Getting over those Doha blues

4 September 2008

 

 

The breakdown of the Doha Round at the end of July makes a deal implausible for another year or two. This article argues that this is an opportunity for world trade powers to identify ways to adapt the WTO to the needs of the 21st century. Although difficult, the outcome of such talks could hardly be worse than the fear-driven, adrenalin rush that the WTO membership embarked upon seven years ago in Doha.

But what are we supposed to do with the Doha Round now that WTO members have failed to agree on modalities for reforming several key elements of
world trade?

Hibernate or deliberate?

A recent Financial Times editorial argues that the Round is over, but many senior trade diplomats have refused to go that far.2 For sure, the political timetable in the US, India and the European Union will make it almost impossible to continue serious negotiations over the next 18 months. So what should trade ministers, interested analysts and business do in the interim? Hibernate...or deliberate?

No progress until 2009 or 2010

Deliberation is the right option. A constructive, confidence-building, and potentially ground-clearing process could serve the WTO membership well in the years to come. But for it to deliver it must be initiated and supported by senior political leaders. An independent or Geneva-led initiative could help, but its potential upside is less. Whether we like it or not there is no time left for "just one more push" before the pressures of the American and Indian elections tighten.

That does not mean the Doha Round negotiations have to be declared officially dead. Nor does it mean abandoning pro-development objectives at the centre of this Round. It will, however, mean a searching examination of the different means to reach common ends. The Doha Round should inform that examination and stop crowding out more systemic thinking by senior policy-makers and trade diplomats, as it has done for the past few years. Moreover, with the challenges associated with climate change, growing trade restrictions associated with border security and the use - and misuse - of state and private standards to regulate trade, now is the time to break free from the Doha straight-jacket, as the closing verse of the late singer-songwriter Laura Branigan's hit suggests:

Oh it's been hard enough getting over you

You know you kept me holdin' on til the end

Oh it's been hard enough getting over you

I don't think that I could say goodbye

I know that I can't say goodbye

I don't think I could say goodbye again

Laura Branigan - It's been hard enough getting over you

 

Time for innovative thinking

The breakdown of talks in Geneva at the end of July revealed some stark political constraints on agricultural and goods trade liberalisation and those limits will not go away soon. But this is not the end of the matter. The WTO can contribute much more to global well-being than to lowering trade barriers. Now is the time to figure out what balance is needed between the WTO's rule-making, liberalisation, juridical and deliberation functions, in light of the commercial, developmental and political realities of the 21st century.

The forward-looking, deliberative initiative on the WTO that is needed should address:

 The subjects that fall within the WTO's remit (the "what?" question);

 The contribution of the various WTO functions to different ends (the "how?" question);

 The need to demonstrate the relevance to a broader set of stakeholders (the "for whom?" question).

These three matters are linked.

To take just one example that is growing in importance to both developing and industrialised countries: the tightening of security checks on containers. These checks directly affect manufacturing exporters, who may have taken a lower profile in the Doha Round, thinking that prevailing near-zero tariffs limited their stake in WTO negotiations. Given the sensitivities associated with national security matters, the WTO's transparency and deliberation functions might provide a more effective way to prod countries to adopt less trade-restrictive security measures.

Identifying such potential future initiatives is important. They would deepen the WTO's relevance to existing stakeholders, widen the set of stakeholders with a positive interest in the conclusion of WTO accords and are consistent with the broadly agreed goals of the WTO. This is exactly how we should use the year or so ahead. This is not just about expanding the remit of the WTO - surely the experience with the Doha Round raises some hard questions as to whether the WTO has a significant role to play in the regulation of agricultural policies and various service sectors? A cold, hard look at where the comparative advantage of the WTO lies in each major area of commerce and current and future regulation is long overdue.

The Single Undertaking approach

During the Doha Round, WTO members strived to combine a series of disparate accounts into one package that all members would sign up to: the "Single Undertaking." In some respects this has been unfortunate: it has ignored the other - and often more flexible - WTO agreements that can advance common goals. So-called critical mass agreements and plurilateral accords could be viable alternatives to those that require every WTO member to sign on to binding disciplines. We urgently need a better understanding of the government policies and circumstances in which such agreements and accords are more suitable than a Single Undertaking. This is not an easy task, but multilateral accords riddled with exceptions for different classes of WTO members, typical of the Doha Round, are not that appealing either. Part of the deliberation exercise could be to determine a formula from which a multi-track, yet coherent WTO could emerge.

Trade policy reform: unilateral, regional
and multilateral

Governments can reform their commercial policies unilaterally, in the context of free trade agreements, and in plurilateral and multilateral WTO accords. Many developing countries have independently cut their tariff barriers a lot. Service sector reform tends to take place outside of trade agreements too. Plus, dozens of regional deals have been negotiated over the last decade. The relevance of the WTO to these significant reform dynamics needs fresh thought. Until now most ink has been spilt on the relationship between multilateralism and regionalism. Experience would seem to suggest that there is little willingness on the part of the WTO membership to accept constraints on the free trade agreements they negotiate. But that need not be the end of the matter.

The WTO's transparency and deliberation functions could be used to identify free trade agreement provisions that limit discrimination in world trade, that involve less paperwork for traders and other better practices. Indeed, the deliberation initiative could draw on the growing body of knowledge on multilateralising regionalism, as the associated body of literature is known.3 With respect to unilateral trade reform, further thought could be given to devising incentives for WTO members to bind these. In the past some have proposed giving "credit" to countries that bind unilateral reforms. These ideas - and others with a similar objective - should be dusted off and developed further.

Dealing with the political realities head on

The reciprocal nature of WTO accords means that certain other practicalities should be met head on. For example, development campaigners may want to see WTO initiatives that reform certain industrialised country policies, such as agricultural support schemes. But that will not happen unless there are more Western firms willing to lobby for WTO accords. Likewise, commercial interests with stakes in the WTO must appreciate that the development concerns and multi-polar nature of the global trading system are not going away.

This reality check may be hard for some to stomach initially, but the WTO has evolved into a system where many more parties can effectively veto progress. Reciprocity may create strange bedfellows and those partners may well vary markedly with national circumstances. Ultimately the reflection exercise that is needed should lay the foundations for a broader constituency in favour of multilateral trade accords.

Last year I argued that a number of inter-related factors have frustrated progress in the Doha Round.4  The deterioration in the world economy after the first quarter of 2007 and the uncertainties created by the coming US presidential election have probably sharpened minds, but ultimately they have not relaxed these four constraints.

[caption id="attachment_28149" align="alignnone" width="191" caption="The Doha prize is now beyond reach."][/caption]

 

If anything, recent events have laid bare the shadow of domestic politics in Beijing and New Delhi over the WTO, adding to the trade policy gridlock in Washington and a perennially defensive EU. The Doha prize is now beyond reach, making one more negotiating push futile. As Elvis put it, the fair is moving on - but where?

All the rides are over and done

It's late and no prizes are left to be won

The rides are closed, it's the end of the day

The horses are moving away

Yes the fair's moving on

- Elvis Presley - The Fair's Moving On

 

Acrimony and discord - the likely result of some very sensitive cases being brought to WTO dispute settlement - with the consequent risk of an ever greater political backlash, must not be allowed to fill the vacuum created by the recent collapse in negotiations. Instead, now is the time for those governments that are seriously committed to the world trading system to initiate a comprehensive, pragmatic and open reflection exercise on the future of the WTO.

Conclusion

A deliberative process that identifies a work programme for the WTO that meets the many needs of the 21st century could hardly do worse than the fear-driven, adrenalin rush that the WTO membership embarked upon in the Qatari capital in 2001.

 

1 Simon J. Evenett is Professor of International Trade and Economic Development at the University of St. Gallen, Switzerland, and Co-Director of the CEPR Programme in International Trade and Regional Economics. The Warwick Commission Report, published in December 2007, is a recent example of one such independent initiative. The Report included a proposal for a period of reflection on the future of the WTO, and this piece builds on some of the ideas presented in that Report.

This article was originally published at www.voxeu.org

The arguments were developed subsequently in a paper titled "Reciprocity and the Doha Round Impasse: Lessons for the near term and after." More recently, these arguments have been updated with a video presentation. Both are available at www.evenett.com 

2 See: Multilateralism not as dead as Doha, Financial Times, Editorial comment, July 30 2008.

3 See: Background on WTO conference "multilateralising regionalism" Sponsored and organized by WTO - HEI, Co-organized by the Centre for Economic Policy Research (CEPR) September 10-12 2007. www.wto.org/english/tratop_e/region_e/conference_sept07_e.htm

4 See: Doha's near death experience at Potsdam: why is reciprocal tariff cutting so hard? Simon Evenett June 24 2007 http://voxeu.org/index.php?q=node/317

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