Panel: Doha Round Hijacked Trade, But Geopolitics May Force Adjustments

The future of the multilateral trading system looks bleak although global trade is in good shape overall, and developing countries are becoming heavier trading partners as a new geopolitical landscape is emerging, according to panellists in a concurrent event to this week’s World Trade Organization ministerial meeting.

With no certainty of closure of the Doha Round negotiations in 2010, almost 10 years after its launch, the role of the WTO is in question. The lack of desire to commit to reforms on the developed countries’ part, the relative lack of interest for this “Development Round” on the developing countries’ part – notably because it is not considered by some as sufficiently development-oriented, and the single undertaking condition for the closure, all have brought this process to a stall, according to the panellists.

The International Centre for Trade Sustainable Development organised the Geneva Trade and Development Symposium as a parallel event to the 30 November to 2 December WTO ministerial in an effort to encourage discussions about trade and development.

ICTSD this week also released a discussion draft of a new joint report entitled “Strengthening Multilateralism: A Mapping of Proposals on WTO Reform and Global Trade Governance,” by Carolyn Deere-Birkbeck and Catherine Monagle. Deere-Birkbeck also posted a separate article to the Global Economic Governance Programme blog entitled, “Momentum Builds for Discussion of Reform at WTO Ministerial Conference.”

Several things have gone wrong, according to Simon Evenett, professor of economics at the University of St. Gallen, Switzerland. The fact that countries went into a round expecting all members to pass painful reforms and binding multilateral accords is problematic.

There are few encouraging signs that governments are prepared to undertake meaningful reforms – that is, reforms that hurt a commercial interest – in terms of binding accords, he said on an earlier panel on 1 December at the same event.

There are three possible outcomes to the round, he said. The first is formal abandonment; the second that it become a “round of convenience,” waiting until a moment when “everyone finds it geopolitically useful to conclude,” or too embarrassing not to; and the third that there is informal abandonment or “drift” into abeyance, letting things “chug along until there’s a window for movement.”

Countries have been discouraged from entering into any discussions about alternatives, and “we are tied more and more to the Doha mast,” Evenett said, adding that an informal abandonment of the round was already taking place.

“We have let it suck all of the oxygen out of any discussions” on the multilateral trading system and without a change of course, the “WTO will cease to be seen as a place where serious governments do business.” Countries as small as Singapore and as large as Korea are saying they have lost engagement and are instead focussing on bilateral agreements, he said at the earlier panel.

What the world needs is a developmental reform of the international trading system, said Rob Davies, South African trade minister. The needs and interests of developing countries need to be placed at the heart of the work programme. Most of the developed world is not ready to accept sufficient commitments towards development needs, he said.

Frank Heemskerk, Dutch minister for foreign trade, said the WTO played an important role in the crisis and that many things have gone right thanks to the WTO. In July 2008, “we did a lot of work,” but the Bush administration did not wish to finalise the work. At the moment, looking at the United States, at the top of President Obama’s agenda are Afghanistan, healthcare and climate change, he said. So, “let’s be realistic and let’s do the utmost to have Doha on the agenda in 2010,” he said.

What has gone wrong is that liberal economies might have over-promised the benefits of trade, Heemskerk said. Aids for trade programmes are needed, as well as efforts to make the world trade mechanism more sustainable. More flexibilities should be brought into the WTO, he said, and welfare should not be promised to everybody.

For Carlos Márcio Cozendey, a Brazilian economic affairs minister, developing countries might have no interest in this agenda because their trade, for the most part, is already open. They do not have enough interest to introduce necessary reforms nationally. WTO is facing a change in global geopolitics, he said.

Governments are reluctant to commit themselves, they are willing only to do things that are not binding, said Roderick Abbott, former deputy director general of the WTO. The Doha Round is clearly in trouble but global trade has done remarkably well, he said. The economic crisis was not brought by trade but was primarily due the financial sector. Key emerging economies are now very important, which is why attention is increasingly on the Group of 20 countries instead of only the G8 industrialised nations. “We need to bring a wider group into the leadership of the global economy,” he said.

The WTO in this respect has gone rather far, he said. There was a G4, a G6, and Brazil and India have been in the leadership since the Cancun WTO ministerial in 2002. So if reforms are needed in the WTO, he said, “We should not throw everything out with the bath water.”

However, the WTO has weaknesses that need to be addressed, Abbott said, but it lies mostly with the members of the organisation rather than with the secretariat. It was a mistake in 2001 to believe that the single undertaking would bring all the members to agree to massive tariff-cutting, for example.

A lot of energy has been put into Doha, said Heemskerk, and the WTO is one of the few institutions where all voices are being heard, adding that in future the WTO should involve the business community more.

Developing countries have enough power and influence to resist developed country pressure and that brings a new geopolitical environment, said Davies. The Doha Round was never going to be a development round because the WTO is about bargaining, it is not about development, he said.

In one sense, “the Doha Round has already delivered,” in that the negotiations are not just about market access and rules, but also the need to complement access with capacity building and technology transfer so developing countries and least developed countries can benefit from it, said Bernard Hoekman, director of the International Trade Department at the World Bank.

Hoekmen said Doha suffers from a “small numbers problem” – namely, that incentives that drove the Uruguay Round are not there in Doha. There is, he said, “a lot of modelling over ‘what are we going to get’ in terms of additional market access … and the result is that we’re not going to get very much.” But this is a narrow view, and a focus on increased market access as a prerequisite for a deal will only impede progress, he said.

It has to be recognised that the Doha Round is not going to work as it is, according to Abbott who published a policy brief on the subject. He proposed to scale it back, to go for a less ambitious agenda, a much simpler approach of tariffs and subsidies cutting, for example.

Developing countries have supported multilateralism, said Davies, and new forms of trade relations with developed countries is a reality. Overall, the anti-globalisation feeling is strongest in the developed world, he said.

WTO: Protector of Public Goods?

The WTO model for inducing voluntary but binding offers could be used to increase the supply of global public goods, said James Love of Knowledge Ecology International at a separate side event on 1 December, hosted by KEI and IQsensato. KEI has developed a proposal for WTO Agreement on the Supply of Public Goods.

The WTO “approaches trade liberalisation as an under-supplied public good,” said Love: countries negotiate commitments so that collective benefits improve.

Love argued that a WTO agreement with binding commitments, analogous to commitments to reduce tariffs or liberalise services could be used to “address issues that are deemed to be important to the international community” and that “cannot, or will not, be adequately addressed by individual countries acting alone,” as he said it was put by an International Task Force On Global Public Goods.

Such public goods could include funding innovations for climate change or neglected diseases, or the digitisation and translation of books, said Love.

Ahmad Mukthar of the Pakistan mission, commenting on the proposal, said points to consider are free rider problems, the wisdom of using public goods as a bargaining chip, and the need for clarity on scope and in definitions. Were traditional knowledge or folklore declared a public good, there would be problems with indigenous communities trying to reclaim rights, he said. And knowledge is not homogeneous: a digitised out-of-print book is not equitable to something just made by a pharmaceutical company, costing a billion dollars, he added.

Tony Taubman, who heads the IP Division at WTO, called the idea an “interesting vantage point for reflecting on what we’re doing or trying to do,” but cautioned against over-emphasising the enforcement role played by dispute settlement. The biggest incentive to comply with commitments is the danger that concessions will be withdrawn, he said, adding that with public goods, it is difficult to see how you could withdraw what is inherently non-excludable.