[Mb-civic] An article for you from an Economist.com reader.

Fri Nov 11 09:36:48 PST 2005

- AN ARTICLE FOR YOU, FROM ECONOMIST.COM -

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Michael Butler (michael at intrafi.com) wants you to see this article on Economist.com.

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STUCK WITH THE SECOND BEST
Nov 10th 2005  

It has been a bad week for free trade

EARLY on November 8th, Rob Portman, America's top trade negotiator, and
Bo Xilai, his Chinese counterpart, got stuck in the lift of a London
hotel. They eventually emerged to announce a deal on America's imports
of Chinese textiles, which in effect reinstates quotas until 2008. A
day later, free trade was jammed elsewhere. Mr Portman and other top
trade ministers began to admit publicly that next month's ministerial
meeting in Hong Kong was unlikely to produce a big breakthrough in the
Doha round of global trade talks. 

The textile deal, reached after three months of talks, allows America
to reimpose quotas on 34 products, from trousers to towels, which
together cover about 46% of all textile imports from China. To some
extent, it simply formalises an ugly reality. Under the terms of
China's accession to the World Trade Organisation (WTO), America may
set "safeguard" quotas for textiles, and has already done so for 19
products. But such quotas must be renewed annually, creating annoying
uncertainty for producers and importers. 

The new deal offers greater predictability and America has promised to
"exercise restraint" about using safeguards in future. Both sides tried
hard to avoid the farce that followed a similar agreement between the
European Union and China earlier this year, in which boatloads of bras
piled up at Europe's ports. The Sino-American agreement makes room for
Chinese textiles already in American docks (though socks may be an
exception). 

Even if predictable quotas are less bad than erratic ones, both are bad
nonetheless. The deal is a cave-in to America's ever-protectionist
textile industry. Mr Bo caustically pointed to an old Chinese saying
that the "crying baby gets the milk first". American textile producers
were predictably jubilant, but their glee may not last long. Production
will shift to other foreign countries, not return to the Carolinas.
Chinese producers will favour quality over quantity, which will hurt
the remaining American producers more. 

For both sides, however, the agreement was about more than textiles.
George Bush is due to visit Beijing this month. The Americans will now
hope that he can shift discussion to trade quarrels where they are on
stronger ground--such as China's failure to enforce
intellectual-property rights. China wanted to show that it sticks by
the agreements it has signed in the WTO.

That sentiment seems sadly absent from the WTO negotiations themselves.
Although all countries signed up for an "ambitious" trade round that
would provide "significant market access", especially in agriculture,
that goal looks increasingly elusive. Thanks mainly to the EU's
completely unambitious approach to farm tariffs, the prospects for the
Doha round are darkening. Many of the hardest decisions look set to be
put off until after the Hong Kong meeting. Celso Amorim, Brazil's
foreign minister, has talked of needing a "Hong Kong II" in future.
Negotiators who recently were proclaiming the necessity of a
breakthrough in Hong Kong now claim that there is plenty of time to
strike deals in 2006. If this week's US-Chinese disappointing stitch-up
is any guide, let's hope the lifts in Hong Kong keep working.

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