By Joe Guinan and Nicola Lightner
The Doha Round of multilateral trade negotiations at the World Trade Organization is now dead. Like the Monty Python parrot, it has passed on, is no more, has ceased to be, expired and gone to meet its maker, kicked the bucket, shuffled off its mortal coil, run down the curtain and joined the choir invisible. It is an ex-round – all the straining to strike an optimistic note by trade ministers departing Geneva notwithstanding.
Nine intensive days of negotiations brought the trade talks within an inch of agreement, but yesterday’s collapse served only to underscore the fundamental lack of seriousness that has plagued the round for much of its seven-year life. The proximate cause of the collapse lies in the arcane details of the so-called Special Safeguard Mechanism (SSM) – a device that would allow developing countries to increase tariffs to protect their farmers from import surges and price declines. No-one had expected this to be the €˜deal-breaker’ – there were many more likely candidates – but a stand-off developed between, on the one hand, India and China, and, on the other, the United States at the head of a group of agricultural exporting countries. Failure to bridge this gap led WTO Director General Pascal Lamy to end the Ministerial with an admission of defeat.
There will talk up prospects for a resumption of negotiations in the near future. But the emotions on display among the principals yesterday tell a different story. European Trade Commissioner Peter Mandelson called the setback “heartbreaking,” and a “collective failure“; Susan Schwab, the United States Trade Representative, was visibly frustrated and distressed; while, in a measure of the last-minute desperation, Washington Trade Daily reported that Celso Amorim, the Brazilian foreign minister, pressed Schwab and India’s Kamal Nath “to have one last go €¦ Whatever agreement you two reach I will accept without questions.”
The Doha Round is dead. While India, China, and the United States were the ones left standing in the immediate blame-game of musical chairs yesterday, there are many others who share responsibility. Like Murder on the Orient Express, the answer to the question “who killed the Doha Round?” is that they all did it. The United States, India, China, Brazil, the European Union, the farm lobbies, the industrialists €¦ the list goes on and on. Europe neatly escaped blame for the final stand-off, but cost precious time at an earlier stage in the negotiations by failing to make an improved offer on agriculture. Key European leaders contributed their share of unhelpful comments from the sidelines in the closing stretch. Irish farmers staged protests against a deal. And French Agriculture Minister Michel Barnier appeared like a specter at the feast in Geneva, convening regular meetings of the European Council on the margins of the Ministerial and issuing statements, including the threat that France and eight other EU members states would reject the draft deal as it stood.
As Alan Beattie reported in the Financial Times, defensive interests – the agriculture lobbies, in particular – were out in force in Geneva this past week, while those constituencies that could normally be relied upon to push for trade deals, especially the wider business community, were notable by their absence. Not only was the number of business delegations trying to influence the outcome last week lower than at any other WTO Ministerial in years, but many private sector representatives don’t even seem to follow the negotiations, believing that there aren’t sufficient gains to be had from an agreement. This behavior is difficult to understand. Latest models on tariff reductions in industrial goods may only point to modest trade opening, but, as Patrick Messerlin has argued in a recent GMF policy brief, this should hardly come at a surprise after two decades of industrial tariff cuts by the largest world economies. But industrialists are mistakenly disregarding the value of the increased certainty stemming from large cuts to bound tariffs. A huge share of current trade is living on borrowed time in the gap between bound and applied tariffs. Now, without an agreement, average tariffs across a range of the largest economies in the WTO could surge at any time by up to three-and-a-half times.
So what’s next?
First, there will be a period of reflection, maybe a lag of as much as two years before any serious decisions are made. The political calendar – with elections in key WTO members around the world – looks like becoming more, not less, unforgiving. There will doubtless be a race to bilaterals, with all the risks they pose in terms of lack of transparency, trade diversion, and power imbalances. It may be that a frank pronouncement of the death of the Doha Round is necessary to allow for a “harvesting of the organs” – valuable elements of the deal such as trade facilitation, duty-free-quota-free access to large economies for the poorest countries, and so forth – which could serve as important confidence-building measures for getting the WTO back on track.
Ultimately, however, the failure of Doha underscores the necessity of rethinking the purpose and functioning of the World Trade Organization as an institution. Shallower and faster agreements – rather than the great omnibus trade rounds of the past – could be one way to facilitate progress so that the WTO can keep pace with rapid changes in the global economy. And perhaps the single undertaking itself – the negotiating principle that nothing is agreed until everything is agreed, and by all 153 members of the WTO – will have to be relaxed.
But for now, it is a matter of letting the dust settle. And of coming to terms with the fact that, collectively, the WTO membership as a whole just lost the option of a global insurance policy for the uncertain economic times ahead.
Joe Guinan is a senior program officer and Nicola Lightner is a program officer with GMF’s Economic Policy Program.