Sources of the WTO’s impasse

Ujal Singh Bhatia 11 May 2011

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The Doha Round is not dead but perilously close to that. Having said that, I believe there is no inevitability about its demise. On the contrary, there are good reasons to believe that good sense will eventually prevail, as I argued in my previous column (Bhatia 2011).

Globalisation cannot indefinitely move on autopilot. Challenges will continue to emerge and will have to be addressed. The default option is global chaos. Business cannot be expected to look beyond its bottom lines. The onus is on governments to manage globalisation. Therefore, there is no escape from multilateralism. The Doha Round has to succeed if global cooperation is to prevail.

Why is Doha blocked?

The world is nowhere near a shared understanding on what the source of the WTO “illness” is and what medicines are needed for the cure. But there is a danger of over analysis when it comes to the question: Why is the Doha Round near death?

The reasons for the present impasse are not systemic. They have less to do with faulty institutional design than with the concerns of one large member, specifically the domestic political compulsions of the US. Some others may talk of their dissatisfaction with the results achieved so far, but in my view, the remaining 152 members would be quite happy to sign on to a deal, should such an opportunity arise, and move on.

While the US was the prime mover (along with the EU) for the launch of the Round, it has since donned the mantle of victimhood and there seems to be a broadly shared view within the US that they have been in some way short-changed in the negotiations. I would not like to dwell on how this has come to pass, but clearly the growing economic challenge from the large emerging economies has seriously dented US business confidence.

For me the key issue is that, unlike in the past, business is not pushing for a quick outcome, partly because its market access concerns are being largely taken care of by unilateral and regional liberalisation and partly because the Doha agenda inadequately addresses its ground level concerns. This is clearly a new situation – in previous Rounds, business was the driving force behind the negotiations.

Due to the changed global economic situation, the rationale for the Round has shifted from new market access to consolidation, predictability, equity, and transparency through reduced bindings and stronger rules. These issues are more systemic than dollars-and-cents market-access issues. As such, they are more the concern of governments than businesses. Governments therefore have a greater responsibility for moving the ball on the Doha Round. This can only happen when the politics is auspicious. Unfortunately, that is not so presently.

Addressing the oversimplifications

In the broader debate on the Doha Round elsewhere, a number of simplistic comments have been made. I would like to refer to two of them.

  • First, that the big deal-breaking issue is the reluctance of emerging economies to agree to US demands for near zero tariffs in three sectors of interest to the US.

This implies that once the emerging economies fall in line on this issue, it should be possible to wrap up the other outstanding issues. This claim is seriously misleading.

The three-sector issue is not the only elephant in the room. The fact is that this is a big room and there are other elephants wearing camouflage. For many months there has been no engagement on the issue that was blamed for Doha’s last crisis in 2008 – the Special Safeguard Mechanism that would allow new protection on agricultural goods in the face of import surges.

We all know the potential of that one. Moreover, there has been little discussion on agricultural subsidies in general and cotton subsidies in particular. The US demand for more market access in agriculture and services remains in the background somewhere. All these issues are of the same order of importance in terms of their deal breaking potential.

  • The second impression is even more problematic – the impression that the US is holding out for a more ambitious outcome in defence of global trade liberalisation and that the emerging economies in particular are resisting this.

Judged by whatever metric we may adopt, the facts do not square with this claim.

The US has defensive red lines across the range of negotiating areas – agricultural subsidies, carve-outs in agricultural market access, the cotton issue, 100% duty-free-quota-free access for least developed nations, zeroing in anti-dumping investigations, stronger disciplines on standards, disciplines for services subsidies, Mode 4 (i.e. temporary cross-border movement of workers) market access in services, etc. The list is long. Suffice it to say that for a balanced and ambitious outcome to emerge, all these issues will need to be addressed.

The emerging economies must step up to leadership roles

This is not to say that emerging economies share no part of the blame for the impasse. Whichever way you slice this, the fact remains that the world has changed dramatically over the last decade. But much more of the same is to come. The emerging economies cannot continue to hide in the crowd. Given their rising role in the global economy, they will have to step up to the plate and display leadership to take the multilateral process forward. There is little evidence of that at present, perhaps because, in their assessment, the time is not right.

References

Ujal Singh Bhatia (2011) “Salvaging Doha”, VoxEU.org,10 may.
 

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Topics:  Global governance International trade

Tags:  Doha Round

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

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