Where Do We WTO from Here?
On Tuesday negotiations of the “Doha round” being held in Geneva by representatives of the world’s major trading nations, under the rubric of the World Trade Organization (WTO), resulted in a break-up of the meeting with failure to reach any new agreement. Olivier le Bussy, writing for the Belgian daily La Libre Belgique, tackles the question remaining on all observers’ lips: And Now What Do We Do?
“Let’s not go backward, but let’s capitalize on 85% of what was accomplished,” was the appeal from WTO Director Pascal Lamy. But one problem is that there is no further time-period in prospect in which negotiations could be resumed that could reasonably stand a chance of succeeding. This is partly because Lamy’s own term at the head of the WTO is set to expire next year, and meanwhile the current presidential campaign in the US and similar elections scheduled within the EU in 2009 (including federal elections in Germany) can be counted on to choke off any remaining political will in those countries to make the concessions necessary to make the Doha round succeed.
On the other hand, as Le Bussy points out, it’s also not as if the WTO can simply set up another meeting in the near future to call all the trade representatives back to try again, for the nine-days-straight negotiations leading up to the announcement of failure on 29 July produced some heavy bad feelings. The US and India are angry at each other because of the safeguards the latter wanted to keep to allow developing nations to re-erect tariff barriers in agricultural products. (From this account in the NYT, it seems that China joined India on that issue at the eleventh hour and so definitively killed the talks. Maybe George W. Bush can discuss this when he goes to Peking for the Olympic opening ceremony.) But the Chinese were already angry at the Americans, joined in that by the Africans, because of the USA’s refusal to discuss cotton tariffs. And the old Banana War (EU edition) came back from the past to mess up the negotiations: the European Union has run afoul of international trade rules in the past over its inclination to favor banana imports from Latin American countries over others, and this apparently is still unresolved. But then the EU Commissioner for Trade, the UK’s Peter Mandelson, had less-than-complete backing from his political masters, following recent attacks on his negotiating stance from the French government (current EU president).
Regression Is All That’s Left?
Of course, international trade will simply go on, and the WTO will remain the one recognized world forum for resolving trade disputes in anything like a proper judicial manner. But this seeming crashing-out of the Doha round also means that there remain too many tariffs and trade restrictions in place throughout the world. Pure economic trade theory preaches getting rid of your national trade barriers entirely, unilaterally, to gain for country the maximum benefits from trade (namely access to a wider range of goods that your country could not produce itself or could never produce so cheaply). Of course in the real world that means unemployment and bankruptcies and so is a non-starter, so that traditional trade-regime negotiations have involved quid pro quo trade barrier dismantlement between states.
This is done most effectively if it involves the whole world, but now that that approach has gone nowhere the only alternative would seem to be regressing to the way it was generally done prior to World War II: bilateral agreements. Brazil has already announced that it will be seeking those with the world’s major trading blocs. But Brazil can do that: as this recent NYT points out, that country is itself becoming an economic giant. As always, it’s the small and weak among the developing countries that suffer when a multilateral process like the Doha round collapses. In bilateral negotiations they will inevitably hold the weaker hand; and they cannot afford the sort of industry and price subsidies commonly employed in the US and the EU (for agriculture, in particular; but also found elsewhere) to manipulate trade flows their way.
