November 21, 2005

The Saudis Slip In Silently (to the WTO)

The big news is often in the silence. that was certainly true in the case of Saudi Arabia's quiet entry into the World Trade Organization. Last week trade ambassadors in Geneva blessed the move, which will be made official at the upcoming summit in Hong Kong.

Yet there have been few headlines and little public debate about the linkup between the world's most important multilateral organization and a country that possesses 25 percent of the global oil reserves, greatly influences the price of the Earth's most important natural resource and affects the trade balance of virtually every country. Could it be that trade negotiators tried to bury serious flaws in this process? It sure looks that way. At the least, some big issues should have received more attention by the U.S. Congress and others.

Saudi Arabia is also the linchpin of the world's most important cartel—OPEC. Whether you think this club of oil exporters has been a force for price moderation or for gouging consumer nations, there is no doubt that OPEC's mission is to allocate export quotas among its members and thereby control prices. Such behavior would be considered an illegal conspiracy within the United States or Europe. In the past, Washington has at least tried to use its antitrust policies to break up cartels in such areas as vitamins, uranium and glass.

But the U.S. and other governments have given OPEC a free pass on its anticompetitive behavior for decades, and there is no record that they even tried to use the WTO negotiations to loosen the cartel's stranglehold.

The United States and the EU didn't have to take a sledgehammer to Riyadh before granting it WTO membership. Given that Saudi Arabia is in the middle of a political earthquake zone, I can understand why too much pressure to change its economic structure right now could have been ill advised. But Washington and Brussels could have demanded liberalizing economic changes that would unfold over the long term, thereby laying down markers to which they could eventually return, and giving all WTO members the political cover to keep pressing Saudi Arabia to open up its system. Instead they chickened out and made a mockery of their professed support for an increasingly open world economy. No wonder they kept the talks below the radar screen.

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