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Little Chance of Progress Seen at World Trade Talks

Trade specialists meeting in Washington Wednesday were generally pessimistic that there will be significant progress towards freer trade at next week's ministerial meeting in Hong Kong.

Fred Bergsten, the director of the Institute for International Economics, says the trade liberalization talks that began in Doha, Qatar four years ago are in serious crisis. He says the World Trade Organization meeting in Hong Kong Dec 13-18 involving 148 countries could collapse amid finger pointing between developing and developed countries.

Such an outcome, says the former U.S. treasury official, would invite serious erosion of the rules-based trading system credited with dramatically boosting living standards over the past three decades. Recalling earlier failures of WTO talks in Cancun, Mexico in 2003 and Seattle in 1999, Mr. Bergsten said it is critically important that the Hong Kong talks not break down.

Jeffrey Schott, another trade expert at the Institute for International Economics, is less pessimistic. But he concedes that expectations are modest because the European Union and the United States have been unable to reach agreement on reducing their agricultural subsidies that are so vehemently opposed by developing countries.

While Europe and America seek a reduction in the trade barriers of developing countries, poor nations refuse to make concessions unless the trade distorting farm subsidies are greatly reduced. Mr. Schott says the most likely outcome of Hong Kong will be a promise to try to complete the talks during the course of 2006.

Bill Cline, an economist at the Center for Global Development, says the talks must succeed. Free trade, he says, has brought huge benefits to developing countries, lifting 500 million people out of poverty in the past 15 years. He says even more gains would result from a successful Doha round. "The income gains to developing countries would be 200 billion dollars a year; half of that would come from liberalization of industrial country markets, the other half would come from liberalization of developing country markets," he said.

Mr. Bergsten says the risk of failure is great in part because policymakers in Europe and America have turned politically timid in the face of anti-globalization protests. Mr. Bergsten says loss of momentum in trade liberalization would adversely impact the U.S. economy, a principal beneficiary of globalization. "The share of trade in the U.S. economy today is triple what it was 25 years ago. Triple. The United States is now a more open economy than the European Union as a group. We're twice as open as Japan in terms of trade to gross domestic product ratios," he said.

Mr. Bergsten says U.S. capacity to lead on global economic matters has diminished because of the large and chronic U.S. trade and fiscal deficits. He says that even in the best-case scenario, a promise to move the trade talks forward, the negotiations can not be completed for at least two years.