WTO and Doha

Nov 09, 2009 Editorial

As we ponder the now all-but-dashed hopes that the December Copenhagen meeting on Climate Change will lead to a new Protocol, we should spare a thought for the status of the WTO’s Doha Round. A new Protocol on Climate Change, of course, will most likely incorporate incentives for the preservation of standing forests, providing us with funds for our Low Carbon Development Strategy (LCDS). The latter focuses heavily on new agricultural development and the Doha Round – the “Development Round” – focuses precisely on the same item.

The previous nine WTO negotiating rounds had all studiously excluded any meaningful discussions on agriculture – the bedrock of the underdeveloped world. The developed world in the meantime had instituted intricate systems that doled out incredible amounts of subsidies to their farmers, which then placed farmers in developing countries at a severe disadvantage. The 2001 Doha Declaration provided for negotiations aimed at substantial improvements in three areas related to trade in agriculture: market access; export subsidies and trade-distorting domestic support. However, it was felt that the offers of reductions of tariffs by the developed countries were merely symbolic in light of the vast reductions that had already been instituted and so were not reciprocal to the sacrifices demanded of the developing countries.

Last July at Geneva the major protagonists were India and the US. India directed several alliances of developing countries such as G-20, G-33 and Non-Agricultural Market Access (NAMA) to ensure that the “development dimensions” of the Doha Round were safeguarded. On the other hand, the US, the European Union and other developed countries mounted pressure on the ‘large and developing economies’ like India, China, Brazil and South Africa to throw open their markets globally for both agricultural and industrial goods. The talks collapsed.

Since then there have been several meetings that attempted to broker agreement by 2010 but these also collapsed. – On the most recent one last month, the US Brookings Institute said, “The U.S. team, anxious to ascribe fault to others, accused China of “walking away” from the deal after having first accepted it—but the Americans were the ones who could most accurately be described as abandoning it.”

It would appear as with the deal on Climate Change, the US Obama administration has not gotten its act together on international trade issues. All this bodes very poorly for completing the Doha Round in its present form. Beyond the foregone benefits, the round’s travails pose significant risks to the WTO itself. For all its flaws, the WTO is a crucial lynchpin of stability in the global economy.

It is the current embodiment of the multilateral trading system that was established after World War II to prevent a reversion to the thirties. The WTO’s rules keep a lid on the import barriers of its 153 member countries and members take their trade disputes to WTO tribunals for adjudication rather than engaging in tit-for-tat retaliation. In addition, the WTO is the guardian of the “most favoured nation” principle, under which member nations pledge to treat each other’s products on a non-discriminatory basis—a valuable bulwark against trade blocs of the sort that, during the thirties, stoked rivalries among the great powers.

The WTO’s centrality to the global trading system is already under some doubt, thanks to the proliferation in recent years of bilateral and regional trade agreements. More than 400 of these are currently in force, ranging from the well-known such as NAFTA, to the ridiculous one such as our EPA with the EU. Governments are increasingly tempted to think of these pacts as reasonable substitutes for multilateralism, especially as disillusionment deepens with the WTO’s ability to foster new deals. Although the WTO is not about to disintegrate overnight, the danger is that its authority will erode to the point that member nations will start to flout their commitments and ignore the rulings of WTO tribunals.

That would greatly increase the threat of trade wars and a breakdown in the system that has helped keep trade blocs and protectionism at bay. The world in general and small states like Guyana in particular cannot afford such an eventuality. The US has to flex.