The failure of the Round will raise questions about the G20’s legitimacy, and conversely, the group’s efforts to ensure a successful conclusion will symbolise a global resolve to address such challenges.
As the Director General of the World Trade Organisation, Pascal Lamy is its chief cheerleader, pushing, cajoling, coaxing members to show just that extra flexibility to melt the frozen impasse around the Doha Round negotiations. He is also the public face of the organisation, tirelessly preaching the virtues of freer trade flows. He has performed that job admirably through the tortuous grind of the negotiations.
His address to the Trade Negotiations Committee of the WTO on 29 March therefore makes curious reading: “Now is the time for all of you, and in particular those among you who bear the largest responsibility in the system, to reflect on the consequences of failure. To reflect on the costs of the non-Round to the world economy as well as to the development prospects of members, in particular the smaller and least-developed which are more dependent on an improved set of global trade rules. And above all, it is time to think about the consequences of the non-Round to the multilateral trading system which we have so patiently built over the last 70 years. It is the time to think hard about multilateralism, which your leaders, yourselves and myself preach at every occasion. In politics, as in life, there is always a moment when intentions and reality face the test of truth. We are nearly there today.”
So why is Lamy challenging WTO member-countries to face “the test of truth”? Why does the Doha Round, launched with fanfare in 2001 as “the Development Round,” with the declared intention of completion within three years, continue to hover uncertainly in the ether zone in 2011? Is the Round effectively dead?
The immediate provocation for the present bout of heightened activity in Geneva was the reaffirmation by G20 leaders, in Seoul in November 2010, of their commitment to a prompt conclusion of the Round. So plans were drawn up for intensive consultations in early 2011 leading to new texts on key issues by the spring and an informal meeting of Ministers by summer to finalise the broad agreements, based on which the Round could be concluded by the end of the year.
Someone obviously forgot to inform the negotiators. In the consultations so far, they have largely stuck to their positions and there has been no narrowing of gaps on the key outstanding issues over the last three months. The lack of progress calls into question the rationale for new texts and therefore, the rationale for a Ministerial meeting. A bruising, underprepared and inevitably high profile meeting of Ministers with little prospects for agreement, can only serve to highlight to the world that the WTO remains gridlocked.
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Behind the dichotomy between the platitudes of the leaders and their negotiating positions lies the reality of a changed global economy. Earlier negotiations in GATT were propelled by business interests in developed countries, in search of new market access. With their market positions in their home turfs secure, they sought new horizons, especially in emerging markets. The rapid economic liberalisation across the world over the last two decades has changed many things. Market access is no longer the constraint it was in the past.
But apart from the unprecedented opening of markets, the period has also witnessed the emergence of highly competitive manufacturing centres in several emerging economies. As a result, businesses in developed countries are increasingly feeling the heat of competition in their home markets. Therefore, their support for further liberalisation through the WTO process is more equivocal than in the past.
On the other hand, while businesses in emerging markets need open global markets, many of them are still in the process of consolidating their positions in their home markets. In short, unlike in the past, there are few demandeurs among business interests, pushing for the early completion of the Doha Round. As a result, the onus of support for completing the Round has shifted to governments and they must do so not only for systemic reasons but also with the recognition that the Round will make a positive contribution in addressing global challenges.
For instance, the political turbulence in the Middle East has much to do with the limited employment opportunities for the millions of youths entering the labour market every year. Similar situations prevail in much of the world. The answer lies in creating greater trade opportunities, greater openness, including in labour markets. The Doha Round can help.
Despite the hype to the contrary, there is much more on the table in this Round than in any previous Round. Industrial tariffs in developing countries will go down sharply for most products; tariff peaks on such products in developed countries will disappear; agricultural tariffs will also be reduced substantially, though not as sharply as for industrial goods; export subsidies for agricultural products will be eliminated; permissible limits on trade distorting domestic subsidies on agriculture will also come down sharply; a large number of new sectors and subsectors in services will come under binding commitments for market access, especially in developing countries; disciplines will be introduced, for the first time, on fisheries subsidies to address the global problem of overfishing; disciplines on anti-dumping and subsidies will be tightened to prevent their abuse; a new agreement on Trade Facilitation will make it easier for trade to flow.
The special dispensations being provided for smaller developing countries and LDCs (least developed countries)will facilitate their greater participation in the global trading system. These outcomes add up to a very substantial result for the global trading system. They will enhance global trade flows and make them more predictable and robust.
Despite this impressive list of outcomes, the Round remains hostage to bickering by a few to garner additional gains to appease their constituencies. Sadly, there is little in the present situation to suggest that the wisdom and leadership of statesmen will trump the narrow mercantilism which has led to the impasse.
The failure of the Doha Round is no longer the theme of habitual doomsayers, but a real possibility. The continuing differences require the balm of a political settlement, not the slow poison of negotiating attrition. The Doha Round is therefore a major litmus test for the leadership credentials of the G20. The failure of the Round will raise troubling questions about the G20’s legitimacy. Conversely, the G20’s intervention to ensure a successful conclusion will symbolise a strong global resolve to address global challenges in a cooperative manner.
The writer was India’s Ambassador to the WTO, Geneva between 2004 and 2010