Trade ministers from around the world met at the World Trade Organization’s Eighth (8th) Ministerial Conference in Geneva (December 15th – 17th, 2011).  They left the meeting with no clear path toward concluding the Doha Development Round, launched in November, 2001 and with very little expectation of doing so in the near to immediate future.  Although they are unlikely to take the bold step of labeling the Round “dead”, undoubtedly the outcomes contemplated when the Round was launched ten years ago is no longer an option.  Apart from the fact that the issues facing this swiftly-changing world are vastly different from those on the table ten years ago, factors intrinsic to the Round have also undermined this likelihood.

The “Development” Dimension

To overcome the reluctance of developing countries, who were increasingly unhappy about the outcomes of the previous Uruguay Round, to engage in a new negotiating round the decision was taken to dub the Round launched in 2001 at Doha the “development” round.  However, the language used by poor and rich countries is often at odds in the trade negotiating arena.  The title had initially led developing countries to assume that the Round would focus on addressing their unfinished business from the Uruguay Round, e.g. developed country agricultural subsidies, with very little asked of them in return.  In other words, a “round for free” that would help to address past inequities.  In fact, this concept runs so counter to the WTO negotiating principle of reciprocity, which requires that concessions made to one WTO member be offered to all, that a “free round” was never a serious possibility.  However, as this reality became clearer developing countries once again felt cheated out of the promised benefits of WTO membership.  They essentially dug their heels in – notably at the Cancun Ministerial of 2003 — and protested vehemently against taking on new obligations while they were still struggling to understand and to implement those undertaken during the Uruguay Round.

As a compromise, the negotiating agenda was essentially distilled down to four areas — agricultural market access, market access for industrialized goods, trade in services, and trade facilitation.  This, however, is when the business interests in the developed world, most notably the United States, began to lose enthusiasm for the Round.  From their perspective, the compromises made in order to launch the Round diminished the negotiating agenda to such an extent that only significant inroads in the access to emerging country markets merited the United States making the concessions that would, in turn, generate proposals worthy of consideration from the other key negotiating partners.  Still straddling the developed and the developing world, however, the emerging market countries never fully bought into the rhetoric introduced in an attempt to sync the development aspirations with the market liberalization goals of the Round.  “Trade liberalization is the best way forward for development,” goes that rhetoric.  The reality behind that rhetoric, however, has focused on elimination by emerging and developing countries of tariff barriers, while ignoring or relegating to a distant second place attempts to address the technical and other non-tariff barriers that their goods face upon entry to developed country markets.  Furthermore, with the exception of the extremely poor least-developed countries (LDCs), support among the developed countries for development-focused proposals is tempered by fears that they will provide China and the other emerging countries with some competitive advantage.   As the desired level of market access to emerging markets failed to materialize, U.S. business interests’ enthusiasm for the Round just about disappeared.

What is on the Table?

The last time a substantive agreement was reached on the Doha negotiating agenda was essentially in July of 2004, with most of these decisions reinforced or refined by a July 2008 agreement.  These decisions represent agreement on broad principles:

·         Elimination of agricultural export subsidies, including subsidies hidden in export credit, operation of state trading enterprises and non-emergency food aid;

 

·         Tariff reductions on agricultural products, starting from existing bound rates, (i.e., previously agreed-to tariff rates) with the deepest cuts to be made on products with the highest tariff rates, except that “sensitive” products from all member states and “special” products from developing countries would be allowed to make lower cuts (or even be exempted in the case of least developed countries);

 

·         Tariff reductions on all manufactured products, according to a tariff-cutting formula which would result in a maximum tariff of nine percent (9%) for developed countries and fourteen percent (14%) for the majority of tariff lines for developing countries, with special treatment afforded to the small, vulnerable economies (SVEs), least-developed countries (LDCs), and recently-acceded members (RAMs);

 

·         In services, general agreement that all sectors would be open to liberalization with members making requests of individual countries of those sectors to which they would like to receive access and/or offers of those sectors they would be willing to liberalize, but with the decision left up to each member as to which sectors it would liberalize and to what extent.  Very few offers or requests have been made to-date;

 

·         Trade facilitation negotiations to introduce rules aimed at streamlining members’ trade and customs procedures in order to expedite the movement, release, and clearance of goods, incorporating consideration of countries’ actual implementing capacities and ability to undertake investments in infrastructure projects.  Trade facilitation has been a primary focus of discussions on delivery of aid and technical assistance – “aid for trade”;

 

·         Special and differential treatment for LDCs and SVEs which include longer transition periods for the introduction of new rules and disciplines and smaller tariff cuts, with LDCs being exempt from any tariff cuts.  RAMs will also have special terms.

Consensus has also been reached on some decisions of primary importance to the LDCs, notably:

·         Duty-Free, Quota-Free entry for all LDC products; and

·         Removal by developed countries of all trade-distorting subsidies and policies for cotton exporters

Implementation of these, and other decisions beneficial to LDCs, have however been held hostage to the principle of the single undertaking – nothing is agreed until everything is agreed — which has governed the previous negotiating rounds.

Meanwhile, further negotiation is being undermined by the competing interests of the major players which have led to deadlocked positions.  WTO Director-General, Pascal Lamy has said, listing the requirements for a successful deal – the United States must make deeper cuts on its domestic supports; the EU must offer increased agricultural market access; and the large developing countries must offer more on industrialized tariffs.  However, the diminished agenda has meant that none of the parties consider that they will gain enough benefits to warrant making the concessions that they are being asked to make.

What are the Implications of this Impasse?

The impasse has generated calls for alternative approaches to conducting the negotiations, proposals to reform the WTO and its agenda, and speculations about the continued existence of the organization itself.  Naysayers predict the demise of the WTO itself should the Doha Round fail.

 

Alternative Negotiating Approaches:  Key among these alternative approaches is the movement away from the “single undertaking” toward the use of plurilateral agreements, i.e. agreements signed only by those countries ready to reach agreement on a given issue.  (This approach is already in use with respect to government procurement, an agreement on which has been signed by a subset of WTO members.)   In the June, 2011, issue of Foreign Affairs, Susan Schwab, a former United States Trade Representative, suggested that negotiators admit defeat on Doha and instead move forward on a plurilateral basis.   This could be a disturbing development, however.  It threatens to exacerbate the development gaps and reintroduce the “club” atmosphere in which the richer countries huddle together and agree on those rules that best suit their purposes and goals.  These norms could then find their way into bilateral agreements signed between developed and developing countries, where the poorer countries have even less leverage in these bilateral agreements than they do on the multilateral arena.  This approach has been rejected by the majority of WTO members, except with respect to those decisions that could be taken in the interests of LDC members.  This group of approximately forty (40) countries share less than one percent (1%) of world trade and present a threat to no one, providing an easy target around which to reach consensus.  Director-General Lamy has proposed that the body conclude agreement on these proposals in what is being referred to as an “early harvest” of the Doha agenda, leaving the other negotiating issues for later.

Alternative Agenda:  Some members have called for the WTO and the Round to reorient itself to those other pressing issues, such as the stability of the global economy, the debt crisis, and trade and climate change.  They express the fear that failure to address these issues will make the WTO increasingly irrelevant.  The counterargument is that engaging too much with these issues while ignoring its original mandate will dilute the WTO trade agenda and focus.  WTO working groups already engage many of these issues but the majority of Members have expressed reluctance to dilute the trade agenda before concluding the Doha Round.

WTO Viability:  Even if the Round fails, at a minimum the WTO will retain its role as a monitor of the existing trade rules, primarily through its dispute settlement functions.  Some have argued that the proliferation of free trade agreements (FTAs) is creating alternative systems of dispute settlement that can diminish the role and importance of the WTO dispute settlement mechanism.  In fact, the opposite appears to be true as many of these FTAs use WTO provisions and/or retain the use of the WTO as a forum for dispute settlement.  Of course, as is the case with any other tribunal, the rulings of the WTO dispute settlement body will have to continue to evolve in order to remain relevant.  This will be a function of the issues brought before the body, but one primary way in which the body can retain its relevance is through creating a body of trade law that is better-placed to address the development dimension of trade liberalization.

Addressing the Development Disconnect

Primary responsibility for injecting a more vigorous development agenda into the WTO, and hopefully into the Doha Round, must lie with the countries that will benefit, i.e. the developing country members themselves.  Developing countries need to be prepared to invest in the process of engaging in research to develop more development-friendly trade approaches that look beyond preferences and of advocating for these approaches.  Take the issue of non-tariff barriers, for example.  Is “aid” truly the only way to address this issue?  While the promises of aid to support trade liberalization and reform ensure continued participation by developing countries, more vigorous thought is needed to find an acceptable compromise between the need for developed countries to maintain standards for entry of goods and the barriers that these standards present for developing countries.

A recent discussion on the Foreign Policy blog illustrates just how wide the disconnect can be between the perspectives of persons from the developed and developing economies.  Steve Kenny, a U.S. journalist, in an April 18, 2011 post suggested that, even if the Doha talks failed, developing countries could conduct their own tariff reforms to achieve the benefits of world trade.  He then supplied examples of what he viewed as irrational tariff policy in some African countries, specifically an average of 40% on imported vaccines and as high as 100% on solar products.  In response, African readers pointed out the following alternative interpretations of these policies:  (1) the unavailability of unlimited foreign exchange reserves and hence the need to have policies that restrict imports; and (2) different perspectives on what constitute “luxury items” worthy of being subjected to the higher tariff.   Vaccines imported by private clinics, for example, could be considered a “luxury” because government-run clinics which are not subject to the higher tariffs are the primary provider of health care to many Africans, leaving access to the private clinics to wealthier citizens who can afford the higher costs caused by the tariffs.  Or alternatively, a solar lamp would be considered a luxury item by many persons who rely on wood which they can collect for free.  This is not to suggest that these positions don’t merit further investigation, but they illustrate the different assumptions and realities that can underlie trade policy in the two worlds.

Can the Round refocus on reaching a bargain that gets countries more of what they really want and need?  For developed countries, this is more market access to a broader range of sectors in a wider sweep of countries.  For developing countries, for whom in general tariff rates imposed on their goods by developed countries have been declining, this is addressing the unfinished Uruguay Round agenda, notably removal/easing of the non-tariff barriers that limit that access, and improving access for services, an area of growth for many of these economies.

Making progress on concluding the Round with a more development focus will also require that the larger emerging markets be willing to step away from claims to any rules or mechanisms created to address developing country needs.  Their failure to do so is a sure way to guarantee developed country opposition to anything but small concessions that recognize the plight of the poorest of the poor among WTO members.

Conclusion

So, at the moment it would appear that no deal is better than a bad deal.  Until some of these fundamentals are addressed, and consensus emerges around how to introduce a truly development-friendly approach to trade liberalization and growth, any deal that may be reached will bear little relationship to the development aspirations that gave the round its name.