World Bank Chief Calls Open Trade Best Economic Stimulant

World Bank President Robert Zoellick is urging the United States to take the lead in pushing the moribund Doha-round free-trade talks forward. He said open trade is the best way to help the struggling global economy. Zoellick delivered his blunt assessment at a World Trade Organization meeting in Geneva on Monday.

Zoellick said practically everybody in the world is in dire economic straits. He noted Europe is struggling with the eurozone. The United States is bogged down with debt and deficits, and is in desperate need of a growth strategy. He said Japan is coming out of a nuclear disaster and is struggling with low growth.

“So, it seems to me that in addition to the work on sovereign debt and deficits, the world needs a global growth strategy," said Zoellick. "And, opening trade drives growth. It is the best driver of structural forms that the world has seen. We have seen it with proven effectiveness all throughout the past 60 or 70 years. So, why not revive Doha?”

That is a question more easily asked than answered. Zoellick has invested a lot of his time and his capital as a trade negotiator in Doha. He helped launch the Doha Round of free-trade talks in 2001, and remains deeply disappointed that 10 years later an agreement remains elusive.

Agriculture continues to be the main stumbling block to a deal. The developing countries are demanding the United States and European Union cut their farm subsidies. But the United States and European Union are calling on developing countries and emerging economies, such as India and Brazil, to open their markets to industrial goods and to grant greater access to services.

Since these conflicting demands appear unsolvable, Doha negotiators are discussing a potential smaller package of trade concessions, but no consensus has been reached on what is to be included in that package.

Zoellick is no fan of this “mini-deal,” which he said will be as hard to achieve as the big deal. He called it the dumbing down of the Doha round.

"So, I urge a turnaround. Now, I certainly understand that this requires leadership and it has to come from the major developed countries, as well as the emerging market countries," he said. "That is a different world than it was 15 or 20 years ago. And, obviously, the U.S., as the world’s largest economy, is a good candidate. Why not? The U.S. is going to be cutting agricultural subsidies as part of its budget deal. There was just an agreement in the U.S. Congress to cut not only the ethanol tariff, but the ethanol subsidy.”

Zoellick called this a serious moment. He warned that the failure of the major trading nations to talk about lowering global trade barriers is putting economic growth at risk, particularly for the poorest countries.

He said it would be a huge mistake for countries to allow the Doha round to die. He also said that at a time when the world desperately needs a pro-growth strategy - closing down, rather than opening up markets - would be the worst possible thing to do.