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Global trade growth seen continuing despite WTO setback

Updated:2008-08-02 09:29:49

Just call it 'two steps forward, one step back' for the global trade talks.

The collapse of the World Trade Organization's trade talks this week without an agreement is a setback, economists contacted by BloggingStocks agreed, but it is not likely likely to prevent international trade from growing in 2009.

The nine-day talks in Geneva -- aimed at completing the Doha Round -- collapsed Tuesday after the United States and the European Union could not reach an agreement with China and India on what constituted acceptable tariffs for food imports, The New York Times reported Wednesday. The U.S. and E.U. say China and India wanted to impose prohibitively high tariffs. China and India counter that they were insisting on safeguard rules to protect their food supplies.

Economist Glen Langan told BloggingStocks the elimination of food import tariffs would have resulted in more-efficient deployment of resources, and, ultimately, lower food prices for consumer around the world, along with increased the increased commerce that trade brings. "The failure of the talks is a real loss for consumers in China, India and in the U.S. and Europe," Langan said. "It will also really hurt low cost food producers in Brazil, Argentina, Australia, New Zealand and South Africa. Ultimately, China and India will have to relent, or the west may begin to complain about free trade conditions for manufacturing and services. That manufacturing free trade policy has been the source of a considerable amount of China's and India's economic growth."

Sees 4.5-4.8% global trade growth in 2008

Nevertheless, Langan does not expect the Doha Round setback to prevent international trade expansion this year. Driven by the end of Cold War and the implementation of capitalism around the world, as well as by technological advances, such as the internet, that have made international business contacts cheaper, global trade has increased at a 6% annual pace over the past decade, Langan said, and he expects trade to increase 4.5-4.8% in 2008.

"Most of the decline in trade this year will be due to the credit-market and housing-related economic slowdown in the U.S., not due to the breakdown of the global trade talks," Langan said. "And as soon as U.S. economic growth revs back up trade growth will increase."

Further, Langan also expects, now that the global-wide talks are on stand-by (for now), major food producers such as the U.S., E.U., and Brazil to negotiate and sign bilateral agreements with individual developing markets on food exports.

Economic Analysis: China and India cited food safety concerns as the reason they did not agree to lower tariffs for food in the Doha Round. What's more likely: the two were trying to protect small, domestic, 'Mom and Pop' farmers who would be among the first to be displaced by the entrance of lower-cost food imports. The stance by the two, large emerging countries is a double standard that must be addressed by the WTO -- China and India are very much pro-free trade when it benefits them, namely in manufacturing and services -- but they've displayed a decidedly protectionist posture when other nations would benefit. That has to change if the two expect to continue to receive barrier-free access to the lucrative U.S. and E.U. markets.

Source:http://www.bloggingstocks.com

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