After too many wasted opportunities

Alberto Trejos 28 April 2011

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My reaction, when I was asked to write a few pages about the importance of concluding the Doha Round at this Friday´s meeting of the Trade Negotiating Committee, was to refuse.

I believe that there are many arguments why a good conclusion to this Doha Round is important for the world, and especially for developing countries. But I am not sure that there is anything new that I can put forward to argue the case, after so many have defended the point for so many years. What else is there to say, after so much disappointment and erosion of credibility?

Numerous opportunities

There are many ways in which concluding the Round in 2011 provides unique opportunities.

  • This is an opportunity because of its economic magnitude.

A good result would allow the global economy to seize trade gains that have been estimated by various computer simulation models (CGEs) to be on the order of half a trillion dollars. The world does not have many pockets of untapped, sustainable income of such value.

  • This is an opportunity because of its symbolism.

An agreement could put away the negative perceptions by many nations about the Uruguay Round. Some nations consider the Uruguay Round as an incomplete job having made good progress on many topics yet not enough when it comes to the most controversial topic of all, agriculture. This result left many countries dubious about the fairness of the multilateral process, and about whether deeper commitments were worth pursuing. It is vital to kill such suspicions by finishing the job this time. A successful Doha Round with a comprehensive agriculture agreement would accomplish this. Otherwise, the lost trust will cost the system for decades to come. If Doha fails, will there ever to be another trade round?

  • This is an opportunity because of its timing.

This Round was in part launched because in late 2001, the world was so concerned about the economic consequences of newly found political uncertainty, that many governments put aside their fears of protectionist political pressure at home, and their love of cheap anti-trade rhetoric, to take the bold steps needed. The recession feared then was trivial by comparison with the contraction we have just been through, and from which we have not fully recovered.

If we wanted good news in 2001, we crave it now. I doubt that there has ever been a better moment to invigorate world markets, and strengthen the faith worldwide in the globalisation process, than during the current painfully slow recovery from such a deep fall.

  • This is an opportunity because of what has happened, during the Doha delay, in the regional and bilateral front.

A much broader web of free trade agreements and regional arrangements exists today than ten years ago. This is partly because some nations that have been active in both the multilateral negotiations and the pursuit of specific deals have had the chance to complete their broad planned spectrum of agreements, and also because some large parties that were very multilateral in their approach – back when a deep and prompt Round seemed accessible – have shifted strategies. Frustrations with the Doha process, and fear of costly trade diversion if others kept advancing and they did not drove them to regionalism.

I believe that trade liberalisation through regional means is more of a building than a stumbling block for multilateral success. Yet, and more to the point, I feel that the current timing is key, if the Doha Round gets concluded, for both fronts to advance together in the future, and for each to become a constructive force reinforcing the other. The current imbalance between progress on one side and stagnation on the other is very damaging.

Bad precedents

But we have set many undesirable precedents in the Doha process. More than the fact that it is 2011 and we are still pursuing the conclusion of the Round, it is the manner in which we have gotten delayed that is the most damaging. We are not late because of intense disagreement by those that want to move forward; we are stuck because those who want a standstill have been successful in dragging their feet and, thanks to the rules in the decision-making process, in tying down everybody else´s feet as well.

Along this process, for the first time a major player refused to accept as a starting point for negotiations in agriculture, the pre-modalities draft document put forward by a neutral, once acceptable third party that had been commissioned to do so. At the time, some of us feared that, once this happened, such a reaction would become almost a necessity of negotiation by every side regarding every such draft, and that moving forward would become ever harder. We were sadly prescient.

At some point one of the major players became so absorbed in its own politics that it resisted anything other than to dictate the outcome of the negotiations. That country even opposed a majority of all-but-one in a matter that was not only commercially indispensable but also a humanitarian necessity. It set the precedent for never-before-seen intransigence in the negotiations. This attitude has continued, not only by that party, but also by others pretending to be global powers.

At some point in the process, a powerful new grouping was put together to negotiate on agriculture on behalf of developing nations, on the basis of some mutual agreements on the topic. This was one of the freshest and most constructive forces to influence the multilateral process in years. Only that later, the same group deviated into an alliance of unlike-minded nations to drag an undefined agenda on all topics. It used to be a vehicle for those nations that wanted to move forward, by also being sensitive and constructive regarding the problems that other nations had regarding a more comprehensive trade liberalisation process. It has now become the cynical method by which the latter provoke paralysis. The fertile ground of variable geometry has given way to alliances based on political discourse and that range across all issues; the practical and straightforward language characteristic of trade negotiations has given way to diplomacy of the worst kind.

At some point in the process, we allowed all notions of a schedule or a deadline to the Doha Round to fade. Many presciently feared that this could mean that, later on, the guidance that sometimes imaginary time pressures put on negotiation processes would disappear, with no useful alternatives.

New organising principles needed: Limit nations’ veto power

Writing today to simply encourage a successful conclusion to the Round would be futile. This essay is not about asking the handful of parties that are slowing everything down to change their views. That would be simplistic and naive. Nor should we fool ourselves that the largest players – who have so far been devoid of flexibility and commitment – can find the will and capability to lead.

It used to be that countries who regarded trade liberalisation as a bad thing, and never wanted to partake of it, simply were not members of GATT. As non-members, they were sovereign about their own participation in any negotiation or deal, yet they could not dictate an outcome, or a lack of outcome, on everybody else. We need an alternative path which takes us back to some of that.

I understand that the parties that do not want further progress could never be asked to renounce their veto power regarding agreements that commit them to change policies. But I believe that the parties that are willing to advance are crazy to permit this veto power to extend to the agreements they could reach amongst themselves.

Faced with the enormous cost that the delay has caused the planet, we should now be making a starker choice, between either giving a good conclusion to the Round now, or beginning to suggest the nature of the alternative. This should not be a choice between now or later – or more precisely, now or never. This should be a choice between a successful Doha Round, and something else.

What could that alternative route be?

  • Plurilateral agreements within the multilateral system, in which countries can choose not to commit, but cannot stop others from engaging?
  • More regional deals?
  • An effort to harmonise the rules, extend the rights and allow accumulation of origin across similar Free Trade Agreements, using them as raw materials for deeper regional integration among the countries that want to keep the bicycle moving forward?

I am not sure. But working in our favour some we need good old-fashioned trade diversion – inefficient in the short run but perhaps it is the lubricant we need to push the unwilling along.

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Topics:  International trade

Tags:  WTO, Doha Round

Professor of Economics, INCAE