From Nairobi to Confidence Building Measures in Geneva

14 December 2015

The major developed economies, whatever they may say in public about it, have by now lost interest in pursuing the WTO Round (aka the Doha Development Agenda (DDA)) in its present form anymore.

It is perhaps less clear with developing countries. Certainly a very large number at least say that they are committed to it and still want it to proceed. Is that serious or tactical?

It makes little practical difference, because the major developed economies at least have moved on.

Primarily to bilateral or regional free trade agreements. Secondarily to plurilateral agreements. The two so-called mega-regionals (TPP and TTIP, not forgetting the Japan-EU FTA) represent a qualitative and a quantitative shift in that regard.

This is a situation that is a million miles away from the situation at the commencement of Doha. It is a million miles away even from the situation that prevailed at the decisive breakdown of the DDA in 2008.

Up to that point, the only real negotiating forum for the three to negotiate trade with each other was the WTO. It had always been like that.

That is over.

There is nothing complicated about what it means for the DDA. It is very simple. It means that those economies simply don’t rate a WTO round anymore.

Just restricting it to market access alone, the FTA model works on the serious premise that the participants go to zero. Sure, there are exceptions and there are phase-ins. And some of the former are egregious.

But let’s not kid ourselves: these liberalisation outcomes are light years away in their scope and depth from anything that was even dreamt of multilaterally, let alone what ended up in the Agriculture and NAMA texts in 2008. No “lesser cuts”. No haggling about how much “water” is acceptable. It is real cuts to applied rates and most often all the way to zero. No argument. The only real debate is how long it takes. And they apply to developed and developing counties.

There is, in fact, no shortage of developing countries that are prepared to negotiate. The major economies have seen the very same countries which make small liberalisation offers in Geneva prepared to make much more far-reaching one in FTAs.

The major developed economies figure out it is only a matter of time before the rest come knocking on the door also.

Just look at the immediate reaction to TPP alone. Within only weeks, the Governments of the Philippines and Indonesia were already publicly saying they want to join. China says it is open-minded. It will go on and on like this.

That has utterly changed the mind-set within the big three. To put it brutally: once you have acquired the taste for red meat, you aren’t so ready to settle for a DDA side salad.

This is the harsh reality of the so-called “competitive liberalisation” model.

But there is much more. Those traditional market access barriers are still of interest to the major developed economies. They would prefer to see them gone. But they are of much less relative interest now.
What matters much more are issues such as Foreign Direct Investment, Services, State Owned Enterprises, Intellectual Property Protection, transparency. Not to mention such areas as Environment and Labour.

This reflects the evolution that has occurred in the real world of trade over the last decade. And the DDA has pretty well zero to offer in any or all of these areas. They are matters either outside the WTO (such as FDI) or with a DDA mandate that is lightweight (such as trade in services).

For all these reasons (and more) it is a serious mistake to think that there is any genuine oxygen in these negotiations at the moment. Nothing could be further from the truth.

In these dire circumstances, we should be looking at realistic palliative care; not squandering effort on unrealistic approaches which only guarantee that things get worse.

A series of demands that developed economies must do a selective smorgasbord of things out of the DDA agenda is doomed. There is zero inclination and zero leverage to render that remotely feasible.
There will be no agreement to dispose of the DDA. If there had been any such prospect, it would have happened by now. To force this line only obliges others to dig their toes in ever-stronger

No-one can make all the dirt stick on one or a few other countries.

Various players have been trying that game for years. And it has never worked. The mud is everywhere. One might even add that outside the Geneva beltway in the wider world nobody actually cares that much anyway. Which is sad, but true.

We should be thinking seriously, rather, about salvage.

In that respect the best I can suggest is four major elements.

First, there are some tangible outcomes that need to be fronted up to in Nairobi.

Export Competition seems almost doable. Developed countries have been distorting and stealing markets for decades with these instruments. In recent years this practice has, thankfully, much diminished. Formalising it by reaching a contractual agreement to refrain from it would be welcome. But, obviously, it has to be balanced.
The undertaking to reach a lasting agreement on public stockholding is not something to be brushed under the carpet.

It is long past time to have something serious to say about Cotton.

 Second, there is an urgent need to de-escalate unrealistic expectations. There is zero chance that the DDA is going to be obliterated overnight. And treating anyone that happens to feel otherwise as benighted or recidivist is guaranteed to create deepened acrimony and divisiveness.

There is a need to accept on the other hand that there is zero chance of negotiating some substantive wish-list of demands as if anybody could possibly really believe that this could ever happen. All that will do is crowd out any other possibility for constructive engagement.

It is, in the end, to no good purpose to wallow in dispute and guaranteed failure. Because that is all it will get you.

Third, there has been too much tactical blame-shifting going on.
Those who have moved on need to be frank about that, and explain the reasons why, rather than all-too-readily just blaming the other guy for being unreasonable. That might even involve acceptance of responsibility for not living up to past commitments. Sometimes the mere fact of an honest admission can make all the difference.

Those who have not moved on need to be at least to be ready to listen to what those reasons are rather than simply insist on their engrained version of entitlement. They need to start thinking about what might actually help reluctant partners to come around to a different view.
A truth and reconciliation process in Geneva? Why not? At least start an honest dialogue.

Fourth, on the back of that, I would suggest coming back to Geneva to develop what I have tentatively called “confidence building measures” (CBMs). This could prove to be considerably more constructive than trying to deal with the consequences of a series of failed demands in Nairobi.

Someone (the D-G, the Chair of the General Council, selected wise heads-whatever) is granted (or assumes) the responsibility to consult on the way ahead, including this. The then Chair of the General Council Carlos Perez Del Castillo undertook a consultative exercise to great effect after Cancun in 2003. Mike Moore undertook it to great effect after the Seattle debacle ultimately getting the DDA launched on Doha.
The idea is that, pending ongoing Doha negotiations, participants could undertake, in parallel, confidence building measures (CBMs) which, while formally short of contractually binding commitments, can, over time, progressively build much needed confidence that we can still stabilise and improve the system. 

 Such confidence- building commitments would apply initially e.g. over a one or two-year period.

Who knows? That may even, in time, actually make it easier than anyone currently imagines to take the final step to reach fully binding commitments.

You could start with, e.g. domestic support for agriculture and then move on to even market access for agriculture and NAMA. Starting with domestic support for agriculture makes the most sense because the gap between applied and bound is enormous.

To take a purely a hypothetical example, participants could make a CBM to reduce OTDS by 25 percent. That undertaking could be made for an initial period of e.g. twelve months. Or they could make an undertaking, for example, to reduce their product specific AMS on Cotton by a specific percentage for e.g. twelve months.

These would not be a formal bound commitments. But they would be a serious undertaking not to exceed those levels during the lifetime of that undertaking. It would be understood that any party breaching an undertaking would, following immediate consultations with the aim of reversing that breach, permit all other parties to withdraw their CBMs.
I believe that, sovereign governments acting in good faith would be loath to be held responsible for the failure of such a serious project.

To be clear, this would not be a substitute for negotiated bound commitments coming from the DDA or an abandonment of it.
That process of negotiation would continue on its own track.
These CBMs would be arrived at in parallel. And because they are short of binding commitments in legal terms, and would be pitched at levels that do not infringe on actual applied levels of protection or support, they would not require formal treaty undertakings from e.g. sovereign legislatures.

In addition, the CBMs even at those reduced and non-contractual levels, are time-bound. After the expiry of the period (I would imagine either 12 or 24 months would be the realistic time period) any government would be free to withdraw the confidence building measure if, for whatever reason it became unable to sustain it.

But, of course, the idea is that, once governments get a bit used to this idea, they could be open not only to extending these measures for a further period, but also to taking a further measured step forward on the same basis for another period of time.

Market access is perhaps more difficult. But, even here, it is a matter of starting small. My guess is that, in this area, it would be more of a mix and match approach.

 Some could take straightforward steps to undertake not to raise their tariffs above a level that is still higher than their current applied levels but still somewhat lower than their UR commitments. Others might be able to take CBMs bearing on market access other than on tariffs.
In this area it could even be a case of like-minded countries smaller and medium sized economies coming together to make such undertaking voluntarily, reflecting this philosophy, precisely in order to encourage or challenge the reluctant larger ones to join in the exercise.

This way the absurdly wide gap between where things were at the end of the Uruguay Round and where they are now in the real world could be progressively lessened. Now is not the time to predefine all the possible modalities. The above is just meant to open the way to thinking about intermediate possibilities that create confidence and trust over time.