Trade corpse 'not yet at the crematorium'

To avert a chaotic collapse of four years of global trade talks, the Director General of the World Trade Organisation (WTO) Pascal Lamy, announced recently a slightly more dignified “suspension’‘. A postmortem may be premature—in the words of the Indian Trade Minister, Kamal Nath, the round is not dead, merely “between intensive care and the crematorium’‘.

But as the blame game subsides, there are big questions that need answering before trade ministers next come to the negotiating table.

First, why is the WTO so accident-prone? One reason is that, unlike aid and debt relief, trade negotiations are hounded by vested political interests such as United States steel makers or the European sugar lobby. Governments dig their heels in because the WTO matters.
For all its faults, it comes closer than any other international body to combining genuine multilateralism and disciplinary teeth. Its dispute settlement body is in effect a world trade court. Countries large and small have generally had to abide by its rulings.

Trade is also something of a bellwether in the global economy. To some extent the paralysis is symptomatic of the political sclerosis of the old order, as yesterday’s superpowers grapple with the rise of India, China and Brazil. Tectonic shifts are seldom smooth.

Second, how has the world (and its understanding of trade) changed since the launch of the Doha round in 2001? Beyond the technical trench warfare, some important and irreversible shifts have taken place: the old days of European Union-US trade stitch-ups, presented to the remaining 122 WTO member states as faits accomplis, are gone forever. Negotiations now involve much more complex geometry.

There is also an increasing recognition that there is more to development than just opening up markets—in fact doing so prematurely can be disastrous. Governments need the flexibility to follow the paths taken by other successful countries such as the Asian tigers, even if that means opening their markets more slowly than the West would like.

In terms of their overall economies, agriculture is a sideshow in Europe and the US (though not in most developing countries), but it became the Achilles heel of the round. What agribusiness lacks in economic weight, it makes up for in political noise. The attempt to open up northern agricultural markets and curb their grotesque subsidies, with their severe impacts on poor farmers around the world, proved impossible.

What should happen next? The most important step is to recognise that the suspension of the round is not the same as the end of the institution.

There is a strong development case for the multilateral system, even one as flawed as this. For there to be any grounds for restarting talks, trade negotiators need a complete change of mindset. Rich countries should only come back to the table once they have done their homework and have a clear commitment to end the dumping of their agricultural surpluses, fuelled by subsidies. They must also acknowledge developing countries’ special needs for flexibility over how and when they open up their markets.

In the meantime, developed countries should respect current rules on subsidies or, if they break them, accept they will face litigation and must abide by the rulings of the WTO court. They must refrain from abandoning the multilateral system and arm-twisting developing countries into regional trade agreements that are more damaging deals than those on the table in Geneva. They should use the time ahead to reopen the debate on institutional reform of the WTO.

However minor, such gains would at least give the world’s poorest countries something to show for five grinding years in the negotiating chamber.—Â

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