Can the WTO be decoupled from the Doha round?

Ujal Singh Bhatia 25 June 2011

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In recent weeks, there has been a spate of comments about the damage the Doha Round is causing to the WTO (see for example Rodrik 2011 and Schwab 2011). Such comments inevitably lead to a call for building a firewall between the two to enable the WTO to get on with the rest of its business. But can such a decoupling be achieved in practical terms? To answer this question, it is essential to delve into the political context of the impasse in the WTO.

In the nearly 50 years of its existence, GATT essentially performed two functions – it served as the multilateral platform for progressive non-discriminatory trade liberalisation and created an impressive corpus of rules which today provide the underpinnings of the global trading system. This is the legacy that the WTO inherited. The Dispute Settlement Mechanism which emerged from the Uruguay Round provides the muscle to the WTO to enforce compliance with the rules.

Two comments are in order regarding the central role played by GATT in the development of the post-war global trading system. First, even during the GATT era, as Bernard Hoekman has pointed out, much of the liberalisation took place outside the GATT and the main contribution of GATT was to consolidate the liberalisation through multilateral bindings. Second, the power and credibility of GATT were, to a large extent, due to the leadership and support of the US and the EU. These countries supported the GATT because, in a large measure, they exercised control over its agenda.

The speed and nature of trade liberalisation have changed significantly in recent years due to the rapid structural changes in the global economy which are pushing countries towards greater economic integration. The acceleration in the pace of new regional trade agreements (RTAs) and the addition of non-tariff issues to their content is driven by this need. The integration requires new rules and these are being written into the RTAs. While the RTAs are fulfilling an essential need, they are also creating a more unequal world because of the unequal power of the participants. Many of the rules being incorporated into RTAs are “WTO minus” in the sense that they reduce the policy space provided for developing countries in the GATT/WTO Agreements. The intellectual-property-right provisions in several RTA’s between developed and developing countries provide a good illustration of this point. Such provisions typically constrain the flexibilities for developing countries built into the TRIPS Agreement (trade-related aspects of intellectual property rights).

In line with the role played by GATT in the past, the WTO’s major expectations from the Doha Round are twofold:

  • bringing in to the multilateral system as much of the liberalisation that has taken place through RTAs and other means, as possible, and
  • revising WTO rules to make them more relevant for present trading conditions.

The first will arrest the continuing erosion of the non-discrimination principle. The second will thwart the trend towards unequal rules being incorporated into RTAs. Together, they will reinforce the centrality of the WTO in the global trading system. The prolonged standoff over “new” market access, by preventing the WTO from fulfilling these objectives, is causing serious damage to the global trading system. The solution to the WTO’s problems, therefore, lies not in decoupling the WTO from the Doha Round, but in enabling it to achieve an ambitious Doha outcome based on its development mandate.

There are a number of factors that lend credence to the view that the support and leadership of the US and EU for the multilateral process is diminishing. First, both continue to be preoccupied with the management of the aftermath of the financial and economic crisis. Second, the political dynamic in the WTO has shifted towards greater equality of voice among members and it has become difficult for the erstwhile leaders to have a decisive say in moulding outcomes. The increasing focus of the US and the EU on RTAs is a response to this development. The ACTA negotiations (anti-counterfeiting trade agreement) are another manifestation of this response.

Viewed from this perspective, the crisis in the WTO is not due to the Doha impasse. Doha is a symptom of the deeper crisis in the WTO which is essentially due to the changed political economy of the organisation. Only when WTO members arrive at a shared political understanding regarding the future role of the organisation can we begin to see light at the end of the tunnel. Without such an understanding, arguments for decoupling the WTO from Doha have little meaning.

The Doha Round can only conclude when members of the WTO acknowledge the systemic damage that is being caused by the paralysis in the multilateral process. The recent recognition among members that while it is not possible to conclude the Round this year, steps nevertheless need to be taken to retain the credibility of the multilateral process, is a tentative first step towards such a shared understanding. But we will have to reserve judgement for the moment as to whether this is genuinely a new beginning or yet another false dawn.

Reference

Rodrik, Dani (2011), “Martin Wolf: Doha is weakening the WTO”, Dani Rodrik’s weblog, 15 April.

Schwab, Susan C (2011), “Acknowledge Doha’s demise and move on to save the WTO”, in Richard Baldwin and Simon J Evenett, Next Steps: Getting Past the Doha Round Crisis, A VoxEU.org Publication, 28 May.

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Topics:  Frontiers of economic research International trade

Tags:  WTO, Doha Round

Formerly India’s Ambassador and Permanent Representative to the WTO in Geneva

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