New trade machete

Rich country services deal looks worth the effort

A rich country trade deal on services looks worth the effort. With the Doha Round of global trade negotiations stymied and bilateral agreements proliferating, a multilateral services deal among an initial group of 20 mostly rich countries could cover a lot of trade - and address numerous knotty problems. Even without the BRICs, it would fight creeping protectionism and should bring big returns. The intention to open negotiations was announced by US Trade Representative Ron Kirk on January 15.

The global services trade - including travel, financial, business, professional and technical services as well as royalties and license fees - totaled $4.24 trillion (exports plus imports) in 2011, according to the United Nations Conference on Trade and Development. That represented 19 percent of all cross-border trade in goods and services, a proportion that has been steady for a decade.

Ideally, all global trade would be liberalized. However the Doha Round, which was supposed to make progress in that direction, has achieved little since negotiations opened in 2001 and none at all since 2008. A global services accord is unlikely, since Brazil, Russia and China are unwilling to engage in trade talks covering only services.

The group now entering into negotiations thus consists primarily of rich countries, plus such poorer nations as Colombia and Chile, which already have free trade agreements with the United States. However with the EU and Japan at the table, two-thirds of services trade is covered. The Peterson Institute has estimated that tradable business services remain five times less likely to be exported than manufactured products, so a deal which reduced that disparity could produce major trading and economic gains.

Free trade negotiations need to be continuous; if they stop, protectionist barriers grow like kudzu vines. These negotiations should keep the weeds from proliferating, and potentially add to global economic welfare.