William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.

On March 31, the World Trade Organization missed its deadline for reaching a consensus on cuts in agricultural tariffs.  Efforts to promote more open farm trade have been the major focus of the new Doha Round of WTO talks.

The WTO's failure to meet the deadline is due to differences of opinion between exporters of farm products, including the United States and Australia -- which are seeking to export more agricultural goods -- and a second group, including Japan and France, that wants to protect their domestic agricultural industries.

Under the ongoing trade talks, the WTO members are also seeking to reach a consensus about cuts in tariffs on nonagricultural products in May, including mining and manufacturing goods.  In September, the 144 WTO member countries are scheduled to meet for ministerial talks in Mexico to discuss the broader agenda of items which are to be negotiated by January 2005.  However, the WTO's failure to establish a consensus in the agricultural sector could cascade into a fatal blow to the entire round.

The term consensus is used again and again because that is the basis for WTO negotiations, a process that seeks unanimous consent based on a shared vision of the world.  It is also the reason the Doha Round will likely fail.  In the harsh world of international politics, there can be very little expectation of consensus when the stakes are high and vital interests are in peril.  This has long been observed at the misnamed United Nations, where the debate over Iraq provided a new and vivid example of discord among the major powers.  It should not be surprising for the same behavior to be seen at the WTO.  The naive notion of ?free trade? theory, that a liberal economic order is a win-win situation for all concerned, has never been accepted by the states and industry groups who are actually affected by the cut-throat nature of global competition.

Agriculture has become the most obvious case because those who work the land are tied to particular nation-states.  In an op-ed in the April 1 Financial Times, Franz Fischler, the European Union agriculture commissioner and Pascal Lamy, the EU trade commissioner, argued that "for societies from Mauritius to Malta, from Bangladesh to Sri Lanka, from South Korea to Sweden, farming also concerns the environment, food safety, safeguarding the food supply and protecting the rural way of life. Strong exporting countries flatly refuse to accept these concerns, conveniently ignoring the Doha declaration, which clearly states that they have to be taken into account."  They might well have included China, India, and Japan in their list of countries opposed to trade liberalization for the simple reason that it is not considered to be in their national or societal interests.

The same logic applies, of course, to other sectors such as energy and strategic industries. A wild decade of globalization has brought home to a growing number of policy-makers a painful lesson. It is irresponsible for national leaders to allow the international distribution of economic assets to be determined by private actors whose petty calculations are done without regard to the larger needs of societies struggling to stay afloat in a stormy sea of global intrigue.

This is not to say that trade does not generate benefits or that private enterprise is not the most efficient way to carry out economic tasks.  What it does say is that governments are legitimately seeking ways to guide the workings of the market.  Even the great laissez-faire economist Milton Friedman has conceded that while the only social responsibility of business is "to increase its profits so long as it stays within the rules of the game...[it] is the responsibility of the rest of us to establish a framework of law? that creates and enforces the rules of the game.  Friedman has spent his life arguing that the rules should be very few, but he cannot deny the principle of a higher authority.

The WTO was meant to be a rules-creating institution, but it is becoming increasingly clear that it cannot perform this task on the basis of a global consensus. Meanwhile, its dispute settlement panels seem bent on destroying all rules in an anarchical ideological frenzy against all national policy-making.

As an alternative to the WTO, governments are forming their own "coalitions of the willing" in preferential trade agreements and regional trade blocs.  This allows negotiators to reach agreement on those matters were there is a basis for mutual gain and where the scope is small enough to allow more control over events.  Some 200 preferential trade agreements have been signed, and the number is increasing.

This trend has thrown "free trade" purists into confusion.  They have never understood why people do not surrender their fates en masse to "the market" or why their academic theories about economic efficiency have such limited appeal.

An example of how far this confusion has spread was presented by Jagdish Bhagwati, a economics professor at Columbia University who has long been one of the most influential advocates of free trade. He was testifying before the House Financial Services Committee on the proposed U.S. trade agreements with Singapore and Chile.  He opened his statement by denouncing the idea of preferential trade agreements in general as a threat to global free trade, trotting out the usual claims of academic theory.  Bhagwati then criticized these two agreements in particular because they require that  garments ands textiles must use American fabric if they are to qualify for the preferential entry into the American market.  That the United States can negotiate from a position of strength in bilateral talks with smaller nations was also disturbing to Bhagwati.

But then he shifted to a different topic, denouncing the agreements because they seek to block the use of capital controls.  Bhagwati is all for the unrestricted movement of goods, but not for the unrestricted movement of capital because it could be harmful to the economic stability of nations.

He argued that governments "must be allowed the freedom to exercise their discretion and use capital controls (or taxes).  Here, again, there seems to be a sound body of opinion that Malaysia did well to use capital controls as noted by many economists at the time" during the 1997 Asian financial crisis.  Among the economists he cites favorably is Dani Rodrik of The Kennedy School at Harvard -- whom he had denounced at the opening of his testimony as a "populist opponent of free trade."

But then, Bhagwati had also earlier referred to Pascal Lamy as "the articulate and intellectually exciting Frenchman" despite the fact that by training Lamy is a socialist and in policy a protectionist.

The 21st century is quickly dispelling many of the illusions of the 1990s.  The proper standard for trade agreements is not whether they are in line with some airy doctrine whose adherents are in disarray, but whether they confer to the nation an economic advantage in some very practical fashion.

---