The Center for International Relations has organised an International Affairs Forum on the future of world trade. They ask:
In the wake of the failure of the Doha round, what does the future hold
for world trade? What can, and should be done to get negotiations back
on track?
My reply follows. To read the other contributors’ answers, click here.
In the short term, the failure of the Doha Round will make
little difference: the global economy is booming, and with it world
trade. Optimists suggest that talks may resume soon after the US’s
Congressional elections in November and that little lasting harm may be
done. I hope they are right, but unfortunately that rosy scenario is
highly improbable. The Round is unlikely to resume in earnest until a
new US president is in office – and who knows when a deal may finally
be concluded. In the meanwhile, the multiateral trading system may be
stretched to breaking point.
Let me explain. Twelve years have elapsed since the Uruguay Round
was completed and since then the WTO has staggered from one failed
meeting to another: Seattle, Cancún, Hong Kong and now Geneva. The only
exception to this dismal run of failure is the Doha launch in the
immediate aftermath of 9/11, when circumstances were truly exceptional.
Perhaps the system is broken. The world economy is booming and yet a
Doha deal remains elusive. If a deal can’t be done when the going is
good, perhaps it can’t be done at all.
Next year hardly looks promising: President Bush is set to lose his
"fast-track" power to push through trade deals without Congress
unpicking them, precluding US negotiators from striking a credible
bargain with other WTO members; a new farm bill that could entrench
America’s contentious subsidies is in the offing; and an economic
downturn could sharpen fears about trade-related job losses.
But if the round remains on ice for too long, the WTO risks being
sidelined, with the benefits of global competition, multilateral rules
and impartial adjudication giving way to tit-for-tat protectionism and
a web of bilateral arrangements that privilege rich country companies
at the expense of the poor.
Already, the EU is looking to conclude bilateral trade deals with
countries in Asia, while the US pursues its own bilateral agenda with
renewed vigour. These misnamed "free-trade agreements" risk tying the
world economy up in knots: how are companies supposed to build an
efficient global supply chain if a tangled web of rules-of-origin requirements and other fiendishly complicated protectionist rules distort their operations?
What needs to be done to get the Doha show back on the road? The EU
needs to agree to bigger cuts in its farm tariffs, the US needs to
make a better offer on agricultural subsidies, and big developing
countries, notably India, need to show greater willingness to open up
their industrial and service sectors. It isn’t rocket science, and it
is in each country’s best interest, but overcoming entrenched political
opposition to liberalisation is not easy.
Perhaps the protectionist
fallout from a global downturn will scare WTO members to act; or
perhaps it will take the prospect of the US losing faith in the WTO,
the only multilateral institution which it still wholeheartedly
supports, to bring Europe, Japan, India and other recalcitrants back to
the negotiating table.