make U.S. farmers less vulnerable to international trade disputes over commodities like cotton, sugar and rice. Mr. Portman has converted that message into trade speak, offering to reduce market-distorting subsidies in a manner consistent with a proposal offered by Brazil -- America’s least favorite farming country -- on behalf of developing countries.

Only nine months ago, finding a coherent American trade and development policy required cobbling together references to the benefits of trade liberalization in speeches made by President George W. Bush, a proposal to cut the budget by reducing domestic support for American farmers, and a proposal to increase support for the Millennium Challenge Account -- the administration’s version of the United Nations Millennium Development Goals. To that confusing message, add the bungled effort by the Americans and Europeans to resist agriculture reform going into the last WTO talks held in Mexico in 2003, and it was clear that the trans-Atlantic powerhouses had lost the moral high ground on trade policy. So what has happened to force the administration’s position to jell?

It largely goes back to the two hurricanes, which left the Bush administration facing three years of a frustrating domestic political agenda. In this "post-Katrina" world, most political energy must be focused on Gulf Coast reconstruction, leaving Social Security reform on the rocks and tax relief going nowhere. After the dogfight to pass the Central America Free Trade Agreement, the president’s political gurus likely realized that mounting an offensive for a trade deal that nets little in the way of real benefits to the U.S. economy would bleed too much political capital.

So in the face of pundits who argue that President Bush’s finest policy hours are long past, officials seem to be positioning the administration to go for broke in trade negotiations by offering up one of the fattest beneficiaries of government largess -- the corporate farmers who don’t need help anyway. Get rid of harmful farm supports, and you earn the leverage necessary to move developing countries on issues like market access for manufactured products and financial services, and greater protection for intellectual property rights.

Recently back from the disastrous "bra wars" with China, EU Trade Commissioner Peter Mandelson seems to be paying close attention. Burned by this ill-fated attempt to encourage French approval of the EU constitution, Mr. Mandelson seems prepared to match U.S. commitments on agriculture in a positive "tit-for-tat" game that should better position both parties to negotiate market concessions in manufacturing and services -- the vital, job creating areas of EU and U.S. economies.

But while this approach to pre-Hong Kong WTO meetings has worked so far, battling hot air from the likes of Agriculture Committee Chairman Saxby Chambliss and EU member states like Germany, France, Italy and Poland will require more concentrated efforts to make the case for reform at home. Looking more like Ebenezer Scrooge than the senior senator from Georgia, Mr. Chambliss has threatened to take farm program reduction out of conservation efforts and food programs targeting the poor. While we should expect to see the U.S. and EU continue to play tit-for-tat to the end of the year, Messrs. Portman and Mandelson would be wise to spend more time making the case for reform in self-interested terms: creating better jobs at home, ending wasteful spending and promoting development abroad. In the end, neither the U.S. nor Europe will let itself be left behind in the race for position at the Hong Kong meeting.

Mr. Audley is a Brussels-based senior transatlantic fellow at the Transatlantic Center of the German Marshall Fund of the United States and principal author of GMF’s regular report on public opinion on trade and poverty reduction. The views expressed are his own.