Doha: Round We Go?
Thomas Hobbes described life in the state of nature as “nasty, brutish and short.” In contrast, trade rounds at the World Trade Organization – in which all members participate, and in which no part of the negotiations can be ratified until the whole package is agreed to – are rather civilized, and brutally long.
The last trade round lasted almost eight years. The current Doha Round began in November 2001, spurred in part by the interest to show global economic solidarity in the wake of the 9/11 attacks. The Doha Round is still ongoing eight years later, with no clear end in sight. Is the time of negotiators, not to mention the budget required to fund ongoing negotiating conferences, worth the ultimate benefits and the opportunity cost?
On one hand, it could be argued that trade rounds may take a long time, but involve a big pay-off. The Uruguay Round outcome included significant tariff cuts and the expansion of trade liberalization to new areas, key among them services. The dispute settlement mechanism was streamlined and strengthened. The outcome was so comprehensive that members decided to create a new organization, the WTO, to encompass the agreement.
While studies vary, it is estimated that the Uruguay Round provided gains to the world economy of around US $200 billion annually. The Doha Round could also produce significant benefits. Kym Anderson, an Australian economist who also works for the World Bank, has calculated that the global economic gains from a comprehensive result to the Doha Round could be upwards of US $120 billion annually, with $17 billion going to the world’s poorest countries. An even more ambitious result – ending agricultural tariffs, subsidies and domestic support programmes – would boost global welfare by nearly US $300 billion per year by 2015. Such an outcome would mean that entrepreneurs would have access to more markets, consumers would have more choices, and millions would see their standard of living rise. A big pay-off indeed.
Despite these benefits, trade rounds have been criticized. Chief among the complaints is that, given the asymmetrical power of the US and the EU, their interests skew the results of the negotiations, leading to unbalanced outcomes. Their domestic agricultural subsidies were untouched by the Uruguay Round, and are antithetical to the core purpose of the WTO – namely, opening markets and promoting transparency.
To address this imbalance of power, developing countries have formed coalitions in the Doha Round to express their interests more effectively. Large and significant economies, such as Brazil, India and China, are at the heart of the G20 coalition of developing countries. They have refused offers from US negotiators (under the last US administration) to cap domestic subsidies, and are calling for deeper cuts.
Indeed, developing countries feel that the commitments and obligations of the Uruguay Round have yet to be implemented, especially with regard to trade in agricultural products. The domestic subsidies, import duties and preferential trading arrangements of developed countries have resulted in trade distortions with damning consequences for developing countries, blocking competitive producers out of valuable markets. Other commodities – such as cotton and bananas – have remained sheltered from competition due to the way that the Uruguay Round result was structured, and developing countries want to see these included in any new package.
That said, time spent on the Doha Round also means that the negotiators and the global policy community – international institutions, business associations, academics, think tanks – that provides the intellectual support for the negotiations are being eaten up with no clear end to this round in sight. The Doha Round has now lasted as long as it took to conclude the Uruguay Round, and member states are still far apart on the critical issue of agriculture. This has led some to call for a simplification to the goals of the round, although a comprehensive deal is what holds the most value for producers and consumers alike.
Just how much time are we talking about to conclude the round? The Director-General of the WTO, former EU Trade Commissioner Pascal Lamy, hopes that they may conclude next year. However, given the large number of participants and the complex agenda of the round, and where we are in the political and economic cycle – with a new administration in the White House that does not hold Fast Track authority, and in the midst of a global economic recession – it could take several years before we see the end of the Doha Round.
No one wants the world to fall off the bicycle of trade liberalization – no matter how slowly it rides forward. But until it appears that a deal on agricultural subsidies is ripe, WTO members should give thought to other ways that the talent and energy of their negotiators and the WTO Secretariat could be used.
Here are some compelling options.
First, members should look for ways to unilaterally liberalize trade. This is the most cost- and time-effective way for an individual nation to benefit from open markets. Canada, for instance, recently eliminated import tariffs on machinery and equipment – a move that will save businesses hundreds of millions of dollars. WTO members – developed and developing alike – could look for ways to reduce barriers unilaterally on products of interest to developing countries – especially agricultural products, where barriers remain. While no trade negotiator likes to give up his or her chips, such actions would make economic sense, in addition to being a sign of ‘good faith’ in the development aims of the Doha Round.
Continuing on the development theme, the WTO Secretariat and national experts could, if invited by developing nations, direct some of their skills toward providing the initial administrative resources for regional free trade agreements. As Dambisa Moyo has pointed out in her book Dead Aid, free trade areas and single currency zones could harness the purchasing power of large African regions, also making them attractive places to invest. This work could be started now, and does not need to wait for the conclusion to the Doha Round.
WTO members could also cast their eyes to the parts of the globe where states have not yet joined the organization. One region stands out in this regard – the Middle East. Countries such as Iran, Iraq and Yemen are all in the process of acceding to the WTO, but this is a notoriously slow process that takes years to conclude. The Russian Federation, too, is absent from the WTO. The energy of trade negotiators could be spent demonstrating the importance of trade liberalization to these states and concluding their accessions – not least so that they may be more deeply woven into the fabric of mutual benefit that is at the heart of global commerce.
Finally, the surveillance and review of domestic policies could be increased by the WTO Secretariat. The Trade Policy Review Mechanism of the WTO allows for biannual reviews of the largest economies. The review cycle could be sped up for all members, given the protectionist pressures on governments brought about by the current economic conditions. (Note: World merchandise trade is expected to contract by 10 percent in 2009, and foreign direct investment flows could plummet by as much as 40 percent, according to a recent study by the WTO, OECD and UNCTAD. This same study assessed that there has been “policy slippage” in the G20, leading to the reintroduction of protectionist measures. Barriers such as domestic purchase requirements in various stimulus packages, and escalating tensions between the US and China, could mushroom should unemployment continue to rise.) The WTO should use every opportunity to keep the spotlight on protectionist measures which threaten current trading relationships.
There are many other ways that the energy of trade negotiators and the expertise of the WTO Secretariat could be used, including finding a way to better reconcile environmental goals with trade policy. However, ensuring that the economic fortunes of developing countries improve – integrating missing states into the global rules-based system and avoiding protectionist back-sliding – are paramount.
Negotiators will, of course, continue to work on the Doha Round, but the opportunity costs of the continued preoccupation with the negotiations per se is worth considering. At the end of the day, an ambitious result to the Doha Round is the only result that will satisfy WTO member countries, and justify the time and energy spent on the round.
Bela Balassa likened trade liberalization to draining a swamp. As the water level – in this case, barriers to trade – lowers, the detritus under the surface comes to light. Trade negotiations therefore get harder and harder to conclude as the protectionist policies left to eliminate are more entrenched. The WTO and Doha Round negotiators find themselves in even uglier circumstances given the global economic climate. This nastiness should not blunt the determination to press forward, in any and all ways possible.
Ailish Johnson was a member of the Canadian WTO negotiating team from 2002 to 2006. She lectures at the Norman Paterson School of International Affairs (NPSIA), Carleton University.