Bibek Debroy: Eight Doha myths

The future of Doha Work Programme (DWP), meaning the timeframe, is now uncertain. We are probably looking at 2009/2010 for resurrection. The way I see it, there are several myths floating around. Let me try to dispel these. Since myths are simplifications and generalisations, arguments to dispel myths should also have the liberty of simplifying and generalising.

Myth 1: The recent G-6 (US, EU, Australia, Japan, India, Brazil) meeting in Geneva, and earlier meetings, failed to break the DWP deadlock because of agriculture. Had agriculture been the stumbling block, we wouldn't have had the Uruguay Round agreement. Issues were no different then. And we could have had an apparent consensus that agriculture wouldn't be liberalised much, like the Blair House Accord of 1993. That didn't happen because some major developing countries have greater clout now.

Myth 2: Developing countries stuck together and called the developed country bluff. G-20, G-33, G-90 and NAMA-11 don't matter, even if they stick together for public posturing. LDCs and minor developing countries can be weaned away, with carrots and sticks, as has happened in the past. The difference was India, Brazil, South Africa and China sticking together and their collective economic clout.

Myth 3: WTO is important for trade liberalisation. Unlike GATT, except for instances where countries accede to WTO and have to undertake trade liberalisation as price for membership, where has liberalisation been driven by WTO? There hasn't been a single completed multilateral liberalisation round through WTO. Liberalisation has been unilateral, explaining the gap between applied and bound tariffs, or contingent on regional (including bilateral) agreements.

Myth 4: The WTO process will recover. We still haven't figured out how to handle decision-making processes within WTO. Each of the 149 members can, in principle, block consensus and WTO is fast becoming another UN General Assembly. To revive the WTO, we have to (a) recognise importance in decision-making of major and emerging developing economies (which the developed world is still reluctant to do); and (b) formalise the Green Room process. By (b), one means that one should divide up members into two categories "" first, developed countries and major developing countries that undertake commitments and therefore have rights; second, minor developing countries (including LDCs) that are exempt from commitments and, therefore, have no rights in decision-making. Since this politically incorrect decision will never be taken, WTO will remain dormant. It will administer Uruguay Round agreements and provide a dispute resolution process. But no new agreements will be negotiated through the WTO. The WTO will remain irrelevant for future liberalisation, except instances of accession.

Myth 5: There is always a regional versus multilateral route debate, not just the trade (and investment) diversion/creation issue, and regional agreements become temporarily important whenever multilateralism goes through hiccups, such as during Uruguay Round negotiations. Once we have a multilateral agreement, the present fad of regionalism will disappear.

This isn't true. First, because of the point made in myth 4, we won't have multilateral agreements through WTO quickly. Second, even if we have multilateral agreements, liberalisation will be incomplete. Regional agreements will be WTO-plus, such as in services, intellectual property, environment, and will continue. Indeed, the regional route will be the main channel for liberalisation.

Myth 6: Regional (and bilateral) negotiations involve higher transaction costs and multilateralism is preferable for relatively smaller countries, especially because there are economies of scale (and scope) in transaction costs. That would have been true had we had to negotiate bilateral agreements with 149 trading partners. But we need to negotiate only with major trading partners, not everyone. In every such agreement, there is not only the quid of giving, but the quo of getting. Since we don't get significantly from everyone, why give to everyone, which is what WTO's MFN clause will force us to do? MFN won't apply to situations where there are no multilateral agreements, so why encourage free riders? In these WTO-plus agreements, we will increasingly move away from classic FTAs (free trade areas) that cover manufacture, towards CECAs (comprehensive economic co-operation agreements) that emphasise services. Finally, India's increased economic clout reduces transaction costs and makes India less susceptible to are-twisting. So, other than existing ones, let's do EU, Japan, South Korea, China, even the US.

Myth 7: Now that there is no external pressure, we can ease up on reforms. Life is easier now, compared to Uruguay Round, because of liberalisation. Liberalisation increased economic clout and also made it easier to handle WTO commitments, because those were things we did, or wanted to do, in any case. The interim must therefore be used for pushing liberalisation, such as in agriculture.

Myth 8: India has been a successful leader of developing countries. Not only is this false, India has more to gain by abdicating the mantle of leadership. Let's forget about sub-Saharan Africa and focus on India instead.