Commerce Secretary Rahul Khullar recently commented that the Doha Round was stuck and it was unlikely that the decade-long negotiations will be completed before 2013. The question that has been discussed informally by academics and analysts over the last few months in Geneva and across the 153 members of the World Trade Organisation (WTO) is that will Doha succeed or fail, given the current state of play.
The reaction has been that the Doha Round has to succeed, or else global trade liberalisation may face a strong challenge. The response, therefore, has ranged from suggestions for diluting the existing agenda and making it more conducive or moving the negotiations forward issue by issue rather than deciding on all issues together so as to meet the criteria of a “single undertaking”.
WTO, undoubtedly since its inception in 1995, has remained a symbol of multilateral trade liberalisation and a platform for seeking transparent and fair rules for global trade. Its strength of one member one vote, which ensures that all decisions are taken by consensus, has helped maintain the credibility of the institution. WTO continues to be driven by rules-based system that to a great extent provides an unbiased hearing to countries that are faced with measures and regulations that hamper free trade of goods. The continuity of this platform that treats all countries, big or small, on a par is important to keep world trade fair.
Despite the fact that negotiators have failed to move the negotiations forward, world trade has increased since the launch of the Doha Round. Figures collated by multilateral agencies show that global trade has moved from $12, 431 billion in 2001 to $29,492 billion in 2010. Developing countries have also increased their share in global trade considerably. What is of significance is that it is not just exports that have grown from developing countries. Imports, too, have grown significantly.
This, many analysts believe, is because of the fact that there has been a large proliferation of free trade agreements (FTAs) covering nearly all large developing countries. India itself has become an exponent of FTAs and has signed or is negotiating several comprehensive FTAs covering goods, services and investment. The proliferation of FTAs has in itself been a matter of debate. Many analysts are of the view that the institutional framework under the WTO has eroded due to the increase in FTAs since they go against the basic tenets of multilateralism.
However, a strong school of thought also states that the FTAs achieve what the WTO looks to ultimately achieve, namely tariff elimination or reduction on products of interest to trade partners. They are of the view that the tariff liberalisation achieved through FTAs can be aggregated at the WTO to arrive at a consensus on market-access issues. However, this poses a challenge since issues on providing preferential tariffs differ depending on the trade partner. Therefore, it seems possible that countries find it easier to increase market access by simply binding themselves into bilateral agreements rather than through the WTO.
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This brings us to the moot point — what if Doha fails? The answer is that then countries stand the possibility of diluting a strong organisation that has not just provided a platform for settlement of global trade disputes but has also introduced rules for a fair and transparent global trade regime.
It also looks very probable, given the current state of global economy that many large developing economies will be able to continue to grow their exports despite a setback to the WTO since their products remain competitive and they have in the last decade developed preferential access through the bilateral route.
China has grown its share in world exports from 4.3 per cent in 2001 to 10.9 per cent in 2010 and it is not primarily because it joined the WTO. India and Brazil’s share of world exports has also gone up from 0.7 per cent and one per cent to 1.4 per cent each, respectively. However, for the US, the share in world exports has fallen to 8.8 per cent in 2010 compared to 11.9 per cent in 2001. Share of US imports in global trade have also dropped from 18.7 per cent in 2001 to 13.1 per cent in 2010.
While a failure will hit both developed and developing countries hard, the developing countries have managed to develop greater access within the southern hemisphere through preferential access in the last decade, which will provide a strong safety net. However, a conclusion of the Doha Round can increase those gains substantially since it is a Development Round. Therefore, it is important for both developed and developing countries to push the Round ahead firmly and quickly if WTO has to remain relevant and strong.
The author is Principal Adviser with APJ-SLG Law Offices