Global Insight Perspective | |
Significance | World Trade Organization (WTO) director general Pascal Lamy formally suspended emergency talks on the Doha Round yesterday, declaring that there was no way out of the impasse. The Round was intended as a major stride towards global free trade, and a spur to the poorest countries' development. |
Implications | Idealistic goals were predictably replaced by acrimonious horse-trading among the most powerful trading nations, and with concessions falling short of expectations there was growing disillusion on all sides about the Round. Nonetheless, there was still hope that a deal could be secured, and failure has provoked accusations from all sides. |
Outlook | The Doha Round could conceivably be revived, but the prospects are poor with fast-track negotiation authority soon to expire in the United States. The failure also represents a challenge to the credibility and agenda of the WTO itself. Efforts to launch a rebadged Doha Round are likely in the medium term, but key states such as the United States and France would have to make politically difficult decisions on agriculture. |
Dead End
Six leading trading powers (Australia, Brazil, the European Union, India, Japan and the United States) yesterday emerged from two days of talks in Geneva, Switzerland, to confirm what most suspected—the Doha Round is all but dead. The negotiations were suspended by World Trade Organization (WTO) director general Pascal Lamy, who declared that he had given up trying to persuade wealthy nations to accept deep agricultural reforms. The European Union (EU) reportedly made new concessions, but the United States and others argued that these did not go far enough for them to reveal new concessions of their own. Developing nations insisted that rich countries must lower agricultural barriers before they offered wider access to their own markets. With such a wide-ranging deal on the table there were numerous different strands of disagreement, but in the end it boiled down to how far the United States and EU were prepared to compromise. Only when they had offered sufficient concessions could the details of what other nations would offer in return be hammered out. Watching from the sidelines were the least developed countries, who could offer little in the way of concessions themselves, but who stood to benefit from special treatment. The World Bank had argued that the Doha Round was critical to alleviating suffering and poverty in these countries.
This is not the first time that Doha Round talks have broken up with no agreement, but this time there is an important difference—the U.S. president's "fast-track" Trade Promotion Authority (TPA) has effectively expired. This was originally granted by Congress only after a major political struggle and needs to be extended come 1 July 2007. Without agreement on Doha now there is effectively no time to conclude within this deadline. An extension of the TPA looks very unlikely given greater protectionist sentiment in Congress and the weakened political control of the presidency. If the Doha Round was concluded without the TPA in place, members of Congress could unpick its provisions one by one to favour their special interests. With a TPA in place Congress has to approve or reject the deal in its complete form.
Embarrassment for Leaders
While many leaders' enthusiasm for Doha was sometimes in doubt, it has been a major plank of their diplomatic and economic agenda. Group-of-Eight (G8) leaders met in Russia last week and gave their strong backing, only for their negotiators to reach an impasse days later. U.S. President George W. Bush has been looking for some international successes to trumpet, but now faces more awkward questions about his foreign policy agenda and tactics. The EU is meanwhile left to lick its wounds after ferocious internal disagreements. There is a wide gap between states over agricultural protectionism—France has fiercely resisted concessions advocated by the European Commission and various northern member states. After the failure to ratify a new European Union constitution, the failure of Doha raises renewed questions over the momentum of European integration.
A Silver Lining?
Nevertheless, before one sinks too far into despondency, there are many who argue that Doha deserved to die. These include many campaigners for the poorest countries who argue that, in reality, the Round had little to do with development and that it would always be weighted in the interests of the richest nations. Greater access for wealthy nations to developing economies would arguably undermine local businesses and farmers, and the concessions offered in return would have little relevance to the worse-off. Others argue that such an ambitious and all-inclusive Round was never realistic. The United States said it strongly supported the Round, but at the same time it has pursued a string of bilateral and regional free-trade agreements (FTAs). These are much easier to negotiate and many believe these are realistically the future of trade diplomacy. Opponents of this strategy argue that FTA negotiations are too lopsided in favour of the wealthier states and that the poorest countries are last in the queue.
Where Does the WTO Go Next?
The collapse of the talks is inevitably a major blow to the prestige and purpose of the WTO. It was founded in 1995 on the back of the successful conclusion of the Uruguay Round, and ever since the Doha Round (and the prior build-up) has been a central preoccupation. It has strongly argued that a comprehensive trade deal is far preferable to a web of uneven bilateral treaties.
It is much too early to write off the organisation, however. It remains a potent arbiter in international trade disputes, and fears that the United States might increasingly ignore it have been allayed. The United States publicly backed the WTO yesterday and did not rule out trying to revive Doha. The climate in Congress may even improve sufficiently to see a new TPA through. Neither was the French government celebrating the apparent demise of Doha. It cautioned that previous Rounds were written off prematurely and that the deal could make a comeback. Even without Doha (or a rebadged successor) it seems the WTO is sufficiently entrenched in the global economic system. Governments recognise the importance of trade to their economies, and despite the political deadlock flows have continued to rise year after year. Merchandise exports increased to US$9.12 trillion in 2004 from US$6.45 trillion in 2000.
Outlook and Implications
The apparent demise of Doha thus evokes mixed emotions. The theoretical benefits of a single multilateral deal that takes into account the interests of the poorest countries are clear, but the realities would have been messy and would arguably have failed to live up to the "Development Agenda". It is a shame to see so many years of negotiation apparently wasted, but on the upside key countries have become willing to countenance substantial concessions. Indeed, the preliminary deal agreed in Hong Kong in December 2005 would have seen rich nations eliminate all of their farm export subsidies by 2013 and allow quota and tariff-free imports from the least-developed countries. The discussions have also highlighted the fact that all developing countries cannot be lumped together. The interests of fast-developing countries such as China, India and Brazil are often at odds with those of the least-developed countries. Finally, the debate over Doha has drawn global attention to the trade distortions currently in place and the damage they do. The failure of the talks means the protectionism is not going to be dismantled in the near future, but there is much wider recognition that this situation cannot continue indefinitely.