This time last week, the attendees at the 2012 World Economic Forum’s annual meeting in Davos, Switzerland (held January 25th – 29th) were just recovering from their jetlag and round of meetings. The Davos meeting brings together the world’s top business leaders, international political leaders, and selected intellectuals and journalists to discuss the most pressing issues facing the world.
As is customary, one of the sessions was devoted to a discussion on global trade, in this case specifically the future of the World Trade Organisation (WTO) Doha round of negotiations. Participating on that panel were people who would be in a position to know. They included:
Pascal Lamy, the WTO’s Director-General; and the chief trade officers representing the two most powerful players within the WTO — Ron Kirk, the U.S. Trade Representative and Karel De Guch, the EU’s Commissioner for Trade. Also on the panel were a representative from Brazilian industry, (President of EMBRAER, the aircraft manufacturer), and trade ministers from Australia, India, and Indonesia. They represented a good sampling of the interests in WTO, as reflected in the following discussion highlights.
Countries would prefer to conduct trade negotiations in a multilateral forum, i.e. the WTO, because:
• Today’s businesses operate and source their supplies globally and would find it more efficient and cost-effective to have global rules and standards.
• Many of the issues that need to be addressed to rationalize the trading regime, such as intellectual property rights and investment, need to be addressed multilaterally.
Nevertheless, the Doha multilateral negotiations have stalled because:
• Bilateral negotiations allow countries to choose their partners and yield quicker results, whereas multilateral talks require greater efforts to bridge wide differences and arrive at consensus;
• As we have noted elsewhere, the area of biggest divide is the differing perceptions between developed and developing countries about the meaning and focus of the “Development” dimension of the Doha Round. In particular, there is the new perception among developed countries that the emerging economies, such as Brazil, China, and India, are competitors who should be doing more to open their markets to developed country trading partners. Meanwhile, the emerging economies counter-argue that they are still in a phase of development, and that the Doha mandate was to correct historical imbalances from which they continue to suffer. India gave a clear articulation of this divide (starts 10:15 minutes into the video below).
• There is a lack of political leadership to take the hard decisions required to arrive at an effective compromise. To India’s position, the United States highlighted the skepticism among the public about the benefits of trade. U.S. consumers, he said, have come to feel that they have swapped cheap t-shirts and I-Pads for jobs, and therefore no longer accept the mantra that “trade is good” unless it’s also possible to show a clear line between trade and economic growth and job creation. One could imagine the violins in the background as Mr. Kirk went on to compare the plight of poor children in villages in India, Zambia, and Harlem? – stop the violins! There is a leadership problem when the trade representative of the world’s largest and most powerful economy ignores the difference between historical disparities resulting from unfair distribution of wealth at the global level, i.e. between a metropolis and former colonies, and the results of racism and poor income distribution at the national level.
• The WTO governance mechanisms, notably the principle which says there is no deal until everyone has agreed to everything (the single undertaking) came under attack from the representatives from Australia, Brazil industry, and the EU. One solution, they feel, is to adopt the approach proposed by Pascal Lamy, of dividing the negotiations into stages and signing off on those areas on which agreement has already been reached. There does appear to be a difference in opinion as to what those areas would be, however. Everyone seems to agree that Trade Facilitation (rules to clarify and simplify countries’ import-export requirements and procedures along with the relevant technical assistance to developing countries) would be one such area. In principle, as well, there is agreement on the need to address the special concerns of the world’s poorest economies — the least-developed countries (LDCs) — but even here agreement is being stalled over the details. Perhaps the Indonesian representative, who said the single undertaking approach protects developing country interests and that the problem is lack of proper leadership, has a point?
Conclusion: Don’t bury Doha just yet. But understand that it’s in a deep freeze unless countries find the political will and energy to revive it. Meanwhile, countries will continue to pursue the low-hanging fruit of bilateral negotiations because they yield quick results, also continuing the effort in the WTO to sign off on those aspects of the Doha agenda on which they are able to reach consensus.