Farm trade, President Bush and your wallet
If global trade talks collapse, Americans could eventually see higher prices for everything from cars to rice to shoes.
NEW YORK (CNNMoney.com) -- The United States and its key trading partners like the European Union, India and Brazil are scurrying to reach a worldwide deal in the next few months to boost trade in farm and industrial goods.
Why should you care? Because trillions of dollars in cross-border trade are at stake between the United States and its 115 trading partners.
And if these negotiations fail - again - trade experts warn that could ultimately mean higher prices for groceries, clothes, shoes and hundreds of other items for millions of Americans.
"If the talks break down completely, Americans won't see an overnight increase in product prices but it will certainly happen over time," cautioned Daniel Griswold, director of the Cato Institute's Center for Trade Policy Studies.
Dubbed the "Doha Round," the global trade talks through the World Trade Organization (WTO) have been going on for the past five years amid much wrangling between the United States, the European Union nations and other countries.
The talks collapsed last July but were revived again in January. While China wasn't part of that original group since it wasn't yet part of the WTO, experts said America's second-largest trading partner has since become an active participant in the discussions.
Moreover, analysts said, the clock is ticking for the Bush administration to get a breakthrough this time before the July 1 expiration of the so-called "fast-track" authority that allows the president to speed trade deals through Congress for a yea or nay vote without considering any amendments.
Without it, Griswold said other countries lose the incentive to hammer out trade deals with Washington because of concerns that Congress would alter the agreements. In other words, the fast-track provision and the trade talks are intertwined. "You can't have one without the other," he said.
The United States wants to boost exports of homemade goods from ball bearings to shoes, from corn to financial services. Major trading partners like the EU, India and other countries also want greater access to U.S. food and other markets. But they're unwilling, in the eyes of the American negotiators, to open up their markets to U.S. firms.
This isn't only about farming
Although an agreement on agriculture is critical for the negotiations to succeed, Griswold said there's much more at stake than haggling over prices for farm products.
"It's a perversity to think that the Doha trade talks are just about agricultural products. They're not," he said, adding that an agreement on farm trade would become a catalyst to easing trade restrictions in manufactured goods and services as well.
Said Griswold, "The world economy is less productive than it should be. U.S. companies don't sell as much abroad because of [trade] tariffs and barriers."
To his point, the U.S. trade deficit last year jumped 6.5 percent to a record $763.6 billion as Americans' appetite for foreign-made goods again outpaced exports of homemade goods.
Some economists argue that the deepening deficit is a drag on the country's economic growth since surging imports displace domestic production - and jobs. According to the Labor Department, the United States has lost nearly 3.5 million manufacturing jobs since 1998.
If the Doha talks fail, it doesn't only mean that more barriers are likely to go up - but also that existing ones won't come down. That becomes a one-two punch for U.S. consumers and producers.
"Consumers will continue to pay prices higher than they should on imported products like sugar, rice, clothing, footwear and cars, and manufacturers will lose out on market opportunity abroad," Griswold said.
Nariman Behravesh, chief economist with Global Insight, an economic and financial forecasting firm, agreed. "It's the equivalent of throwing sand in the gear and slowing down the process of globalization," said Behravesh.
'In general, opening up trade lowers prices and gives people savings that they wouldn't have had otherwise," said Behravesh. On the export side, trade limitations also mean lost sales and jobs for manufacturers.
It's not surprising that industries with skin in the game, such as U.S. food producers, restaurants, distributors and suppliers, are banding together in support of free trade proposals.
One such example is the the Food Trade Alliance (FTA), a coalition backed by Yum! Brands (Charts), which operates Taco Bell, KFC and Pizza Hut chains.
Griswold said trade barriers have become a prickly issue for U.S. fast-food companies such as McDonald's (Charts), Pizza Hut and others who are rushing to to expand overseas as their own home markets become more saturated.
For now, both Griswold and Behravesh said they're not so optimistic that the trading powers can broker a deal in the days ahead.
"The EU is not in a mood to open up their markets any more than they already have," Griswold said. "India is dragging its feet and Congress is not in the mood to give concessions on global trade. The ingredients are just not there for success."
Said Behravesh, "A lot has to happen fairly quickly but no one wants to be the first to make the big move. Is a breakthrough possible? Yes, but the stars are aligning against it again."
But Sean Spicer, spokesman for the U.S. Trade Representative's Office, said the agency remains hopeful.
"We're keeping our fingers crossed that we get a deal in hand in coming months. We're staying focused on the positive because if the talks fail, it will be a big letdown for our workers, farmers and consumers," Spicer said.
The Food Trade Alliance could not immediately be reached for comment.
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