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Korean Rice Farmers in Hong Kong
Korean farmers jumping into the murky waters of Hong Kong harbor in defense of their rice may be my most lasting image from the 2005 World Trade Organization summit.

The futile attempt of those protesters to swim to the WTO meeting site was indeed bizarre, compelling me to track down one of them and ask: what were you thinking?

``We needed a creative way to get our message across,'' said Han Do Sook, a 40-year-old rice farmer. ``I don't even swim, but I thought it was worth the risk.''

Han's determination to keep foreign rice out of Korea may seem excessive. After all, what's the big deal? Well, telling Koreans to eat foreign rice is like asking Italians to drink boxed wine or Spaniards to eat canned ham.

``Rice has the spirit of the Korean people in it,'' said Lee Ha Young, a 48-year-old farmer holding a photo of a fellow rice protester who killed himself during a demonstration at the WTO talks in Cancun, Mexico in 2003. ``I believe rice is the essence of Korean life and free trade hurts that life.''

There also were protests of the opposite kind in Hong Kong, by pro-trade activists conjuring the spirit of author Ayn Rand, a champion of laissez-faire capitalism. One group, borrowing an image from Pink Floyd's album ``The Wall,'' had participants smash through a wall of cardboard boxes to symbolize the breaking of trade barriers.

``We have to put on a little circus,'' said Andrew Work, executive director at the Lion Rock Institute, a Hong Kong-based free-trade policy think tank. ``We figure that sometimes you have to add a bit of dramatic elements to get people's attention.''

It's the Imbalances, Stupid

Yet neither side made a dent in the WTO negotiations, perhaps because all were focused on the symptoms of the ailing global economy rather than its underlying sickness -- imbalances that make sweeping trade deals all but impossible.

``The main problems that undermine the prospects for a successful Doha round lie outside the negotiations themselves,'' said Fred Bergsten, a former U.S. Treasury undersecretary who's now head of the Institute for International Economics.

The WTO talks that ended yesterday weren't the disaster that the Cancun negotiations were. But then, neither did they achieve negotiators' hoped-for acceleration of trade liberalization. The Hong Kong round ended more or less with pledges to keep the current round of talks alive until their mid-2006 deadline.

In a recent Foreign Affairs article, Bergsten highlighted three factors damaging prospects for a trade deal that would genuinely help the world's poor: massive current-account imbalances and currency misalignments that push trade politics toward protectionism; strong and growing anti-globalization sentiment; the absence of compelling reasons for leaders in reluctant countries to make trade concessions.

Poisonous Politics

The second and third factors are clear enough; the first is worth exploring further. Even as the U.S. must attract $2.1 billion a day from overseas investors to fund the deficit in its current account -- and has a record budget deficit -- the dollar gained nearly 13 percent against the Japanese yen this year.

Why does that matter?

``The history of U.S. trade policy amply demonstrates that dollar overvaluation and the huge and growing trade deficits that it spawns are by far the most accurate predictors of U.S. protectionism,'' Bergsten explained.

When currency misalignments provide sizeable advantages to competitors, industries look to government for relief. And when a nation's goods and services are priced out of global markets, politicians lose the urge to fight for free trade. In the 1980s, as Japan benefited from an overvalued dollar, the U.S. moved toward protectionism. Today, it's China in the sights of Congress.

Hong Kong's Shortcomings

Even with the U.S. jobless rate relatively low at 5 percent, politicians are threatening trade sanctions against China, a far- from-affluent nation. Politically poisonous imbalances make the White House less inclined to scrap trade-distorting subsidies. Europe faces similar pressures thanks to the strong euro.

Sweeping trade deals won't happen without a political will that will never emerge while the U.S. swims in debt and deficits, Europe's economies walk in place and Japan joins both in subsidizing farmers.

All this explains why it's hard to get excited about the six days of talks in Hong Kong, even after a European Union pledge to scrap export payments for farm goods by 2013. Averting a trade meeting failure is a far cry from equalizing the global economic system to help poor nations that need more market access to the rich world.

Brazil and other developing nations have gotten wise to how developed economies protect their own turf, refusing to correct the imbalances that put the global financial system at risk.

Don't look to the WTO for clues to why global trade hobbles instead of sprinting. The pace won't pick up until governments get their own economies in order.
MGR Archive 20.12.2005
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