Developed nations crave market access but don’t want to cut subsidies, thereby jeopardising the future of multilateralism.
Bhagwati has happened upon a perfect analogy for the most recent round of trade talks that the world has seen under the aegis of the WTO and the first since the Uruguay round of talks ended in 1999. The Doha round was given life towards the end of 2001, and it was hoped, would usher in a new era of cooperation in trade and multilateralism. Instead, several rounds of negotiations have failed to meet the set deadlines in order to successfully conclude the round. This is mainly because developed countries (US, Europe) have refused to reduce trade distorting subsidies that would allow developing ones (India, China, Brazil) to export more.
| IF DOHA FAILS: |
| Europe and US would lose greater access to emerging markets of China, India and Brazil |
| Agricultural exporters especially in African countries will miss out on the farm tariff cuts offered by EU |
| LDCs would not get a duty-free, quota-free, market access |
| Poor farmers in developing countries would continue to suffer as US and EU would continue to subsidise their own agricultural produce |
| Bilateral deals will continue to flourish leading to multiplication of trading rules and tariffs |
| WTO’s credibility as a trade governing body may take a hit |
As the negotiations have progressed, in general, exceptions for developed countries have become more generous, while flexibilities for developing countries have been made more stringent. Not only has the overall number of Special Products (SP) which can be shielded from tariff cuts by developing countries declined, a requirement of an overall average tariff cut for all SPs has been introduced. “Any scramble for seeking market access from the so-called advanced emerging countries, which goes beyond the existing negotiating mandate, can only erode the credibility of the rule-based multilateral trading system of the WTO,” said Abhijit Das, head, Centre For WTO Studies, Indian Institute of Foreign Trade.
For instance, upholding the decision of WTO's General Council, would have required a substantial reduction in developed country farm support, elimination of export subsidies and substantial improvements in market access. Further, the Doha Ministerial Declaration mandated Special and Differential Treatment to be provided to developing countries for their development needs. Doha negotiations appear to have fallen short on each of these elements.
“We are stuck, this is true, but the members are committed to finding a way forward and I am sure that they eventually will,” WTO director general Pascal Lamy told Business Standard. Lamy has been spearheading the talks as DG WTO for the last six years.
Naturally, many feel doubtful whether the upcoming meeting of the trade ministers from all 153 members at the WTO headquarter in Geneva from December 15 th -17 th —in effect, Doha’s last dance—will be able to achieve anything at all. With the global economy potentially heading into another recession, the Doha round can be sure of commanding very little of the world’s attention. “Doha for sure is dead now, at least for few years. Countries might seek to revive the talks again by 2013-14 when hopefully the global economy would be in a better position to negotiate,” says Manoj Pant professor, Centre for International Trade and Development, School of International Studies, JNU.
If Doha does die out, the next obvious question is, do we need to spend all this time and money on trade rounds that seemingly go nowhere? Fact is, a multilateral trading regime is always required as it prevents a tariff war from breaking out. Countries may just start talking again under a new form and agenda just as the Uruguay round was continued with a development dimension that came to be known as the Doha round.
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There are huge benefits to the opening up of trade. Lamy himself has conservatively estimated that the Doha deal will bring an increase of at least $130 to global trade. Other estimates suggest that global income could rise by at least $3,000 billion a year.
This hasn’t stopped the US from furthering the state of paralysis by making it clear that it would not negotiate based on the negotiating texts that were issued in 2008 because it believed that those texts did not have sufficient market access provision for themselves. Hence, the US wanted countries such as China, India, Brazil and South Africa to give it more concessions. This led to the issuance of another set of texts during Easter this year, which were not accepted by a large number of countries, especially the developing ones. “The US is not in a position to offer anything but to take more from others. Their economy is in deep trouble and they do not have the backing of the Congress to do the deal,” says Biswajit Dhar, director general at Research and Information System for Developing Countries.
Earlier this year, while delivering a lecture on Doha round in FICCI, Bhagwati had underscored the fact that failure to conclude Doha would undermine WTO’s image as a credible institution. Perhaps the whole endeavour was misconceived. “In hindsight, the Doha agenda appears way too ambitious given that the deal was to be done in only four years and that too through a single undertaking where the ambitions in all the sectors were to be balanced,” says Dhar.
Meanwhile, where multilateralism and Doha seem to be on the retreat, bilateralism has thrived. Since 2008, when the negotiations last broke down in Geneva, India has signed a number of comprehensive bilateral deals with countries like Japan, Korea, Malaysia and the 10-member ASEAN (Association of South East Asian Nations) bloc. “Increasingly the second function of WTO that is trade liberalisation is being performed in alternative forums namely the regional groupings that have led to numerous regional trade arrangements (RTAs) or bilateral free trade agreements (FTAs). These RTAs are driven by the mutual interdependence of neighbours as well as reciprocity,” said Nagesh Kumar, chief economist and director, UN Economic and Social Commission for Asia and the Pacific (UNESCAP).
In the meantime, all eyes are now on the December talks where the future course of Doha will be decided.
The Doha talks started on a note of egalitarianism, of letting poorer nations export more of their products while the rich countries gain market access for their industrial produce. Instead, the game revolved around developed countries gaining more and more tariff-free access of developing country markets in a suspiciously brazen, neo-colonial agenda. For multilateralism to succeed, trade to flourish and cooperation amongst countries in an increasingly interlocked global economy to thrive western nations need to assuage their developing partners that this isn’t business as usual.