Introduction

Richard Baldwin, Simon Evenett 28 May 2011

a

A

Global leaders face a dilemma over the WTO multilateral trade negotiations known as the Doha Round. The talks are dead in the water; both movement forwards and movement backwards seem blocked. How did we get here? Current and former trade policy officials typically emphasise two points.

  • Ten years of talks have made some progress but it now must be taken as a hard fact that the Doha Round in its entirety will not finish this year.
  • No government is willing to announce publicly that they want to abandon the Round.

The sources of unwillingness vary. Some argue that abandoning the Round would throw away genuine progress, such as the ultimate phase-out of agricultural export subsidies. Others wish to maintain attention focused on particular problems in the trade system. Yet others simply fear that they’ll be blamed for delivering the bad news.

Next Steps: Saving the WTO from the Doha Round

World leaders must now decide how to tackle this dilemma at the WTO’s next key meeting on 31 May 2011. Logically, there are only 3 roads ahead:

  • Road 1: Declare failure and call for a period of reflection;
  • Road 2: Buy time by suspending the Round; or
  • Road 3: Think creatively about work-around solutions that avoid acrimony and lock in some of the progress to date.

This eBook on “Next Steps: Getting Past the Doha Round Crisis” gathers the thinking of a handful of the world’s most experienced Doha experts, namely: former US Trade Representative Susan Schwab, India’s former WTO Ambassador Ujal Singh Bhatia, China’s former WTO Ambassador Zenyu Sun, Canada’s former WTO Ambassador John Weekes, and Hong Kong’s former WTO Ambassador Stuart Harbinson – all of whom spent years directly engaged in Doha negotiations.

Road 1: The pitfalls of declaring failure

Susan Schwab argues strongly that declaring Doha’s demise is essential to allowing the WTO to move on. John Weekes likewise argues: “It would be damaging to invest more resources and credibility in something that can't be done.” Ujal Singh Bhatia, by contrast, argues that Road 1 could lead to unpredictable results. Zenyu Sun notes that declaring the Doha Round to be dead would be easy, but then what? “Would such an announcement inspire people to inject more energy into the work of the organisation? Would it serve the purpose of strengthening the multilateral trading system? I rather doubt it”, he writes.

These judgements on the medium- to long-term ramifications differ, but the short-term fallout is clear. Declaring the Round “dead” would invite an immediate storm of recrimination among WTO members. A great deal of hope and effort has been invested in the Round by nations across the globe. Most WTO members are still looking for the Doha Round to effect critical adjustments to the world trading system – especially a rebalancing of the level of openness to agricultural versus industrial trade (Nassar and Perez 2011). If one or more of the Big-5 reject a deal that most members still think is doable, the blame game could get very nasty.

There is a great danger that this level of ill-will could undermine multilateral trade cooperation for years. It could lock in the growing perception that the WTO is not a place where serious negotiations can be conducted. The US in particular is likely to be subject to severe criticism in a way that might have the unintended consequence of convincing US Congressional and private sector groups that the WTO is not a forum where America can do business. Such an outcome would serve no one’s interests.

Despite the clear logic of Schwab’s and Weekes’ arguments, the pitfalls highlighted by Bhatia and Sun find resonance with most world leaders. This is why almost every WTO member opposes Road 1. As a consequence, it is extremely unlikely that WTO members will decide to declare Doha dead any time soon.

Road 2: The pitfalls of suspension

Suspension is certainly the most politically expedient choice for the Big-5, and it is superficially attractive. The logic is well expressed in the old story about a man – condemned to death by his Emperor – who obtains a year’s stay of execution by promising to teach the Emperor’s horse to sing. “Much could happen in a year,” the man reasons. “The Emperor could die, I could die, the horse could sing."

But the usual merits of muddling through don’t apply to Doha. Suspensions have been tried so often that everyone would know that suspension is just a circuitous means of killing the Round; Road 2 is just the long route to Road 1. All the pitfalls of Road 1 therefore also apply to Road 2.

But suspension would be even worse in many ways. The world of trade is changing more rapidly than negotiating positions, so each delay seems to make a compromise based on the existing elements even less likely. Worse still, a suspension would strengthen and spread the belief that the WTO is not an appropriate venue for multilateral negotiations. As Ujal Singh Bhatia writes: “the Round will continue to hang like an albatross around the WTO’s neck, preventing it from addressing new challenges to the global trading system.” This would be particular worrisome since the world economy is moving into a phase of great stress. It is facing new challenges that will require multilateral solutions – issues like food security, natural-resource export restrictions, and trade in goods, services and technology that are essential to climate-change adaption and mitigation.

Road 3: A small package followed by a big package

The third road seems the most likely way to move past the Doha dilemma of not being able to move forwards or backwards on the broad agenda. The idea here is that the agenda would be sorted into “do-able” and “not yet do-able” piles. Nations would move forward on a small package of do-ables for December 2011 while agreeing to discuss the bigger issues later under revised ground rules that would be more likely to permit the trade-offs necessary to make the big package acceptable to all members.

As Stuart Harbinson puts it, Doha is like a ship run aground; a small package of deliverables for December 2011 would act as a “patch” to keep the “good ship Doha” afloat until the high tide comes in and lifts the ship off the rocks. “In this analogy the ‘high tide’ would be a change in the global economic and political seascape, enabling the major trading economies to settle their differences and bring the ship safely into harbour”, he writes.

Choices to make on the small package

All five experienced trade negotiators contributing to this eBook – and most of the WTO delegations with whom we spoke – believe that it is worth trying to lock in agreement on a small number of areas by the end of 2011. There are two critical issues to decide:

i)        How much time should be spent on negotiating the small package?

ii)      Which items should be in the small package?

The contributors disagree over the first issue. Susan Schwab argues for giving it not more than 2 weeks; others suggest longer. They all, however, recognise that a prolonged and contentious negotiation on a small package – especially one that ultimately proved fruitless – would solve nothing and might harm the system.

There is far more agreement on the second issue – possible composition of the small package. All the contributors, and most of the WTO delegations with whom we spoke, suggest that some items on Doha’s massive negotiating agenda are close to conclusion. Indeed, the lists are remarkably similar despite the vast differences in the contributors’ perspectives. They all point out, however, that striking even a very restrained list of agreement will require abundant goodwill and hard negotiating.

Suggestions for the small-package items include:

  • Some sort of accord on duty-free, quota-free treatment for least developed nations;
  • A waiver that allows WTO members to provide preferential access to services trade from least developed nations;
  • An agreement to reduce distortions in cotton to the benefit of least developed nations;
  • A package of measures that promote “trade facilitation”, i.e. reducing barriers to imports stemming from excessive red-tape barriers in customs, inferior port infrastructure, and other non-trade-policy impediments to trade;
  • An agreement on a monitoring mechanism for special and differential treatment;
  • An agreement to make permanent the transparency mechanism for regional trade agreements that has been operating successfully for years;
  • An agreement on certain non-tariff barriers;
  • An agreement formalising cooperation between the WTO and various multilateral environmental agreements.

Other issues may ultimately prove tractable or necessary to provide balance. Those most often mentioned include a standstill agreement on fisheries subsidies, certain aspects of the less controversial rules negotiations, and export subsidies. Such a package could also include other DDA matters for which the negotiations could be completed quickly or non-DDA matters where the WTO membership is at one, such as the promising negotiations to upgrade the WTO's Agreement on Government Procurement.

The final issue is what to call the small package; this is not a trivial matter.

  • One option is to just boldly call the small package the “Doha Round” – to declare victory and move on.

While this would clearly disappoint many, it speaks to the objective of not letting the Round drag down the WTO – not allowing the WTO’s credibility to be further damaged by endless discussions that can never led to a happy ending.

Of course, this option would leave unsolved the core Doha issues – reducing distortions in and improving market access for industrial goods, agricultural products, and services trade, and updating the rules. But it might allow members to re-craft the parameters of the negotiations in a way that would be more likely to lead to success. This is clearly the view taken by Susan Schwab and John Weekes. As John Weekes puts it: “Not completing the Doha Round would be a serious setback to the WTO and the multilateral trading system. However, if it is clear that the Round cannot be concluded successfully, it is better to admit that and work constructively to develop an agenda for the future work of the organisation.”

Another option would be to wrap up the collection of small agreements into a package called the “Doha down payment” or “Doha deliverables”, or “Doha early harvest” as a way of stressing that all the Doha agenda items are still on the table.

A third option would be to view the individual items as standalone agreements to be agreed by the ministers of WTO members at the December meeting without clear reference to what comes next.

This brings us to the next major element of the Road 3 pathway: What to do with the rest of the agenda?

Choices to make on the big package

Albert Einstein once defined insanity as doing the same thing over and over and expecting different results. This makes it clear that any complete plan for a way past the Doha dilemma must change something in the way the negotiations have been operating.

Any multilateral trade negotiation involves choice on a series of negotiating rules or conventions. The Doha Round has accreted an odd constellation of these. Some are fundamental and therefore extremely difficult to change. These include the idea that everything must be agreed by all before anything is agreed (the so-called single-undertaking principle) or the choice to focus on the particular tariff-cutting formula known as the Swiss formulas. But many of the choices are less central, such as the exact way in which flexibilities on tariff-cutting are to be decided.

The ramifications of these procedures on the negotiating dynamic were not well understood years ago when the original decisions were taken. The lack of understanding is even deeper when it comes to the joint operation and interaction among the conventions.

For these reasons, the set of negotiating conventions that guide Round may no longer be optimal. Consideration of the pros and cons of alternatives might identify other ways of finding a package of trade-offs that is acceptable to all.

The forward-looking agenda

A number of contributors suggested that the process of rebuilding momentum and confidence in the ultimate outcome could be boosted by agreeing to launch work programmes (not actual negotiations) on how the WTO could address 21st-century trade issues that have come to the fore since the Doha agenda was set in 2001.

Here, there are two basic lines. The first would consider WTO institutional reform; the second would consider new issues, such as new disciplines to underpin the increasing convergence of trade, investment, and services (as is now routinely done in regional trade agreements), setting limits on acceptable national climate policies with trade implications, or export restrictions.

There certainly seems merit to these idea. If nothing else, it would interject new dimensions to discussions that have been going on for a decade. It would also make it clear that we need to safeguard the WTO as a forum for multilateral discussions on critical 21st-century issues.

Concluding remarks

Many decent, hard-working public servants have committed plenty of energy to the Doha Round since its inception. At this critical time, any temptation for recriminations or lapses into bitter disappointment should be set to one side to let governments chart a new path for the WTO. The circumstances facing WTO members in the middle of 2011 are hardly ideal, and the set of options that stand any chance of acceptance is narrow. In times like these, it would be a mistake to make the perfect the enemy of the good. It is time to think creatively and cooperatively about getting the WTO past the Doha crisis.

A decision, or non-decision, that led to several more years of drift – years that will be complicated by elections and changes in governments in some of the leading trading powers – could turn out to be the beginning of the end for the WTO’s role as leader of the global trading system. The alternative – uncoordinated developments led by the Big-5 in their own systems of regional trade agreements – is a very plausible outcome at this stage, but not one that will ultimately serve anyone’s long-run interests.

References

Andre Nassar and Carlos Perez (2011). “Why WTO members should not give up the Doha Round: The case of agricultural trade”, in Richard Baldwin and Simon Evenett (eds.), Why World Leaders Must Resist the False Promise of a Doha Delay, VoxEU, April.

a

A

Topics:  Global governance International trade

Tags:  WTO, Doha Round, Next Steps Doha

Professor of International Economics at The Graduate Institute, Geneva; Founder & Editor-in-Chief of VoxEU.org; exPresident of CEPR

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

Events

CEPR Policy Research