With the skin gone, what can the hair adhere to?

Lei Zhang, Qian Wang 28 April 2011

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The Doha Round has been going on for ten years with many ups and downs – including a formal suspension in 2008. But this time it is different. The Round’s steering committee, known as the Trade Negotiating Committee, will meet in Geneva on 29 April 2011 to decide the Round’s fate. Many observers believe that WTO members will allow the Round to lapse. This would be a mistake. Governments should not let the round fail, especially in this post-financial-crisis era.

  • Firstly, there’s an old saying in Chinese: With the skin gone, what can the hair adhere to?

It is widely acknowledged that there are three mutually supportive pillars which lay down the foundation of the WTO: the negotiating pillar, the Dispute Settlement Mechanism, and the Trade Policy Review Mechanism. If the Doha Round fails, the WTO’s most fundamental pillar will crumble. After that, how much longer can the Dispute Settlement Mechanism function with teeth? The much softer Trade Policy Review Mechanism would also risk bumping into a big trouble.

In short, the Round is part of the three inalienable pillars that supports the WTO’s role as a platform for a levelled playing field. If the negotiating pillar collapses and the platform with it, players and problems will still be there. Where can the players find another relatively fair arena?

  • Secondly, from the viewpoint of international governance, there is simply no replacement for the WTO’s maturity and stability as a system for execution of agreements given its long track record on enforceability and compliance by member governments.

Other newly established organisations, like the G20, are much inferior to the WTO in this regard. It would be much wiser to adhere to the current international system as it already has teeth; it takes time for children’s teeth to grow.

The idea that the WTO can be allowed to lapse in the hopes of a better organisation emerging brings to mind the old Chinese idiom: “reject what is near at hand and seek what is far away”. For the sake of international governance, we should support the reputation of WTO in its effectiveness in fighting protectionism.

  • Thirdly, the Doha Round is a symbol, which stands for the multilateral trading system that WTO members have built over the last 70 years; if it fails, the threat of trade wars will escalate and countries may try to reverse past unilateral trade liberalisation moves.

The consequences would be catastrophic, especially to the small and least-developed nations which are more dependent on global trade rules. In this regard, developed countries should offer more sincerity.

  • Last but not least is the WTO’s role as a facilitator of domestic reform.

For some transition countries, the WTO acts as an external impetus to internal economic reform. Failure of the Doha Round may deter such nation's reform efforts to turn from centrally planned towards market-orientation.

We strongly advocate a conclusion to the Doha Round by the end of 2011 as it is currently scheduled. However, if this does not come to pass, there are two important things to be done to safeguard the multilateral trading system.

  • The WTO secretariat should freeze the whole Doha Round negotiating packages for further negotiations which may start in one or two years; this would mean taking the packages in its entirety as a starting point for further moves.
  • Beat around the bush by trying to strike a deal on less controversial packages.

This would give confidence and hope to the believers in free trade and multilateralism.

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Topics:  International trade

Tags:  WTO, Doha Round