Political leaders must commit the resources and time to conclude the Round

Peter Sutherland

28 April 2011

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The Doha Round of trade talks being conducted under the auspices of the WTO is literally on the verge of collapse. It seems that some world leaders are permitting this to happen either as a result of their indifference or by taking negotiating positions that, by reason of their inflexibility, are bound to lead to failure.

What is at stake is a great deal more than the loss of potential world trade probably worth over a trillion dollars per annum (Productivity Commission 2009), important though that is. The creation of the WTO in 1995 following the conclusion of the Uruguay Round was the greatest advance in global governance since the late 1940s.

  • It laid the foundations for globalisation as we now know it and established the ground rules, for example, for the integration of the former communist economies into a global trading system.
  • It also created a Dispute Settlement Mechanism that, for the first time, permitted the objective adjudication of serious trade conflicts.

This is, in effect, a court system for trade dispute resolution and has been remarkably successful. Indeed the WTO in its entirety has been a great success.

  • It has played a crucial role in the economic reform of China which has since become vital for global growth.

More generally it has helped over a billion people move from abject poverty to something better through the opportunities it has afforded. But it has a long way to go, not least in respect of developing countries.

Doha deadlock

The Doha Round has been the subject of negotiation for over ten years. It is tantalisingly close to a successful conclusion with major concessions already made that will lead to substantially freer trade to the benefit of all. Just how close final settlement is and how to bring this Round to conclusion is set out in the Interim Report of the High Level Group set up by the heads of government of Germany, the UK, Turkey and Indonesia that I co-chair (Interim Report 2010).

However, as in all such negotiations, nothing is agreed until everything is agreed. Therefore the immediate risk of failure of the Round is very considerable.

  • The least developed countries who have, for example, been promised quota free and tariff free access to the EU would be big losers.

But apart from this serious loss the system itself will be greatly damaged by a failure as the credibility of global negotiations of this kind will be undermined.

  • The consequence will be the proliferation of bilateral trade deals that are already the focus of the attention of the major powers.

These will create differential trading regimes and will lead to reduced negotiating power for smaller and weaker trading countries. Increasingly their weaker bargaining position will become evident and divisive.

Should this failure take place – as now appears very likely – responsibility will lie primarily with the US, China, and Brazil. Ironically these three will be amongst the biggest losers. The results of failure will become evident in every area of trade. For example, in agriculture Switzerland is already discussing the introduction of export subsidies. They will not be alone in rowing back on policies for free trade.

Conclusion

Free trade has never been an easy sell but the eight trade rounds that have taken place have to date helped to define the world in which we live. They have provided a bulwark against the protectionism that lurks in most societies and that is evident in some of the new nationalism emerging in Europe and elsewhere. They have provided growth and stability and have avoided the destructive trade conflicts of the past that have caused such terrible divisions. They have also, through trade liberalisation, kept protectionism at bay and have served the interests of consumers everywhere by lowering the prices particularly of necessities.

Political leaders must now commit resources and time to concluding the Round or they will bear the responsibility for serious damage being caused not merely to globalisation but to the process of multilateralism more generally. Their current failure is lamentable.

References

Australian Productivity Commission, 2009, Annual Report 2008-2009, Chapter 1. Reform beyond the Crisis. Productivity Commission. Australian Government.

Interim Report (2010). “The Doha Round: setting a deadline, defining a final deal”, Interim Report of the High Level Trade Experts Group.

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Topics:  International trade

Tags:  WTO, Doha Round

Peter Sutherland

Chairman of Goldman Sachs International

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