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Doha Collapse Presents Some Interesting Considerations

With the Olympics in full swing, countries like China somehow seem more real. I've never been to China, India, or even Russia, and my understanding

With the Olympics in full swing, countries like China somehow seem more real. I've never been to China, India, or even Russia, and my understanding of those countries is so elementary that I probably shouldn't use the word "understanding" at all.

America is such a large and dynamic country that, for most of us, the rest of the world is often seen as either a potential war zone or a vacation spot. And, at the same time, we all understand the transformation that is taking place as our economy increasingly becomes global in nature.

The geopolitical ramifications, especially as it relates to oil, are simply too big to ignore. A great example of this is Russia, which has been able to retreat from democracy and reassert its influence over Eastern Europe using the riches that oil has brought it.

Its latest invasion of Georgia, while universally condemned, has been greeted with little more than outrage. The reality is the U.S. has very little leverage over Russia, as it doesn't need our dollars to prop up its economy anymore. Meanwhile, Europe is reliant upon Russia for its natural gas and oil, and can't risk making it angry.

A global economy intertwining with a myriad of national-security interests has made things more complicated than ever. So it’s not surprising that almost every country has grave concerns about trade as it relates to their future.

At the same time, isolationism and protectionism are no longer a realistic alternative. Just seven weeks ago, everyone was surprised to hear that the Doha talks were again moving forward and that the ag issues had been resolved. Few were surprised with the latest pronouncements that once again the Doha talks were dead.

Ironically, China and India had agreed to lower their tariffs on industrial goods, with the U.S. and EU doing the same on agricultural products, only to see the compromise collapse as India and China sought to protect what they consider to be vital ag products. At this point, the talks are unlikely to be resurrected until after the November elections.

While everyone agrees that bilateral agreements, while preferable to no agreements, aren’t as efficient as broader global agreements, they continue to be far more likely to be reached. During the last seven years while Doha negotiations have languished, global trade flows have increased by 70% to $14 trillion. The U.S. remains the world's dominant player accounting for just less than 1/3 of that, or $4 trillion in 2007.

The question is: if a large, far-reaching agreement involving a large number of countries is unattainable, will the U.S. be proactive in establishing smaller groups that provide U.S. producers/businesses with wide-ranging access and competitive advantages? Or will we continue to prevent action on these smaller agreements?

It’s unlikely that any single agreement between countries will create the opportunity for significant change. Meanwhile, the world is watching to see what direction America will take. Do we plan to be a leader in the global economy moving forward or will we continue to retreat into our own borders?

The implications are significant for ag and the economy, in general. Perhaps it’s not surprising that Doha failed. We don't have a consensus in America on the subject of foreign trade, either.