What has happened to the Doha Round at the World Trade Organisation (WTO), the multilateral trade negotiation that was meant to encourage development through liberalising trade in goods and services?
You would be forgiven for believing that the exchanges begun in 2001 and all but stalled since July 2008 have been overwhelmed by the events of the last eighteen months.
Then a surge in food and energy prices, followed by a global banking and economic crisis, and the consequent recession, seemed to have, at the very least, diminished many governments’ appetite for market opening. So much so that even those who believe that free trade is a panacea for many of the world’s ills had begun to wonder if both developed and developing nations might move towards regulation and protectionism to defend their economies.
But perhaps surprisingly there is movement, albeit slight, in Geneva where the new US administration has begun to explore what might be needed to restart the negotiations and bring them to a conclusion. Last month, Ron Kirk, the new US Trade Representative (USTR), travelled to Geneva to quietly re-engage with ambassadors from a wide range of nations, including those from the Caribbean and Latin America.
Until then it was far from certain how the Obama administration would approach the idling WTO round. During Mr Kirk’s visit it became clear that the new US trade strategy is to explore whether changes in the structure of the WTO negotiations might enable movement forwards.
In Geneva Mr Kirk floated the idea that there might be value in bypassing the negotiation of modalities – the broad formulas that will be used for tariff and subsidy cuts to liberalise world trade – with the objective of nations moving directly to negotiating the scheduling of tariff reductions and other concessions.
The idea originates in a belief that this would support the US administration’s need to sell a deal politically at home by enabling it to point to specific opportunities in big markets such as Brazil, China and India in a manner that enabled US business and Congress to easily understand the benefits of reaching an agreement.
However, according to officials in Geneva it became clear during these informal exchanges with ambassadors and others that the US approach was not liked by most smaller developing nations which felt that if modalities were not first agreed, they would be in a less strong position to defend their tariff lines in negotiations with powerful developed and emerging nations. Interestingly, and in an apparent indication of the Obama administration’s sensitivity, Mr Kirk recognised these concerns and was reported to have said that a “third way” would have to be found, suggesting that the US genuinely believes that the Doha Round should have a development dimension.
In his meetings Mr Kirk stressed that Washington was committed to reaching an agreement and that this could support global economic recovery. Despite this, many of the same difficulties the Bush administration had with Congress, the labour unions and environmentalists are still present in Washington, leading to speculation about how much political capital President Obama might be prepared to spend to sell a new round.
Other key players are also looking at how best to advance. India, following its general election, has signalled that it will hold bilateral talks with the US to try to narrow differences. This may be significant as the stalemate last July followed disagreement between India and the US over issues including the special protection to be given to poor farmers against a surge in agricultural imports. India has also said that it is keen at a ministerial level to meet with developing nations that share its concerns, including Brazil.
Meanwhile the WTO Director General, Pascal Lamy, has called for a new approach to bring the round to a close. In a recent speech he suggested that a way forward might involve two parallel tracks; one involving continuing technical discussions and the other ‘outcome testing’, through bilateral or plurilateral discussions, that might enable countries to see the value of the deal.
Where this all leads, remains to be seen, but it is hard to imagine any serious movement forwards until well into 2010 or even 2011, let alone a date for completion.
A more probable scenario is that little will happen until there is a global sense that the recession has genuinely bottomed out and the shape of recovery has become visible. However, it is still far from certain how much political appetite there will be in smaller developing nations for trade liberalization. The recession and the events leading up to it has caused a questioning of a global economic system that rapidly transfers the problems created by poorly regulated first world financial institutions to vulnerable economies in the developing world.
The Caribbean is a case in point. While it is clear that at a technical level ambassadors and officials from capitals have little option other than to continue to engage in dialogue in Geneva and elsewhere, what is much less certain is whether there is a regional political appetite for more in the way of trade liberalisation.
This is already manifest in the slow pace of movement on a new trade arrangement with Canada, the continuing doubts being expressed about the EPA, the associated slow pace of implementation and the seeming disintegration of Caricom.
It is therefore very hard to see how Caribbean governments are going to agree, as a part of multilateral package of liberalization, measures that further open markets and progressively reduce tariffs at present levied on goods from nations such as Brazil and the US that can out-produce the region’s small manufacturing and agro-processing sectors.
One of the odd aspects of the present economic crisis has been the almost unchallenged mantra that it can be resolved by spending, growth and small adjustments to the model that has led to the recession. This is despite the recent meeting of the G20 all but declaring the Washington consensus dead and raising questions about the future of lightly regulated capitalism.
What all this suggests is that a moment will come soon when thinking Caribbean politicians need to consider rather more carefully where the developed world and the economic philosophy of the last decade is leading and how best to respond to any movement in the Doha Round.
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