Viv Davies interviews Peter Sutherland for Vox

February 2011

Transcription of a VoxEU audio interview [http://www.voxeu.org/index.php?q=node/6076]

Viv Davies: Hello, and welcome to Vox Talks. I’m Viv Davies from the Centre for Economic Policy Research. It's the 1st of February 2011 and I am talking to Mr. Peter Sutherland, Chairman of Goldman Sachs International and former Director General of the GATT and WTO, about a recent report he's written with Professor Jagdish Bhagwati and a group of leading economists titled "The Doha Round: Setting a deadline, defining a final deal." In November 2010, the heads of government of Germany, Great Britain, Indonesia and Turkey called on this group of experts to report on the priority actions that have to be taken in order to combat protectionism and to boost global trade. I began the interview by asking Mr. Sutherland to outline the principal recommendations of the interim report.

Peter Sutherland: Well the principal recommendations are related, I think, to first of all, the absolute requirement that the round be concluded this year, and that a deadline should be fixed for doing so. The reason for that, obviously, is the imminence of a US election and the reality that once an election year has been reached, the prospects of concluding the Doha Round are virtually nil. And that a prolonged period of delay could then be anticipated, as this round has already taken longer than any preceding round. Notwithstanding the fact that there's already on the table a very substantial package that is of particular value to developing countries, but is also of value to developed countries.

It seems astounding that there has been a lack of political will by, in particular, the heads of government of the interested states, who have failed to dragoon their ministers of trade into bringing this round to a conclusion. Everybody is trying to get the last inch out of the negotiations, and they risk doing great destruction to the global economy and to their own economies by failing to deliver what it transparently available by way of an agreement.

The report itself I think is, as Chancellor Merkel very generously described it, extremely clear and comprehensible even to those who are not well versed in the arcane language of trade negotiations. It describes why the Doha Round has stalled. It gives the case for completion. It gives the case for a deadline. And it outlines the structure of a final package in agriculture, industrial goods, sectoral agreements, services, the package for least developed countries and trade facilitation. And it also describes how a move to a final deal should be initiated.

The report itself was sponsored - and the idea for the report came from - the governments of Germany, Great Britain, Turkey and Indonesia. Moving to a final deal, as outlined in the report, indicates the fact that the current Doha package is substantial, and a great deal has already been achieved.

One of the great winners, just to take one example, and this is readily apparent, is Brazil. I can't understand why Brazil isn't at the forefront of bringing this round to a conclusion. But there are others too. The US is a key player. So is China. And they have a great deal to lose if this round is not concluded.

There's a lack of remaining flexibility giving negotiators scope to move. And it's really becoming pathetic, having regard to the rhetoric that we've been listening to at G8 and G20 meetings over the years.

I suppose that the centrepiece has to be the agreement between the US and China. But here it should be readily realizable and of considerable importance both to China and to the United States that the round be concluded.

We found it very difficult to understand, having regard to what we have established as being the current situation, why we are in a situation which is very perilous. It is clearly quite possible that we will tip over the edge and fail to conclude the round. And something has to be done about it.

Viv: So you say that the report covers the reasons why the Doha Round has stalled. Is it simply down to a lack of political will? And if so, how would you ensure now that the right people and the right capitals will be taking this seriously, and commit to such a tight deadline? In other words, how can you be so sure that the commitment can be made binding?

Peter: You can only be sure of that if there is a belief, and I think that there should now be a belief, that at least two very important heads of government have broadly accepted the recommendations in this report, including - as I understood what they said at Davos - the need, absolute need and requirement to conclude this year. This cannot go on. Everybody knows that's the case. It cannot go on beyond the end of the year. And yet, the final steps required of key constituencies have not yet been taken. And in reality, the negotiations probably have to conclude in substance by July, because we need the rest of the year to schedule the offers and so on, and tidy up the agreement. And there is no adequate sign that the flexibility required to conclude the round is there yet. And in particular pointing to member states, the United States has to make this agreement the centrepiece of its deliverables in the US China relationship. And this, I think, is an important element of this agreement. The openness shown by China has to be substantial also.

At the moment China will get an average 36 percent cut in nonagricultural market access from its partners, and 40 50 percent from the EU and US. It is offering 22 percent. It needs to do more. It also needs to engage on sectorals – zero-for-zero agreements in areas like chemicals, electronic products, and advanced healthcare.

The United States needs to focus on changing the compositional support, moving away from trade-exporting support and expanding the use of the green box. There will have to be changes implemented in product-specific support given to cotton and sugar. It has an important role to provide leadership. In all previous rounds, the leadership of the United States has been crucial. It has to be crucial in this round too, and I don't think people are certain that that is going to happen.

Brazil, in reality, is the biggest winner from the current text. Huge gains in agriculture. And that has to be balanced with some give in non-agricultural market access. Brazil really needs to step up to the plate here. On the current modalities and NAMA, Brazil is offering an eight percent cut. It can do more, especially given that they have not materially reduced tariffs since Uruguay Round, unlike India who have.

Viv: You recognize in the report that there are growing gaps between what you referred to as 20th century trade governance and 21st century trade. Could you perhaps expand a little on what you mean by that?

Peter: Well, I think that we should have had a greater emphasis in this round on services. And more remains to be done on services. I still think the European Union can do more on services in the area of personnel, movement of personnel. I think Mode 4, in particular, of the services as it is described, which is of great interest to India, is an area where there could be more progress made by Europe. Europe also has to engage on the sectorals. But I think into the future that there are areas, in the later part of our report which won't be published until later this year, we'll deal with these, we will have to look at the issues like public procurement, like services, like the whole area of investment which might well have been better handled within the WTO, than in the OECD where it is ultimately came a cropper. And these are areas which will need to be investigated and considered further.

And perhaps in the future, we should move away from the process of these huge rounds. We have to also look at that. As to whether it's better to take discreet areas, and whether plurilateral agreements - or what the Europeans and the European Union call ‘variable geometry’, where some can proceed leaving an open door for those who wish to catch up later to join when they feel able to do so - whether that route can also be used in future. But we mustn't, we mustn't above all lose the multilateral framework, which has been built up so painstakingly through eight rounds of the GATT, and which has brought us to where we are.

Viv: So even if there was to be largely a consensus to try to get things done in 2011, how would you envisage it getting through the US Congress without being amended or even blocked by someone there?

Peter: Well we've had these problems before. The Marrakesh Agreement, which was the Uruguay Round conclusion when I was Director-General, was signed by all of the parties and then it failed to be adopted by the US Congress. Many people were amazed at this because there had been such a brouhaha about the signing of the treaty. Everybody assumed then it was a done deal. Of course it wasn't. It required still the ratification by Congress.

So we did have a push on in Congress and I had travel to Congress as Director-General to argue for it. But that we can take in due course after everybody has agreed the text. Let's get the agreement first.

I think Congress, in the end of the day, must recognize that the terrible damage that will be done to the multilateral system by a failure demands that they have and give ratification.

Viv: But this seems to me to be where the real Catch 22 is. If President Obama lacks the legislative authority to fast track the process, surely other countries will anticipate that hurdle and hold back on their concessions until there is a clear signal of support and clearance from the US.

Peter: Look this is a game which you can continue. People can continue playing and making excuses for lack of movement from now until eternity. “We won't do something until we're certain that the US is going to do it as well”. That's not the way to conclude this round, and the stakes are so high that I can't believe that this “playing chicken” approach is going to be persisted in by countries who have so much at stake in the multilateral system.

If the multilateral system is seriously damaged by a failure to conclude Doha, as it undoubtedly will be, then the result is increased bilateralism, which as we know from the past is a recipe for ultimately all forms and types of protectionism. It's not the way to proceed.

Viv: So what happens if Doha isn't completed in 2011?

Peter: Well I think if Doha... People have first of all to bring the horse to the water, so to speak. People have to realize that if it isn't concluded in 2011 then it is effectively doomed. And all that has been achieved is lost. And the huge benefits available for countries - every country gains by this - will be lost. Because that's the reality. If it isn't concluded this year - apart altogether from the deadline - it's doomed by virtue of the fact that the US election puts it on such a long finger that you might as well give up.

Viv: Peter Sutherland, thanks very much for talking to us today.

Peter: Thank you.