Finance News

Column Deadlocked on Doha

The multilateral trading system, after having fostered nearly six decades of expanded trade and prosperity worldwide, is now in crisis. Despite its best intentions, the current round of trade negotiations—the Doha Development Agenda (DDA)—has proven exceptionally susceptible to deadlock. Trade negotiators in the World Trade Organization (WTO) had launched the DDA in November 2001, and had planned to complete it by January 2005. Almost seven turbulent years later—after several failed ministerial and mini-ministerial conferences and repeatedly missed deadlines—we still do not have an agreement. The declining faith in multilateralism is reflected in the proliferation of regional and bilateral trade arrangements: 387 RTAs had been notified to the GATT/WTO by July 2007. The forthcoming mini-ministerial talks, to be held in Geneva from 21 July, provide a crucial opportunity for trade and foreign ministers to rescue the DDA.

Much is at stake. A World Bank study estimates that global gains would be in the range of $95-120 billion per year through an agreement based on the Hong Kong Ministerial Declaration of 2005 (which represents a narrower agenda than the one that was launched at Doha in 2001). But if the Doha negotiations fail, more will be lost than the gains from trade—namely the opportunity to lift billions of peoples worldwide out of poverty. The WTO provides stability to the world of international trade by locking in the commitments of states to lower their tariff barriers through a system of rules that is enforceable through its Dispute Settlement Mechanism. A failed DDA will undermine the credibility of the WTO, and also the system of rules that it governs. Those who wish for a weakened WTO do so at their own peril at even the best of times; to risk the weakening of the WTO in the perilous economic times that we live in today would be catastrophic. And yet, if so much is at stake, why has an agreement proven so difficult to reach?

An important reason for the failure to conclude the DDA lies in the lack of political will and leadership on the part of major developed and developing countries. As a first step, political leadership in the WTO involves a demonstration of firmness and commitment on certain values and goals. Developed countries have seldom had a problem doing this, given their large markets and greater bargaining power. But developing countries have also shown great success in demonstrating firmness of intent in the recent negotiations, especially through coalitions such as the G20, the G33, and the NAMA-11 group. But standing firm on its own does not make a WTO leader. The second and crucial step of political leadership in the WTO requires the courage and willingness to make some concessions, and to be able to return to one's domestic constituencies with the reassurance that the package thus obtained will be of benefit to all members of society (with national policies of redistribution and welfare if necessary). Neither the key developed countries nor the major developing ones have demonstrated this second step of leadership so far.

For the developed world, particularly the EU and the US, ministers will need to mobilise the pro-trade lobbies at home that balance out against the protectionist lobbies on agriculture. By repeatedly referring to the Doha Development Agenda, political constituencies in the OECD countries have begun to see the round in terms of charity that they are bestowing on the developing world, as opposed to a round in their own interest. This is far from the truth. The gains from the DDA negotiations will benefit the developed countries as well as their developing counterparts. A recognition of this by politicians, and a successful delivery of this message to pro-trade interest groups and lobbies at home, will make it easier for the OECD governments to make concessions and conclude the round.

For the developing world too, the framing of the current round as the Doha Development Agenda has created a different set of problems. These take the form of excessive and unfair expectations from the round, and result in a lack of willingness to make any concessions until these expectations are met. Leaders from developing countries would benefit from taking a step back to specify their goals, and also identifying the concessions that they could feasibly make to the developed countries. To some extent, these goals and backup strategies will need to be negotiated with their allies in the different coalitions. Here, special mention must be made of the role that Brazil and India have acquired at the High Table of the negotiation process as part of the G4, the "Five Interested Parties", or the "New Quad." By mediating and coordinating the positions of various developing country coalitions, both Brazil and India could play a key role in facilitating a viable, inclusive, and legitimate agreement.

Ministers of the "G4 plus," Geneva has done its homework. The conclusion of this round - with all the gains that it will deliver - lies in your hands.

The author teaches international political economy at the Centre of International Studies, University of Cambridge, and is senior research fellow at the Centre for International Studies, University of Oxford