Doha is dead
February 6, 2012
Nations belonging to the World Trade Organization (WTO) had big plans when they kicked off their first round of negotiations in the capital of Qatar, Doha, in 2001.
The removal of import tariffs and other customs barriers were meant to boost international trade flows and generate several hundred billion euros of additional wealth around the world annually.
Claims that developing countries would benefit in particular led the negotiations to be dubbed the "Doha Development Round."
More than a decade later, those ambitions have been ground to dust. Despite years of negotiations, the Doha delegates failed to reach an agreement on 20 trade-related themes to form a new deal. WTO rules require member states to unanimously agree on all points included in the round before an agreement becomes binding.
First Agriculture, then industry
Agriculture has been one of the biggest sticking points in the Doha Round. Should rich Western nations be forced to stop supplying billions of euros in farming subsidies? And should poor countries in the southern hemisphere be allowed to use tariffs to protect their farmers from powerful foreign competitors?
These questions divided member states' top trade and economy officials at the biennial WTO ministerial conference held at the Mexican resort of Cancun in 2003. But negotiations rolled on and compromises on agriculture were eventually made.
However, the next major hurdle proved to be much harder to overcome.
"We know which of the 20 themes is really blocking a deal: the reduction of tariffs on industrial goods," WTO Director General Pascal Lamy said at the 2011 ministerial conference held in Geneva.
"This issue has exposed unbridgeable differences between the United States on one side and emerging nations on the other."
The dispute about trade in manufactured goods reflects deep changes in the structure of the global economy. For decades the world was divided into two clearly defined groups: rich industrialized nations and poor developing nations. Then rapid economic growth in nations like China, Brazil and India created a third group: emerging powers capable of competing against richer nations in the automobile and engineering sectors, for example.
A level playing field?
"The US argument is: Emerging economies are competing against us, so they should be made to follow the same rules we do," Lamy said. In other words: China and India should not be permitted to protect their industries more than the United States.
Emerging economies say they accept the need to bear more responsibilities than poorer countries, Lamy said, but that doesn't mean they're willing to follow the same rules as rich industrialized nations.
"There are many reasons for this. Some are purely political. If China, India, Brazil or Indonesia accept the same rules as industrialized countries, that would have serious consequences for negotiations about climate change."
Talks aimed at curbing carbon dioxide emissions are coordinated by the United Nations, not the WTO. Emerging nations oppose strict regulation aimed at preventing climate change because they worry it could smother economic growth. They argue industrialized economies should make the biggest sacrifices because they profited most from the lack of regulation in the past and because their citizens continue to emit the highest amounts of carbon per capita.
American fears
Washington's decision to take a hard line on the manufacturing sector is not without reason. In recent decades, the US has lost a large number of industrial jobs as the national trade deficit climbed. The embattled superpower sees itself as a victim of globalization. Pushing ahead with further trade liberalization measures would only make the situation worse and be impossible to sell to voters in the lead-up to a presidential election.
The failure of the Doha Round was in the interests of America's industrial lobbies and its trade unions, said Jagdish Bhagwati, an economist and globalization proponent from Columbia University in New York. Fewer trade barriers would mean more competition.
"President Obama is hesitant when it comes to trade. I don't think I heard him say the word 'Doha' once last year," Bhagwati said.
"He could have said: 'Let's wrap up these talks and act on what we did manage to agree. We can leave rest for the next round of talks.' That would have made at least a limited deal possible."
Bhagwati said that didn't happen - partly because Obama didn't want to, but also because his advisors are averse to globalization.
"The Obama administration is full of people who are afraid of trade."
Free trade renaissance
The failure of the Doha Round of multilateral talks means future reform is most likely to occur via bilateral agreements between individual nations or blocs.
Speaking at the World Economic Forum in Davos last month, German Chancellor Angela Merkel said the European Union was interested in forging new deals with trade partners: "We reached an agreement with South Korea, and we're working on one with Japan. We also see a lot of opportunities for a transatlantic free trade zone."
Critics say bilateral frameworks allow major powers like the EU and the US to squeeze more concessions from smaller partners like South Korea or India. They also turn the global trade environment into a complex patchwork of separate policies and agreements - something Chancellor Merkel admitted was "not for the best".
But US Trade Representative Ron Kirk defended the bilateral approach as a viable alternative to WTO talks: "The frank recognition that our current path is simply not leading in a fruitful direction is the only logical place to start if we are to find a better and more productive path for conducting negotiations."
Agreements between groups of states within the WTO could emerge as an alternative to bilateral or global deals. This was the path chosen by 42 of the WTO's 156 members when they agreed to improve access to public procurement markets in December.
Given the disappointments of Doha, it's unlikely any genuinely global deals will emerge in the near future. But WTO chief Pascal Lamy refuses to pronounce the talks "dead."
"International negotiations are not animals or plants. Experience shows that dialog never dies," he said, adding that it took the international community 45 years to strike a deal to limit whaling - but they got there in the end.
Author: Andreas Becker / sje
Editor: Joanna Impey