Janus-faced Uncle Sam

Author: Editorial
Publication: The Economic Times
Date: May 25, 2002

The Senate approval on Thursday night of legislation that strengthens President George Bush's hands in global trade negotiations is small comfort. The storm created by the American decision to increase domestic farm subsidies by 70 per cent is likely to destroy much of the likely benefits from any such move. The President evidently believed that this sop to the farm lobby would be a small price to pay to get the Trade Promotion Authority that will allow him to negotiate effectively in the WTO. But the reaction to the move suggests that this price may not be small. Some of this reaction may have been anticipated. The prospect of exporters of farm products, like Argentina and Brazil, going to the WTO may have even prompted the inclusion of a circuit breaker in President Bush's bill. The US farm bill makes it clear that the subsidy cannot go beyond the limit for domestic support fixed by the WTO. But the bill has also come to be savaged by others who the US may have expected to at least be neutral. The European Union which offers very substantial domestic support of its own has been a major critic of the US bill. European' Trade Commissioner Pascal Lamy has argued that the US action makes it even more difficult for him to get the EU to reform its Common Agricultural Policy. It is a measure of the anger that the US farm subsidy bill has aroused that, perhaps for the first time, the World Bank and the IMF have joined the WTO in demanding a reduction in protectionism in the developed world.

By allowing itself to be seen as a champion of protectionism, the United States has not done its cause in the WTO any good. Not too long ago, at Doha, it was leading the fight for a new round of trade negotiations. Its actions since then have done little to convince the rest of the world that the United States believes more open trade is indeed a good thing. India will no doubt see in this action further support for its belief that the developed countries preach free trade for others while they themselves embrace protectionism. The only silver lining is that much of the criticism of the US action has come, not from the developing world but from within the developed world.
 

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