The failure on Tuesday (29) to secure agreement on the Doha Round of world trade talks is rightly being presented as yet another missed opportunity for improving the trading opportunities for all countries, including the world’s poorest. Back in 2001 when this trade round was launched it was presented as a round that would focus on the needs of the world’s poorer nations. Failure to get an agreement will damage those countries most of all.
Economists are famously unable to agree on almost anything, yet the one proposition that does unite them is that liberalising international trade from national protective controls will generate gains for all – rich and poor countries alike. Of course the problem with that proposition is that removing controls on imports – be this for agricultural or manufacturing products or services – is not painless. Domestic suppliers inevitably will face tougher competition and some local producers may be forced out of business. This is particularly the case where trade concessions are granted for products that can be produced ‘abroad’ much more cheaply than at home. On the plus side, of course, domestic consumers will gain from access to lower priced products as new export opportunities are made available to suppliers from other countries – very often the world’s poorest nations. And as these countries benefit from new exports, and their economies grow, all countries stand to gain from the rising trading opportunities that result.
What happened last week was that a few of the world’s key trading countries (the US, China, India) were unable to agree on how to manage the transition to freer trade in agricultural and manufacturing products. No agreement could be reached on how to spread the “pains and gains” between themselves.
This is far from a new problem. This trade round, as others before it, has been beset by this very issue really since it began in 2001. Much of the dispute centred around a specific issue, i.e. the special safeguard measures (SSM) to be applied by developing countries. Countries such as
It should be stressed that the EU was not involved in this dispute and in this respect cannot be blamed this time for the collapse of this round of
What makes last week’s failure especially worrying, however, is that it occurred against a backdrop of what is increasingly looking like an imminent and possibly global economic recession within the richer countries – driven by rising fuel and commodity prices – which is not an environment conducive to trade liberalisation. And there is the not trivial matter of the forthcoming
But the challenges lie not only across the
Notwithstanding this latest crisis, there is a sense that most participants are keen to see this trade round brought to a successful conclusion. The question is to what extent they are prepared to make the short term sacrifices necessary in the interests of securing what will be the very real long term gains.
The timing of the current failure is dire, coinciding as it is with a global economic downturn. There is a real risk that the world’s poorer nations will suffer a double-whammy – first from the immediate effects of declining economic activity and so demand in the richer (and recession-prone) countries and second from a significant lowering of their longer term prospects for raising their levels of exports and so economic growth.
Certainly it is fair to say that the deal on the WTO trade talks table would have had some serious implications for some parts of
On the other hand, its failure could have a considerably more serious longer term consequence for the multilateral trading order as we know it today. If the Doha Round fails, then serious questions will be raised about the continued role of the World Trade Organisation (WTO). The sole remit of the WTO is to manage global trading relations on a multilateral basis – that is by including all 153 countries who have been admitted to its ranks in the negotiations, including of course many less developed countries. If it cannot perform this function then there is a very real likelihood that the WTO will be overtaken by direct negotiations between the world’s largest trading blocs such as the
Globalisation has been, and can continue to be, a positive force for all trading nations. It can lead to rising prosperity and greater opportunities in all countries, including the poorest. But that will only be assured if world trade talks are open to all trading nations: that is are truly multilateral. The WTO is the only guarantor of multilateralism, and in that role is absolutely central to ensuring that the poor as well as the rich countries are able to enjoy the much needed gains from freer international trade.