Getting over those Doha blues

Simon Evenett 01 August 2008

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What are we supposed to do with the Doha Round now that WTO members have failed to agree on modalities for reforming several key elements of world trade?

Hibernate or deliberate?

A recent Financial Times editorial argues that the Round is over, but many senior trade diplomats have refused to go that far. For sure, the political timetable in the US, India, and the European Union will make it almost impossible to continue serious negotiations over the next 18 months. So what should trade ministers, interested analysts, and business do in the interim? Hibernate…or deliberate?

No progress until 2009 or 2010

Deliberation is the right option. A constructive, confidence-building, and potentially ground-clearing process could serve the WTO membership well in the years to come. But for it to deliver it must be initiated and supported by senior political leaders. An independent or Geneva-led initiative could help, but its potential upside is less. Whether we like it or not there is no time left for "just one more push" before the pressures of the American and Indian elections tighten.

That doesn't mean the Doha Round negotiations have to be declared officially dead. Nor does it mean abandoning pro-development objectives at the centre of this Round. It will, however, mean a searching examination of the different means to reach common ends. The Doha Round should inform that examination and stop crowding out more systemic thinking by senior policy-makers and trade diplomats, as it has done for the past few years. Moreover, with the challenges associated with climate change, growing trade restrictions associated with border security, and the use and misuse of state and private standards to regulate trade, now is the time to break free of the Doha straight-jacket, as the closing verse of Branigan's hit suggests.

Oh It's Been Hard Enough Getting Over You
You Know You Kept Me Holdin' On Til The End
Oh It's Been Hard Enough Getting Over You
I Don't Think That I Could Say Goodbye
I Know That I Can't Say Goodbye
I Don't Think I Could Say Goodbye Again

-- Laura Branigan - It's Been Hard Enough Getting Over You


Time for forward looking thinking

This week's breakdown in Geneva revealed some stark political constraints on agricultural and goods trade liberalization, and those limits will not go away soon. But this is not the end of the matter. The WTO can contribute much more to global well-being than lowering trade barriers. Now is the time to figure out what balance between the WTO's rule-making, liberalization, juridical, and deliberation functions is needed, in light of the commercial, developmental, and political realities of the 21st century

The forward-looking, deliberative initiative on the WTO that is needed should address the following:

  • the subjects that fall within the WTO's remit (the "what?" question),
  • the contribution of the various WTO functions to different ends (the "how?" question), and
  • the need to demonstrate the relevance to a broader set of stakeholders (the "for whom?" question).

These three matters are linked.

To take just one example that is growing in importance to both developing and industrialized countries – the tightening of security checks on containers. These directly affect manufacturing exporters. They may have taken a lower profile in the Doha Round thinking that prevailing near-zero tariffs limited their stake in WTO negotiations. Given the sensitivities associated with national security matters, the WTO's transparency and deliberation functions might provide a more effective way to prod countries to adopt less trade-restrictive security measures.

Identifying such potential future initiatives is important. They would deepen the WTO's relevance to existing stakeholders, widen the set of stakeholders with a positive interest in the conclusion of WTO accords, and are consistent with the widely agreed goals of the WTO. This is exactly how we should use the year or so ahead. This is not just about expand­ing the remit of WTO -- surely the experience with the Doha Round raises some hard questions as to whether the WTO has a significant role to play in the regulation of agricultural policies and various service sectors? A cold, hard look at where the comparative advantage of the WTO lies in each major area of commerce and current and future regulation is long overdue.

The Single Undertaking approach

During the Doha Round WTO members strived to combine a series of disparate accounts into one package – the “Single Undertaking” – that all members would sign up to. In some respects this has been unfortunate: it has ignored the other - and often-more-flexible - WTO agreements that can advance com­mon goals. So-called critical mass agreements and plurilateral accords could be viable alterna­tives to agreements that require every WTO member to sign on to binding disciplines. We urgently need a bet­ter understanding of the government policies and circumstances in which such agreements and accords are more suitable than a Single Undertaking. This is not an easy task, but multilateral accords riddled with exceptions for different classes of WTO members, typical of the Doha Round, are not that appealing either. Part of the deliberation exercise could be to determine a formula from which a multi-track, yet coherent WTO could emerge.

Trade policy reform: unilateral, regional and multilateral

Governments can reform their commercial policies unilaterally, in the context of free trade agreements, and in plurilateral and multilateral WTO accords. Many developing countries have independently cut their tariff barriers a lot. Service sector reform tends to take place outside of trade agreements too. Plus, dozens of regional deals are have been negotiated during this decade. The relevance of the WTO to these significant reform dynamics needs fresh thought. Until now most of ink has been spilt on the relationship between multilateralism and regionalism, and experience would seem to suggest that there is little willingness on the part of WTO membership to accept constraints on the free trade agreements they negotiate. But that needn't be the end of the matter.

The WTO's transparency and deliberation functions could be used to identi­fy free trade agreement provisions that limit discrimination in world trade, that involve less paperwork for traders, and other better practices. Indeed, the deliberation initiative could draw on the grow­ing body of knowledge on multilateralising regionalism, as the associated body of literature is known. With respect to unilateral trade reform, further thought could be given to devising incentives for WTO members to bind these reforms. In the past some have proposed giving "credit" to countries that bind unilateral reforms. Those ideas--and others with a similar objec­tive--should be dusted off and developed further.

Dealing with the political realities head on

The reciprocal nature of WTO accords means that certain other practicalities should be met head on. For example, development campaigners may want to see WTO initiatives that reform certain industrialized country policies, such as agricultural support policies. But that won't happen unless there are more Western firms willing to lobby for WTO accords. Like­wise, commercial interests with stakes in the WTO must appreciate that the development con­cerns and multi-polar nature of the multilateral trading system aren't going away.

This reality check may be hard for some to stomach initially, but the WTO has evolved into a system where many more parties can effectively veto progress. Reciprocity may create strange bed­fellows and those partners may well vary markedly with national circumstances. Ultimately the reflection exercise that is needed should lay the foundations a broader constituency in fa­vor of multilateral trade accords.

In one of my Vox columns posted last year, I argued that a number of inter-related factors have frustrated progress in the Doha Round. The deterioration in the world economy after  the first quarter of 2007 and the uncertainties created by the coming US presidential election have probably sharpened minds, but ultimately they haven't relaxed these four constraints.

If any­thing, as this week's events have laid bare, the shadow of domestic politics in Beijing and New Delhi has lengthened over the WTO, adding to the trade policy gridlock in Washington and a perennially defensive EU. The Doha prize is now beyond reach, mak­ing one more negotiating push futile. As Elvis put it, the fair is moving on – but where?

All the rides are over and done
It's late and no prizes are left to be won
The rides are closed, it's the end of the day
The horses are moving away
Yes the fair's moving on
--Elvis Presley- The Fair's Moving On

Acri­mony and discord - the likely result of some very sensitive cases being brought to WTO dispute settlement - with the consequent risk of an ever greater political backlash, must not be allowed to fill the vacuum created by the recent collapse in negotiations. Instead, now is the time for those governments that are seriously committed to the world trading system to initiate a com­prehensive, pragmatic, and open reflection exercise on the future of the WTO.

Conclusion

A delibera­tive process that identifies a work program for the WTO meeting the many needs of the 21st Century could hardly do worse than the fear-driven, adrenalin rush that the WTO mem­bership embarked upon seven years ago.



The Warwick Commission Report, published in December 2007, is a recent example of one such independent initiative. (Full disclosure: Evenett was a member of this Commission.) The Report included a proposal for a period of reflection on the future of the WTO, and this piece builds on some of the ideas presented in that Report.

The arguments were developed subsequently in a paper that I wrote titled "Reci­procity and the Doha Round Impasse: Lessons for the near term and after" and available here. More recently, I have updated these arguments; a video presentation will be available at www.evenett.com on 4 August 2008.

 

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Topics:  International trade

Tags:  WTO, Doha Round, climate change, border security, critical mass agreements, Single Undertaking, multilateralising regionalism

Professor of International Trade, University of St. Gallen; Research Fellow, CEPR

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