There is no Plan B – only Plan A: Towards completing Doha

Mari Pangestu

28 May 2011

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The importance of completing the Doha Development Agenda sooner rather than later goes beyond bringing gains of $360 billion of additional trade with substantial benefits for industrialised and developing economies (HLTE 2011). The importance also goes beyond what pragmatic soothsayers who are telling us: “Why are you worried, the WTO system will continue to be robust whether we conclude Doha or not. Companies and countries will continue to trade”. As a developing country policy maker – and I believe I speak for many other developing countries – I am greatly worried about the costs and opportunity lost of not completing Doha.

The costs of not completing Doha

I will point to four costs of not completing the Doha Round.

  • First is what it could achieve for food security.

During the 2008 food crisis, imbalances between supply and demand were partly attributed to distorted agriculture prices caused by trade-distorting export subsidies and domestic-support schemes. The agriculture package in Doha will go some way to address this. In today’s situation of high commodity prices, now is the perfect time to address the removal and elimination of such trade-distorting policies. Removing these distortions can only be achieved through multilateral negotiations, not through bilateral or regional agreements.

Most importantly, the winners would be the billions of hungry and poor people all over the world; correcting the system and ensuring the future supply of food and greater price stability is very much in their interests. For example, in Indonesia a 10% increase in the price of rice, without any change in income, would lead to a 1% increase in poverty.

  • Second keeping protection at bay.

During the depth of the crisis benign protectionism was the order of the day, according to the self-reporting surveillance mechanism established by the WTO at the request of G20 Leaders. This allowed the rebound of trade to become one of the costless ways for the global economy to recover. It is ironical that in the recovery, the latest report (WTO 2011) shows that there has been a slight increase in protectionism causing an estimated impact of 0.6% to G20 exports.

The main increase has been due to tariff increases, automatic licenses, and other restrictions including export restrictions. Whilst this is still “small”, it is nevertheless double from the previous period. Restoration of the confidence in the world trading system through clear signals that we are progressing on completing the Round is crucial to keeping protectionism at bay. Developing countries such as Indonesia have a great interest in this because only the multilateral trading system will provide the fair, rules-based trading system for us to face large and more developed partners on a fair and equal standing.

  • Third the lack of progress on the Doha Round already has, and will continue to raise the pressure to undertake bilateral and regional free trade negotiations.

In the ASEAN region there are already FTAs between ASEAN and all six of its dialog partners (Australia, China, India, Japan, Korea, New Zealand), and numerous bilateral FTAs. The EU has just completed negotiations with Korea, which has put pressure for the Korea-US FTA to be ratified as soon as possible. The EU has also completed negotiations with India, and is negotiating with Singapore, Malaysia, and preparing to do so with other ASEAN countries. Recently China, Korea and Japan announced revitalization of their FTA initiative. Furthermore we have the Trans-Pacific Partnership initiative between 8 members of APEC.

It is not the bilateral and regional free trade agreements which are problematic per se; it is negotiating them in the absence of a robust WTO system – a system which is seen as meeting the needs of the current and future trade-linked issues. Bilateral and regional agreements can only work towards complementing the multilateral trading system when they are “WTO-plus”, not “WTO-instead”.

  • Fourth the potential dampening effect on unilateral reforms.

The political economy of openness in trade policy and institutional reform have always functioned better within the framework of international commitments. Multilateral rules impose an important caveat on what countries can or cannot do. In a country like Indonesia this has worked to our advantage in the way we frame our reforms, and in fact has functioned in the past to put bad policies to rest.

For instance in the famous National Car case in the mid 1980s, which violated the MFN principle by allowing duty-free imports of cars only from one source country, the domestic politics at the time did not allow for policymakers to remove this policy. The policy was finally ended through the WTO’s dispute settlement mechanism. It would be too bad for reforms if the process is undertaken within weakened confidence of multilateral trading system, or one which will eventually not be relevant to the evolution of 21st century trade issues.

The Way Forward: No Plan B

Despite G20 Leaders’ commitments, and all the good intentions and intensive work in Geneva that came after the push given by trade ministers during their informal meeting in Davos in January 2011, it proved impossible to arrive at a draft text by the end-of-April milestone. There remains “unbridgeable gaps” in a number of main negotiating groups, namely non-agriculture market access.

Given this situation, trade ministers met first during the APEC Ministers of Trade Meeting in Big Sky Montana, and then on the fringes of the OECD meeting in Paris. Fortunately all have agreed that we all remain committed to completing Doha as a single undertaking. However, there was a sense of realism as to the timing and pathways to achieve this desirable outcome in a timely way.

From an Indonesian perspective there is no “Plan B”. We do not support a “Doha Light”, and we remain committed to a comprehensive, ambitious, and balanced package building on what we have achieved to date.

After almost 6 years of negotiations since the key Hong Kong WTO Ministerial, I believe we are more than 50% or some would say 80% of the way done. A realistic way forward is to identify the sequence of steps that would take us to the final outcome; this is necessary to avoid the costs and lost-opportunities I outlined above.

This is not about an early harvest or “cherry picking” and then stopping. It is about identifying the steps forward in a meaningful way towards the final goal of the single undertaking of Doha.

Identifying stepping stones to a final Doha Round conclusion

There are areas within the negotiations that could be seen as steps towards the final package. Of course work and political will is still needed to find ways to bridge the unbridgeable gaps. In identifying the areas where we could find convergence, a number of priorities stand out.

  • First and foremost is areas of negotiations that will contribute and deliver to development objectives such as the Least Developed Countries package and/or an effective aid-for-trade, and facilitation package; this is, after all, a Development Round.
  • Second areas where there would be clear benefits for development and the private sector in facilitating and ensuring the benefits of trade are greater; we need stakeholders to be cheerleading the way forward.
  • Third there could be areas where we would be able to address the food-security challenge.

One could also foresee that, within each current area of negotiations, there could be items which could be wrapped up without disturbing the overall balance of elements in that particular area. It is important that we do not go into “new” negotiations in identifying which areas. We should go into the mode of identifying these pathways and steps with the mindset and political will of win-win.

We need to be guided by priorities and pragmatism. That is, to identify the areas that are doable and achievable in the very near future, but which have an impact on development and increasing the benefits of trade, while at the same time building confidence for us to continue our journey to the final package. Most importantly, we should never lose sight of the final goal of the single undertaking.

Looking forward

It is also important to provide the signal in what we say and do elsewhere. Beyond talking about Doha, we must ensure continued confidence in and implementation of the rules-based, open trading system.

  • This would mean the commitments of G20 Leaders and others on refraining from protectionism going beyond words; the good intentions need to be strengthened with commitments and actions.
  • It also has implications for how we undertake bilateral and regional agreements; these should be done in a way that is not an alternative to, and does not detract from the multilateral trading system. We should pursue regionalism in a way which is going to contribute to and complement the system.

Concluding remarks

In conclusion, we should not underestimate the costs of not doing all this. We will need to draw upon the strength of our individual and collective political commitment. We need to call on the ability of some major economies to look beyond pure national interests, and to look at the impact and costs on the global system and economy. And we need to remember that there are many countries and billions of people – many of which are impoverished – who are waiting for the Doha deliverables.

References

HLTE (2011), “World trade and the Doha round”, final report of the High-Level Trade Experts Group chaired by Jagdish Bhagwati and Peter Sutherland.
WTO (2011). “Reports on G20 trade and investment measures (mid-October 2010 to April 2011)”, WTO Secretariat, 24 May.

 

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Topics:  International trade

Tags:  WTO, Doha Round, Next Steps

Indonesia's Minister of Trade

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