Doha’s self-inflicted blows

The World Trade Organisation and its forerunner, the General Agreement on Tariffs and Trade, is arguably the foremost expression of multilateralism and the most successful institution from post-1945 international economic co-operation. Eight rounds of GATT trade negotiations, culminating in the 1994 Uruguay round agreements, introduced order into international trade relations and contributed to unprecedented economic growth over 50 years.

In 1995, the WTO took effect with a much wider brief, but it has not lived up to expectations. With about 150 member countries, the GATT tradition of consensus decisions has faltered, following a series of contentious and raucous WTO ministerial meetings.

The decision to undertake a new round of trade negotiations was agreed at the WTO ministerial session in Doha in November 2001. In the aftermath of the 9/11 terrorist attacks and following the disastrous Seattle meeting in 1999, the Organisation for Economic Co-operation and Development governments needed a positive outcome. Developing countries recognised this and seized the opportunity to get their trade and development interests on the WTO agenda. Their demands included improved access to OECD markets and trade facilitation supported by an “aid-for-trade” package.

Notwithstanding the evident benefits of trade liberalisation to OECD and emerging economies, developing countries – or at least their ruling elites – still believe that their prosperity depends on financial aid and trade preferences rather than their own domestic policies and institutional reforms. Although recent studies show that development has come from their own trade liberalisation rather than aid transfers, they prefer to believe in “the philanthropy of the compassionate society”, as pronounced by ubiquitous non-governmental organisations.

Doubts about liberal trade strategies are also appearing in OECD countries.

Globalisation has generated international economic imbalances, which are influencing political attitudes to economic policy. The large US current account deficit is balanced by export surpluses in East Asia, especially by Japan and China, which leaves these countries with large holdings of US dollar securities. These imbalances provoke demands for increased trade protection in the US.

Similar political pressures for trade protection are discernible in Europe. Several large European Union countries have high unemployment, increasing social welfare deficits and slow economic growth. Consequently, governments in France, Germany and Italy are reluctant to participate in new co-operative initiatives, including measures to promote cross-frontier trade in services within the EU.

Domestic political pressures are forcing OECD governments to be defensive about trade liberalisation and domestic deregulation to increase market competitiveness. Developing countries’ single-minded pursuit of their log of claims for preferential treatment exacerbates the opposition to liberalisation in some OECD countries.

These domestic political forces are influencing the Doha negotiations. The EU has declared it will not negotiate further on agriculture until others present their offers to liberalise trade in services and manufactures. In contrast, the G20 emerging economies ( Brazil, China, India, South Africa, etc) and the US insist that the EU must improve its offer on agriculture before they will negotiate on other agenda items. This stalemate must be broken before negotiations can begin in earnest.

There is little prospect of a comprehensive final agreement from the Doha negotiations. Some developing country members, tutored by militant NGOs, treat the WTO as another UN platform for speechmaking and posturing, not as a forum for compromise and economic progress. A limited agreement on selected agenda items would reduce respect for the WTO. Some OECD governments and some emerging economies are already prospecting regional free-trade agreements. The downside of this is that trade discrimination, the scourge of the 1930s, will spread among WTO members.

Despite the ministerial meeting called by the director-general at the end of June, little urgency has been evident among negotiators. The prospect of failure may promote a spirit of compromise. But any solution that depends on reducing supports to OECD farmers, or removing impediments to OECD imports of labour-intensive manufactures, does not inspire confidence. WTO negotiations are not an instrument to deliver economic development, social justice or global governance. Ultimately, global trade negotiations are driven by national economic policies.

David Robertson is a former commissioner of the Productivity Commission and author of “The Doha Round: Where to now for the WTO?”, Policy magazine, Centre for Independent Studies.