International Economic Law and Policy Blog

Free book (and I get no commission)

This from Daniel Drezner's blog:

. . . devoted fans of danieldrezner.com can click here to read my just-released book from the Council on Foreign Relations, U.S. Trade Strategy: Free Versus Fair. From the press release:

While policymakers agree that promoting trade expansion serves U.S. national interests, they disagree on how to accomplish this goal. U.S.Trade Strategy: Free Versus Fair, by Tufts University’s Daniel W. Drezner, is a primer on trade policy. Written as a policy memo to an American president, this Council Critical Policy Choice (CPC), published by CFR press, does not argue for a particular policy but outlines two distinct options.

The “free trade” approach seeks to ensure the full realization of the economic and political benefits of free trade. It recommends a renewed commitment to the success of the Doharound of trade negotiations through top-level U.S.involvement in the negotiations and a willingness to resist domestic political pressures regarding issues such as outsourcing, textiles, and agriculture.

The “fair trade” approach seeks to balance the economic benefits of free trade with other values—community stability and income security, for instance—even at the cost of foregoing some of the benefits of trade. This approach recommends a tougher stance, in trade negotiations and in Congress, to ensure receptivity to American exports and to stem the tide of outsourcing and other potential threats to U.S.interests.

“Trade has become one of the most significant and controversial subjects in the international arena,” said Council President Richard N. Haass. “It is also one of the most complex. This book provides students, professors, and others a basic text that will help them better understand the many dimensions of trade policy and help them sort out where they stand on this critical issue.”

In addition to presenting these two alternatives, the book includes background papers on four recurring challenges to U.S. trade policy: balancing America’s trade and current account deficits, managing the intersection of trade policy and issues such as intellectual property and labor standards, supporting workers adversely affected by trade, and harmonizing the multiple tracks of trade diplomacy. The resulting product is a compact, accessible volume on the substance and politics of trade policy.

If you want to save yourself some dough and download the whole thing as a .pdf file, then click here.

The Appellate Body and Zeroing

Over at Opinio Juris, Roger Alford has a post criticizing the Appellate Body's findings on zeroing in the U.S. - Zeroing (DS294) case.  He also has an article on the subject, elaborating on his points in the post.  I haven't had a chance to read the full article, but I do share the skepticism he expresses in his post and the article abstract about the AB's findings in DS294 on the permissibility of zeroing (and this also applies to the recent Article 21.5 ruling in the Lumber case).  We elaborated on this a bit in the Dispute Settlement Commentary we did for the case, but it just seemed to me that the interpretation was a closer call than the Appellate Body's reasoning indicated.  In addition, there were a number of interesting policy issues, as well as some relevant negotiating history, that did not really get brought out in the AB report (but were discussed in the panel reports).

The Way of the World: Bernanke on Globalization

Ben Bernanke, Chairman of the Fed, has made his views on globalization known in a well publicized speech. Globalization is nothing new, it is the way of the world, free trade is wonderful, a cross between liberty and gravity.

This is all well rehearsed and unsurprising. Only towards the end, does Bernanke mention the "opposition". Multilaterlaism and regionalism appear to be interchangeable means to the end. Distributional effects are distractions, the failure of Doha merely a bump in the road:

"The critical role of government policy in supporting, or at least permitting, global economic integration, is a third similarity between the past and the present. Progress in trade liberalization has continued in recent decades--though not always at a steady pace, as the recent Doha Round negotiations demonstrate. Moreover, the institutional framework supporting global trade, most importantly the World Trade Organization, has expanded and strengthened over time. Regional frameworks and agreements, such as the North American Free Trade Agreement and the European Union's "single market," have also promoted trade. Government restrictions on international capital flows have generally declined, and the "soft infrastructure" supporting those flows--for example, legal frameworks and accounting rules--have improved, in part through international cooperation.

In yet another parallel with the past, however, social and political opposition to rapid economic integration has also emerged. As in the past, much of this opposition is driven by the distributional impact of changes in the pattern of production, but other concerns have been expressed as well--for example, about the effects of global economic integration on the environment or on the poorest countries".

"Plan B Is Always Inferior to Plan A"

Dr. Fred Bergsten, Director of the Institute for International Economics, wrote in Financial Times that a grand Asia-Pacific regional bloc, i.e., "Free Trade Area of the Asia-Pacific Region (FTAAP)," should be launched as a "Plan B" in the face of the moribund Doha Round. See Plan B for world trade: go regional," Financial Times, August 16, http://www.ft.com/cms/s/390d8cec-2c82-11db-9845-0000779e2340.html 

In the line of his long-held faith in "competitive liberalization," he argued that FTAAP would effectively threaten those naysayers, such as the EU, Brazil, and India, to return to the Doha Round negotiation table, as was allegedly the case in the Uruguay Round. This proposal for an FTAA incarnate in the Asia-Pacific region is quite reminiscent of the former USTR Robert Zoellick’s intimidation made when the Cancún Ministerial Conference collapsed in 2003. He vowed that the U.S. would go regional with "can-do" countries, leaving behind those "won’t-do" countries.

Here is my response to Dr. Bergsten’s Comment, which has appeared in the same newspaper today. ‘Plan B’ is always inferior to ‘Plan A.’ http://www.ft.com/cms/s/3c2e5142-317b-11db-b953-0000779e2340.html

I basically argued that Dr. Bergsten "profoundly underestimates the demerits of regionalism."

Consultations and Third Parties

The conventional wisdom in the GATT days was that complainants requested consultations under Article XXII when they wanted to attract third parties and negotiate, but under Article XXIII:1 when they did not want third parties intervening and didn't especially want to negotiate.  These days, it appears that things are a bit more complicated.  Under the WTO, about half of all requests for consultations are filed under Article XXIII:1, and half of these attract third parties.  On the other hand, many politically charged cases that are clearly destined for a panel start out under Article XXII, some with no third parties (though, statistically speaking, Article XXII cases do draw more third parties).  Thus the question: is the conventional wisdom from the GATT days no longer true?

More Papers Wanted

A new journal, The Africa International Trade Review, has put out a call for papers on its site: http://www.chr.up.ac.za/academic_pro/llm2/africa_international_trade_review.html

The journal describes itself as: "This multi-disciplinary journal, a first in Africa, forms part of the UP and UWC's programme on Trade and Investment in Africa and seeks to provide an avenue through which research on trade law and economics from an African perspective can be disseminated."

New New Haven School?

This from the editors of the Yale Journal of International Law:

I am writing on behalf of the Yale Journal of International Law to let you know that we have just issued our call for papers for our annual conference, which will take place this coming March. This year’s theme is “The ‘New’ New Haven School: International Law—Past, Present & Future.” We would very much appreciate it if you would be willing to mention our call for papers, which can be found at http://www.yale.edu/yjil/, on the International Economic Law and Policy Blog.

Narcotic MFN

From Sergey Ripinsky of the British Institute of International and Comparative Law

I came across the rule in the US legislation (adopted in 1971), which requires to buy 80% of all narcotic raw materials from two countries - India and Turkey - and the remaining 20% from five other countries (the so-called '80-20' rule, see Title 21 para. 1312.13(g) of the Code of Federal regulations, available http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=9e96138a10368dc7cd0073151052ede1&rgn=div8&view=text&node=21:9.0.1.1.13.0.41.5&idno=21)

On its face, this rule constitutes a violation of the GATT MFN principle. I checked whether the US has obtained a relevant waiver from WTO obligations - it has not. At the same time, I have not come across any concerns raised in this regard by any WTO members. US is by far the largest importer of opium raw materials in the world, so I would assume that other opium-producing countries should be willing to expand their access to the American opium market.

I wonder if somebody could express an opinion on whether (1) this is indeed an unjustifiable violation of GATT Article I:1 (MFN), and if yes, (2) why other opium-producing countries have not challenged this rule.

Bryan Mercurio on Estimating the Benefits of FTAs

Guest blogger Bryan Mercurio writes the following:

Governments often commission and rely on economic analysis to publicly justify FTA negotiations, but it seems to me that such analyses are becoming increasingly meaningless and even deceptive, at most serving only as a 'best case' scenario and often being used to justify a decision that has already been made.

The latest example of this is the recent release of the preliminary results of an Australia-Japan scoping study that finds a comprehensive FTA between Australia and Japan would be worth at least $38.7 billion to Australia over two decades and $27.4 billion to Japan (http://www.dfat.gov.au/geo/japan/tef-study/faq.html ). Based on this information (or so it has declared), the Australian government has expressed a readiness to begin negotiations.

But what appears deceptive to me is the fact that the scoping study uses a model based on almost complete liberalisation of all markets, including agriculture and services. This is mere fanciful thinking given Japan's long history of, among other things, keeping out agricultural imports by protecting sensitive products and maintaining 'food security'. Japan has already attempting to take such items off of the negotiating table. At best, Australia can only hope to match the deal Mexico negotiated (and I am not even sure that Australia's negotiating position will be as strong as Mexico's).

My second 'concern' regarding scoping studies/economic modelling is that they are conducted by groups hired by the governments with an implicit (and sometimes explicit) mandate of the finding benefits outweigh the detriments. Leaving aside the inherent difficulties with predicting gains in IP and services, the fact the governments go through the motions without an interest in actual gains/losses seems like a wasteful effort designed to justify a decision that has well and truly already been made. Making matters worse, the group which is always hired to conduct such studies in Australia are former diplomats with close ties to the government and, in what would seem to be a conflict of interest, have been or are prominent members of the pro-US, China, Japan and Malaysia FTA FTA lobbies.

I don't have a problem with FTAs or even this particular partnership. In fact, given the state of multilateral negotiations and meteoric rise in FTAs (and their consequences), Australia should negotiate this deal (to be sure, a comprehensive deal would benefit Australia. Japan is Australia's largest market for agricultural products, coal, LNG, aluminium, LPG and crude petroleum. It is the second largest source of tourists to Australia.). I do, however, have a problem with the process of this and many other FTAs.

Looking more broadly, have there been any studies looking at the predicted gains of FTAs (at both the start of the negotiations and conclusion) with the actual realised gains and analysing why the figures did not match?

No Coke, Pepsi

When I saw today's FT story about a number of Indian states banning Coke and Pepsi because a scientific study had shown that they contained as much as 24 times the amount of permitted pesticide residues, and saw that the soft drink makers had argued that they comply with international standards, my first thought was "why is there not an SPS-type agreement for investment?"  (I express no opinion on whether the ban is a good idea.)  Then, I remembered that I had written a paper answering this question. 

FDI and the Right to Regulate:  Lessons from Trade Law, in United Nations Conference on Trade and Development, The Development Dimensions of FDI:  Policy and Rule-Making Perspectives (Americo Beviglia Zampetti & Torbjörn Fredriksson, eds. 2003), available at http://www.unctad.org/en/docs/iteiia20034_en.pdf.

The general, political economy-based answer seemed to me at that time to be that there is less risk of protectionism in investment than in trade.  Investment includes local jobs and other links, while trade does not (so much).  But I wonder whether there is any data supporting that view? 

A Political Scientist in Our Ranks

Marc Busch, Karl Landegger Chair in International Business Diplomacy at Georgetown, has joined our group.  Marc has written widely about international political economy, including extremely interesting empirical work on WTO dispute settlement.   

Myanmar Sanctions--from Michael Ewing-Chow

Guest blogger Michael Ewing-Chow of National University of Singapore writes as follows:

On 1 Aug 2006, President Bush has extended the Burmese Freedom and Democracy Act 2003 for another 3 years. (See http://www.whitehouse.gov/news/releases/2006/08/20060801.html)

The Press Release from the White House in 2003 explains that "[a]mong other measures, the legislation bans the import of Burmese products. The executive order freezes the assets of senior Burmese officials and bans virtually all remittances to Burma. By denying these rulers the hard currency they use to fund their repression, we are providing strong incentives for democratic change and human rights in Burma."

Unfortunately, during the last 3 years when the unilateral trade sanctions by the US has been in place, the military junta has just entrenched itself even more, moved its capital from Rangoon to Pyinmana and continued with its lucrative black market cross border trade in timber, natural gas and rubies. Meanwhile, the people in Myanmar have just grown steadily poorer due to the sanctions with the State Department estimating a loss of 70,000 jobs in the textile sector alone and some other reports estimating total job losses at over 500,000. From State Department reports, incomes have fallen from US$300 to US$225 from 2003 to 2004.

To have the ban lifted, the Act requires that the US Secretary of State consult with the Secretary General of the International Labor Organization and other relevant nongovernmental organizations and report to the appropriate congressional committees that the State Peace and Development Council (SPDC) "no longer systematically violates workers rights, including the use of forced and child labor, and conscription of child-soldiers." The US President must also declare that the SPDC has made "measurable and substantial progress toward implementing a democratic government", and before the US President will do so, the SPDC is required to release all political prisoners, and allow freedom of speech and press freedom, and freedom of association and religion. In addition, the SPDC would have to reach an agreement with the National League of Democracy and other democratic forces in that country, including

Burma's ethnic nationalities, "on the transfer of power to a civilian government accountable to the Burmese people through democratic elections under the rule of law." None of these sweeping objectives appear likely to be achieved.

1. Why then has the US seen fit to renew unilateral trade sanctions that don't work but instead counterproductively improverish the people the sanctions are purportedly aimed at liberating?

2. If this is purely a domestic public relations exercise, why has the domestic constituencies not wisened up to the ineffectiveness of such unilateral sanctions?

3. As Myanmar is a WTO member, these sanctions are obviously MFN inconsistent but can these sanctions be justified under any of the exceptions?

4. Why has Myanmar or other states not bothered with bringing a WTO claim against the US? After all, the EU and Japan brought a claim against the Massachusetts Burma Law back in 1997.

5. Bearing in mind the failure of the Helms-Burton Act, can and should any trade related influence be exerted on the two most important trading states for Myanmar - China and India?

6. If unilateral trade sanctions are not the solution, what should be done? ASEAN's "constructive engagement" has also had little effect on the junta.

7. Could a situation like Myanmar be so politically intractable to render ineffective any external effort to effect political change (short of "regime change"). If so, would it be better to focus on improving the lives of the average Myanmar person via free trade and wait in the hope that Barrington Moore's dictum "no bourgeois, no democracy" is true?

Who Makes Trade Law?: Raising the Bar

No, my previous post wasn't intened as a rhetorical question.  Simply inexperience at using Typepad.  What I meant to post was:

Many recent posts, and much media commentary, have tried to identify the implications of the current impasse in negotiations. There is a rough consensus that failure of negotiations on the multilateral track will likely prompt additional efforts to negotiate regional and bilateral pacts. There is also a rough consensus that Doha’s failure will likely result in more dispute settlement proceedings involving issues that are/were on the negotiating table. Indeed, Simon Lester’s recent post suggests that this development may already be underway.

If the breakdown of negotiations means that panels and the AB will, de facto, assume a larger lawmaking role, perhaps trade scholars should pay increased attention to the participants in this process. To be sure, a growing literature discusses which states litigate and under what circumstances. Others have explored the roles that non-state actors play in supporting Member States in the context of WTO dispute settlement, including the crafting of legal positions and drafting of WTO submissions (see here and here). But another development that has largely escaped attention is the successful effort by a relatively small number of major law firms, primarily based in the U.S., to play important roles in WTO dispute settlement.

According to a recent article in Focus Europe (part of the American Lawyer family), it appears that a small number of large firms have become deeply involved in a number of major disputes. Thus, the article reports, for example, that Wilmer and Sidley are involved in the disputes over Boeing and Airbus subsidies; the GMO dispute; the sugar dispute; and a substantial number of other WTO-related matters. The article raises the question of whether we are seeing the development of a small, elite WTO bar, akin to the small, elite Supreme Court bar, or the even smaller ICJ bar – and, if so, the implications of this development for the WTO dispute system.

Clients involved in trade disputes have good reason, of course, to turn to experienced trade law specialists; and there can be no doubt that elite firms like Wilmer and Sidley possess enormous amounts of expertise, and provide first-rate representation to their clients.

However, we’ve already begun to see some of the potential difficulties posed by the existence of a small trade bar (see post here). But the larger and, I believe, more important issues here concern legal sociology. How does a legal culture – in this case, the WTO’s still evolving legal culture – get produced, received and adopted? What role will repeat-player private attorneys play in this process? And – particularly in light of the political breakdown at the WTO and increased pressures on the dispute system to address issues the political system couldn’t resolve – what are the implications of having ideas and legal theories generated by and filtered through a relatively small set of players? In short, should we worry about a potential cartelization of WTO-related legal practice the same way we would worry about a cartelization of other markets?

Jeff Dunoff

Who Makes Trade Law?

Pacific Expansion

It is a pleasure to welcome two more colleagues to the blog.  Andrew Guzman, professor at Boalt Hall School of Law, is an astute commentator on international regulatory issues, public international law, and international trade law.  In addition to his legal credentials, he holds a doctorate in economics.  Junji Nakagawa is professor at University of Tokyo, and is a leading Japanese expert on trade law, with special reference to international regulatory issues, anti-dumping and development.  (Prof. Nakagawa is visiting at Fletcher this year.)   I look forward very much to contributions from Andrew and Junji.

The Doha Failure and Agriculture Disputes

I've heard a number of people suggest that the Doha failure would lead to an increase in WTO complaints relating to agricultural subsidies.  The theory is that Members were hoping to address their concerns through negotiations, but now dispute settlement is the only option.  It seems that we now have the first evidence to support the theory, just weeks after the latest negotiating setback, as Brazil plans to request an Article 21.5 panel to determine if the U.S. has complied with certain aspects of the ruling in the Cotton case.  Reuters reports:

"Brazil will solicit a new panel at the WTO for the implementation of measures," Mario Mugnaini, executive director of the Brazilian government's foreign trade body, told journalists. "If the U.S. does not make its case, we'll ask for retaliation."

It also notes:

The case gained a higher profile after last month's collapse of the Doha round of global trade talks. Analysts say that without the Doha agreement, legal wrangling between countries will likely rise at the WTO.

Gambling Case In the News

Paul Blustein of the Washington Post has a good article on the Gambling dispute (you might have to register with the Post's site to read it). In it, he discusses Jay Cohen, whose arrest by the U.S. for running an internet gambling site from Antigua and Barbuda triggered the case.  I like the part about how the WTO case originated:

Out of the blue, not long before Cohen entered prison in Nevada, a strange letter arrived. He has since lost it. The writer suggested that the U.S. government's position left it vulnerable to a trade complaint.

"Is there anything to this?" he asked a lawyer friend.

In other news of the case, somebody did a brief interview with Mark Mendel, one of Antigua's lawyers on the case.  In answer to the question, what happens to the U.S. if they don't comply, Mendel answers:

We believe that unless the US makes a decision to ditch the WTO altogether at this time and forget about globalization, the US will ultimately move towards some kind of compliance.  We will be relatively patient yet watchful and protective of our rights by keeping pressure on the US throughout a period of what we expect to be as much delay as they can get out of the WTO system.  We are hopeful that Antigua and the US will at the end of the day reach some kind of accommodation, but Antigua will reserve the right to levy trade sanctions against the US in the future to further encourage the US towards compliance.  Hopefully, it will not come to that.

Incidentally, it looks like Antigua's legal team has set up this site which provides a great deal of documentation on the case.

UPDATE FROM THE BLOGOSPHERE:  They are discussing internet gambling, although not the WTO case, over at the Becker-Posner blog.  Becker states the following in relation to the House Bill cracking down on internet gambling that recently passed:

Supporters of this bill argue that easy access to online gambling is dangerous because it encourages and strengthens gambling addictions. The fact is, however, that gambling is even less addict[ive] than drinking, and is not nearly as addict[ive] as smoking. Moreover, gambling addicts can already find many ways to gamble. The vast majority of online gamblers bet modest sums for pleasure, such as the estimated 23 million Americans who now play online poker (the Pokers Players Alliance, which claims more than 25,000 members, opposed the bill).

Other supporters of a ban on online gambling claim that it is used to launder money obtained from drugs and other illegal activities. The laundering argument against gambling is largely irrelevant, given the many other ways to launder money.

Posner's comments on the issue of internet gambling are here.

FURTHER UPDATE:

Mark Mendel did another interview subsequent to the BetOnSports arrests, in which he notes that the arrests

strengthen our argument that the US laws are protectionist, as the DOJ once again goes after an offshore operator rather than the horseracing sites such as YouBet.com and others that the DOJ claims are illegal. 

New Comments on EC-Biotech

In more peaceful days (just a month ago, in fact), the Hebrew University of Jerusalem hosted a roundtable on the EC-Biotech case. Participants were Rob Howse, Mary Footer, Gareth Davies,Oren Perez, Christiane Conrad and myself. It's a bit odd to publish commentary on a Panel Report before it has been issued, but the papers don't need to be translated into Spanish, so here are the first two, available on the Hebrew University International Law Forum SSRN Research Paper Series.

Gareth Davies of the University of Groningen has written on Morality Clauses and Decision-Making in Situations of Scientific Uncertainty: The Case of GMOs :

Abstract: The WTO dispute over European resistance to importation of GMOs centred on the risks that these might, or might not, present, and their accurate assessment. Academic discussion also emphasises the importance of respecting democratic decision-making within states. This paper argues that neither an emphasis on science nor on democracy offer an adequate explanation of the nature of the dispute or a way to resolve it. The science is inconclusive, and reliance on it leads to empty positions, while democracy arguments are incompatible with binding agreements.

Really, when states disagree about matters like this they are not disagreeing about what they know, but about the proper reaction to not knowing. Differences of opinion about this are rooted in different perceptions of when and why it is justified to take risks, and who should be allowed to do so, which are rooted in turn in perceptions about the relationships and obligations that different persons and institutions have to each other. The best description of these kinds of disagreement is in terms of morality, and so the best form of legal exceptions to rely on are public morality clauses.

This paper considers how such arguments can be accommodated within the framework of the GATT, TBT, and SPS agreements. It suggests that the panel report in the GMO case leaves room for such arguments to be made.

Christiane Conrad of Bern, Bremen and Georgetown wrote about PPMs, the EC-Biotech Dispute and Applicability of the SPS Agreement: Are the Panel's Findings Built on Shaky Ground? :

Absract: Despite striking similarities between processes and production methods (PPMs) and genetic engineering, the EC-Biotech panel report is silent on the points of contention raised in the debate on PPMs. The reason is that in EC-Biotech, the panel decided the dispute based on the SPS Agreement, and not based on the GATT or the TBT Agreement. This decision, if not revoked, may well pre-determine the lines of reasoning along which future disputes on national regulations of biotech products will be decided. In this paper, the author critically analyzes the panel's arguments for applying the SPS Agreement. She detects three fundamental concerns: a) the panel interprets the scope of the SPS Agreement in an overly broad manner; b) it fails to address that the contested measures differ considerably from those in previous SPS disputes, and c) it omits exploring the full meaning of environmental protection and biodiversity. Given these doubts about the applicability of the SPS Agreement to regulations of biotech products, the author sets forth the argument that in this particular situation the rule of the minimum of obligations should be applied. With this rule, it can be determined whether the definitions of SPS measures, which in turn decide on the scope of the SPS Agreement, should be interpreted in a broad or rather a narrow manner. Methodologically, the rule requires a comparison of the substantive disciplines on regulations of biotech products contained in different WTO agreements. The author concludes that given the ambiguity of the scope of the SPS Agreement with respect to measures on biotech products, the agreement with softer disciplines provides a more solid legal basis for decisions in respective international disputes.

Other papers will address the role of science and amicus briefs, burden of proof and norm classification, interpretation and the precautionary principle.

T.

A Requiem for the Doha Round

On July 24, 2006, Pascal Lamy, Director-General of the World Trade Organization (WTO), declared de facto dead the troubled Doha round trade talks which has been conducted since 2001. This news sounds so disappointing in that WTO Members failed to deliver what they have already prepared, and in a sense achieved, for the last five years. The news is also frustrating in that this fiasco is testimonial to such a low level of their commitment to the multilateral trading system which has served them so well since the end of the Second World War.

In fact, the Doha round has already been doomed. The rising tide of nationalism-cum-protectionism in both sides of the Atlantic has recently poisoned the atmosphere for negotiations, and made it hard for negotiators to offer concessions. Pending domestic elections in major Members, such as the U.S., the EU and Japan, have also discouraged politicians to address market opening which is unpopular to some of their critical constituencies.

Under these circumstances, some might argue that we should embrace the reality and forget the multilateral trade talks for the time being. Perhaps, we had better anticipate with patience the day when the U.S. Congress will grant the next turn of fast track authority. The life still goes on. We do have alternative trade fora, namely those bilateral and regional trade blocs.

No matter how plausible this prospect may sound, it gravely underestimates costs of dispensing with the multilateral trading system. Trade liberalization can be analogized as riding a bicycle. You are soon to fall when you stop. Losing a momentum for trade liberalization inflicts irreversible damages to free trade. Moreover, the alleged alternatives, regional blocs, are inferior vehicles for liberalization. They permit numerous exceptions and exemptions to liberalization. Powerful countries can exploit the powerless more easily in regional deals than multilateral ones. Proliferating blocs eventually fragment and complicate global trade, thereby raising transaction costs for global enterprises.

More seriously, the demise of the Doha "Development" Round is a bad omen to the world’s poor. The collapse of the development round tends to turn the rich’s hitherto bombastic pledge for development aids a sheer hypocrisy. How could we improve the global peace and security when our poor neighbors are still in abject poverty? How could the poor get out of such poverty while they cannot sell their sole products, such as sugar, cottons and clothing, to the rich’s markets?

The U.S. has also lost handsomely in this debacle. The balance sheet of a successful Doha round speaks in favor of the U.S. economy in general. It means cheaper foods and cars as well as more jobs and incomes. Yet, special interests of those protectionists have prevailed, once again. This economic factionism is exactly what James Madison warned two hundred years ago.

Moreover, the U.S. has also blown out great opportunities to exercise its global leadership, especially in the wake of the war on terrorism. A successful development round led by the U.S. would have sent a strong signal to the international community that the U.S. truly cares for the world’s poor and is firmly committed to their welfare. This would have earned the U.S. more allies, and friends.

Of course, all politics is local. One could not anticipate politicians to risk their imminent local elections over such grand causes as national economy and global security. However, costs and pains from this myopic protectionism will remain national and international, with duration. A requiem for the Doha round should be sung both in the U.S. and Geneva.