What to do about Doha

Anne Krueger 28 April 2011

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In an ideal world, the Doha Round would have been completed by now.

Since it has not been, the best outcome now would be to have a strong agreement that could quickly be negotiated, especially enhancing the agreements on the liberalisation of services and agriculture.

The importance of the trade system

The sharp drop in trade at the beginning of the 2008-2009 Great Recession was a vivid reminder to all of how important international trade has become in the global economy. Trade has been a major contributor to the growth of all economies, and has enabled growth rates heretofore unheard of among the emerging markets that avail themselves of the open international trading system.

Although the financial systems of most emerging markets were not greatly affected, the sharp drops in exports led to serious decreases in real GDP in many emerging markets. Even among other countries, the importance of trade has been vividly demonstrated.

Interdependence makes the rules-based system more important

As interdependence has increased, the importance of a rules-based open trading system has been magnified. In addition, new issues have arisen and existing issues have become increasingly important as new technology has bound the world more closely together.

Many of these are centred on services because of the advances enabled by the internet and information technology. The potential gains for the international economy in the 21st century through open trade in services may well be similar to the gains from liberalising trade in goods in the last century. As some low-income countries have discovered, access to world-class low-cost services is often a necessary condition for their ability to increase exports.

Trade in food in an era of shortages

In agriculture, concern is increasing about shortages of agricultural commodities. Liberalising trade in agricultural commodities, including eschewing export prohibitions, would greatly increase global agricultural efficiency. If some countries choose to use export prohibitions in times of high prices, other countries will decide to resort to “food self-sufficiency” with attendant losses to both the exporting countries (losing their markets in “normal” times) and importing countries (facing higher costs of agricultural goods). Without international agreement among both exporters and importers, the risks of further inefficiencies in world agriculture are great.

Doing “Doha Lite” is better than letting Doha drift

However, if it is not possible to reach a credible plan for moving forward, it would be much better to complete a “Doha lite” than to let the Doha Round drift and die a slow death (or delay for a few more years with no evident signs of progress).

  • Failing to complete the Doha Round after all this time would not only forego the gains that would arise from implementing what has already agreed upon, but it would further seriously damage the already-wounded WTO.
  • Letting more time pass with the Doha Round still “alive” with no signs of significant progress would increase the damage and reduce the WTO’s stature still further.

If the reality is that little or nothing more can be agreed in further negotiations, there are three choices:

  • Complete a Doha lite quickly with what has been agreed;
  • Declare defeat explicitly and terminate the round; or
  • Let the Doha Round die a slow death by continued inaction.

Of these, letting the Doha Round drift is by far the worst option.

The stature of the WTO diminishes as time passes with no visible momentum. Yet all participants agree that the WTO is important for what it has already achieved, in particular its role in continuing the ideal of an open multilateral trading system (admittedly not always adhered to), in dispute settlement, and in enabling a rules-based international trading system.

Better a quick death than a lingering illness that undermines the WTO

As the WTO’s standing diminishes, these existing commitments are gradually eroded. Far better to pronounce the Doha Round ended and to move on to a work programme where progress is possible than to be paralysed by an unbreakable Doha impasse.

Termination, if it is all that can be achieved, could be made less injurious if accompanied by a work programme going forward, such as developing protocols on free trade agreements.

Conclusions

Concluding the Doha Round with that which has already been agreed (‘Doha lite”) would be vastly preferable to an end to the round with no agreement. Although there would still be criticisms of the WTO, the agreements to date would enable progress, albeit more slowly than most would like.

Best of all, however, would be to make sufficient progress to be able to facilitate a very positive and credible communiqué and a timetable. There are large gains to be had in services and agriculture, in addition to those attainable from that which has already been agreed.

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Topics:  International trade

Tags:  US, China, Doha Round, India, global governance, Brazil

Professor of International Economics at Johns Hopkins University

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CEPR Policy Research