By Peter Sutherland
LONDON: The Doha Round of global free-trade negotiations is on the brink of collapse after ten years of talking. This is a tragedy in the making, because the gains available from what has already been agreed upon in the negotiations are considerable, and would provide a major boost to the global economy. Failure would thus constitute a serious indictment of political leaders in major trading countries in both the developed and developing worlds, possibly costing the global economy $700 billion in additional annual income.
By contrast, if the Round is completed, aside from this generalized gain, specific and important improvements would benefit the world’s least developed countries. The European Union, for example, has already agreed that all such countries will be afforded duty- and quota-free market access for their exports. Furthermore, EU export subsidies for agricultural products will be abolished from 2013.
Other such examples abound. But probably none will be realized if the general agreement completing the Round is not concluded. For the rule governing global trade rounds is that nothing is deliverable until everything is agreed.
Moreover, completing the Doha Round is crucial for the World Trade Organization. Brazil’s ambassador to the WTO, Roberto Azevedo, said recently that his country “rejects the notion that this organization’s credibility and legitimacy are in a death embrace with the Round. The WTO is bigger than the Round and transcends it.”
Of course, he is right: even if the Doha Round fails, the WTO will survive. But it would be no minor event, and it would take years for the organization to recover.
Indeed, all previous trade rounds – even the Uruguay Round, which took eight years to complete – concluded favorably. To pretend that the Doha Round’s failure would not have negative and lasting effects for the WTO betrays a profound lack of understanding of the risks we run, as well as of the Round’s vital importance for weaker and smaller states.
So, what will happen? Either the Round will fail outright, or some parts of it will be salvaged, with the rest (most of the areas under negotiation) put to one side amid promises to return to them after the 2012 elections in the United States. Either way, the consequences promise to be far-reaching.
During the last 20 years, the world has witnessed dramatic proliferation of regional and bilateral preferential trade agreements. Indeed, bilateral trade flows covered by such agreements now amount to roughly half of the world’s imports, and have contributed significantly to the dramatic growth of trade.
Yet such agreements pose great dangers if they are not subject to effective WTO oversight. For one thing, they are largely negotiated by states with great asymmetries of power. There is a big difference between multilateral negotiations of universal rules and the effective imposition of rules — and even concessions — in a negotiation between the EU or the US and a smaller trade partner. While large developing countries — such as Brazil, Russia, India, and China – can avoid such impositions from developed economies, most others cannot.
Aside from the great damage caused by unequal bargaining power outside of the multilateral framework, the path of bilateral negotiations threatens to remove the focus from universal outcomes, which are the bedrock of globalization. The basic principle of non-discrimination is at risk: once trading countries negotiate separately with each other, various forms of discrimination become inevitable, giving rise to various kinds of conflicts. A focus on preferential agreements would fragment the global trading system, rather than integrating it.
The gradual marginalization of the WTO would also erode its credibility in fulfilling its key role as adjudicator of trade disputes. The success of the WTO’s adjudication system is reflected in its widespread acceptance. Even when WTO decisions have had serious negative effects on a trading partner, they have generally been accepted.
This constitutes a remarkable advance in global governance. But it will be endangered if the credibility of the WTO is damaged by a Doha Round failure.
The primary responsibility for completing the Round now rests with the US, Brazil, China, and India. This group’s inflexibility is at the root of the current impasse, and, should the Round fail,
they will all, of course, have their own excuses and blame everyone but themselves.
Yet, with even a little flexibility, the Round could still succeed. The US administration’s heart has not been in this negotiation for a long time. However foolish that stance may be, it is even harder to understand why China, Brazil, and India have not made a more determined effort. They have so much to lose. In fact, Brazil would most likely be the biggest winner from the Round, but it has not made the relatively small concessions in non-agricultural market access that are necessary.
All of this recalls earlier times, which one might have hoped were long behind us. The threat to the globalization process may not be immediately apparent, but it is very real. The failure of the Doha Round would be more than a footnote in future history books; it would be a hugely consequential case of political myopia at a time of great opportunity.
Most distressing of all, even now, with the consequences of failure staring our political leaders in the face, they do not get it.
Peter Sutherland, former Director General of the GATT and the WTO, is currently co-chair of the High-level Expert Group on Trade, set up by the UK, German, Turkish, and Indonesian governments to examine the world trading system. Project Syndicate (www.project-syndicate.org).
