Mr. Obama, Global Trade Needs You Now

If the U.S. wants to remain the world's most important economic power, it must put trade back at the top of its agenda.

By Jean-Daniel Gerber

At September's G-20 Conference in Pittsburgh, presidents called on trade ministers to conclude the Doha round of global trade talks by December 2010. Soon, even more world leaders and ministers will meet in Davos, Switzerland, at the annual get-together of the World Economic Forum. There we will again hear pleas for a rapid conclusion of the World Trade Organization's negotiations. But after so many well-meaning appeals, observers and policy makers may be forgiven their skepticism that WTO members—first and foremost the United States—will heed the call.

The U.S., besides being a geopolitical and military superpower, is also, in economic terms, the most important country on the planet. That position, however, brings not only influence, but responsibility. The world needs the U.S. to now take a leading role in multilateral trade.

Many people in the U.S. and elsewhere fear for their jobs, and place most of the blame for economic problems on free trade and globalization. They tend to forget that neither the burst bubbles of the American real estate markets, nor the false incentives given to financial jugglers, were due to trade policy. On the contrary, trade and rules-based trade liberalization have been important engines for growth and for generating valuable jobs in the U.S. and beyond.

No country can trade successfully with itself alone—not even the U.S. Coordinated, reliable international rules on trade are essential. Containing protectionism and maintaining open markets is key to growth and prosperity. Without the WTO and its predecessor—the General Agreement on Tariffs and Trade, created just after World War II—the world would never have attained the unprecedented prosperity that it has. Over the years, the multilateral trade framework has proven its usefulness time and again in freeing commerce, setting rules on services and intellectual property, settling disputes, and tackling environmental issues. In the grip of recession it also constitutes the most effective bulwark against the protectionist impulse, from which no country is immune. It has prevented a repeat of the disastrous trade wars of the 1930s.

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David Klein

In previous multilateral trade rounds, the U.S. took the lead and was an active deal maker. Without its strong involvement, none of the eight previous rounds of trade negotiations would have been concluded successfully. The U.S. co-initiated the Doha Round shortly after the terror attacks of 9/11, and passed legislation granting fast-track negotiating authority to the American president. Washington assumed its responsibility, and aggressively pushed forward the negotiating process. Today, the situation has changed: The White House's special negotiating authority has now elapsed, and the U.S. seems to have other priorities.

The world knows that the U.S. faces significant domestic issues—its budget deficit, foreign and domestic debt, its real estate crisis, its health and tax reforms. Nonetheless, if the U.S. wants to retain its status as the world's most important economic power, it must put trade back at the top of its agenda.

Some time ago, the Obama Administration announced that it would forge a new foreign trade strategy. But its trading partners are still waiting. We speculate on what such a policy would look like. We hope it would stress the unequivocal commitment to the multilateral, rules-based system of the WTO; that it would show U.S. willingness to enter the endgame of the Doha talks; and that it would fully assume American leadership on such crucial debates as industrial goods, agriculture, intellectual property rights, and trade facilitation. Without such a commitment, the multitude of ministerial declarations risk remaining hollow. Many countries, in all parts of the world, are waiting for a clear signal from President Obama in favor of trade liberalization. Concluding the Doha talks would benefit everyone.

What if the Doha talks fail? Already, the multilateral trade system is eroding. The WTO has registered more than 400 free trade agreements. In only 11 cases did the U.S. sign up to such treaties. These agreements cover trade between a few partners only, and discriminate against the majority of outsiders. Without a successful conclusion to the Doha talks, such agreements will mushroom—discrimination would become the rule, with broadly applicable principles being the exception. This cannot be in the interests of the world, nor of the U.S. According to a study by the Peterson Institute for International Economics in Washington, a positive conclusion of the Doha talks would stimulate the global economy by between $300 billion and $700 billion a year, depending on the final deal. These figures do not even include the further benefits that would come with multilateral rules improving WTO regulations in areas such as intellectual property. Such a positive conclusion would also further reduce the risks of protectionism in future.

Without American leadership, a conclusion of the Doha talks is not feasible. The world needs the U.S.'s active participation, and it needs it now. The first test will come in March, when trade negotiators are due to take stock of their progress since the 7th WTO Ministerial Conference in Geneva last December. This important step is a prerequisite for a successful conclusion of the Doha talks by the end of this year.

No deal has ever satisfied everyone's expectations, and never will. But at stake here is more than achieving a tremendous economic boost; the role of the WTO as a venue for non-discriminatory trade pacts based on universally applied rules and principles, is at risk. And in today's world, with its proliferation of both free trade agreements and protectionist barriers, these are negotiations that matter.

Mr. Gerber is Switzerland's State Secretary for Economic Affairs.