The Hindu Business Line : Doha Round: Has multilateral trade slipped over edge?

After the launch of the Doha Round the WTO negotiations did become democratised, with the emergence of more players and changed rules of engagement, only to be nullified by the pulls and pressures within.

Before the start of the Doha Round, negotiations at the World Trade Oragnisation were akin to the Ryder Cup, a golf tournament between Team US and Team Europe in which the spoils were evenly shared between the two sides. The rest of the world followed along the edges of the green, feigning interest, struggling to understand the rules of the game, and applauding respectfully. The Doha Round saw the emergence of more players and changed rules of engagement. Countries such as Brazil and India became more assertive while developed countries discovered with discomfort that public opinions even in the developing world mattered.

Hence, trade experts, after the failed Doha Round trade talks, have been looking beyond the usual suspects to apportion blame. In Brussels, Geneva and political capitals, and the Western media, there is grudging acknowledgment that the calls for lower tariff walls and domestic farm subsidies emanating from Brazil and India can no longer be dismissed as noise.

Power distribution

The distribution of power at the negotiating table may have democratised, but has multilateral trade slipped over the edge?

Three key questions emerge from the post mortem examination report of the recent WTO talks. First, what caused the seizure in talks? Many view the reasons for the failure of the talks as arising out of America's reluctance to reduce domestic subsidies to agriculture unless the EU made deep cuts in its farm tariffs and big economies such as Brazil and India also slashed in their market access barriers on agricultural goods and industrial products.

The US wanted deeper cuts in these barriers so that its farmers could be compensated with access to foreign markets for losing generous financial support at home. While the EU and the developing countries appeared willing to settle for a halfway house deal, the Americans wanted all or nothing. Some analysts such as the Deutsche Bank Chief Economist, Mr Norbert Walter, have blamed the failure of the talks on the `inexperience of Brazil and India'. No doubt, there is relief in the developing world that their representatives — Brazil and India — ignored the guidance of the US, the EU, Japan and Australia at the G-6 talks.

Many analysts, however, worry that neither the US nor India have displayed adequate interest in a Doha deal and this could affect the resumption of talks. The expiry by mid-2007 of the American President's fast-track authority to negotiate without the Congress amending the deal and the prospect of a more protectionist US Farm Bill could scuttle the process. A global economic slowdown and fear of the China factor could also reduce the appetite for multilateral trade talks.

Loss of real gain?

Real gains made in other areas such as services or duty- and quota-free access for least developing countries (LDCs) could be lost as the WTO talks work on the principle that nothing is agreed until everything is agreed. Though several countries appear to be pursuing diplomacy in the background to resume the talks, the possibility of the talks being in cold storage for a long time appears real.

Second, have the lofty ambitions of the Doha Development Agenda been cremated? Five years ago, when the Doha Round was launched against the backdrop of the 9/11 terrorist strikes in the US, it was portrayed as the opportunity to build solidarity across the rich and poor nations to promote inclusive growth and share the benefits of globalisation. Yet, as a chronicle of the talks over the last five years would suggest, progress was slight.

In industrial goods (Non Agricultural Market Access), the US wanted India to cut its bound tariff levels even below the applied levels. In fact, contrary to much of the media analyses in the West, Brazil and India showed flexibility in agreeing to give up the more developing country friendly `modified Swiss formula' (the ABI formula) that would have taken into account the existing tariff structure of a country (the average tariff rate) to ensure that there is no disproportionate cut in tariffs.

If the US and Europe (including non-EU countries) could claim clout owing to its 70 per cent share in the global trade in goods and services, G-20 member countries could, on the other hand, claim to represent 57 per cent of the world population and 70 per cent of the world's farmers. And unlike in earlier Rounds, developing countries were too organised to buckle. Hence, key concessions that could have enabled this Round meet its developmental aspirations did not materialise.

Bilateralism, regionalism

Third, and finally, will bilateralism and regionalism become even more dominant?

This might be a moot question given the explosion of regional trade agreements (RTAs) since the mid-1990s. The failure of the multilateral talks might increase the focus on the expansion of bilateral and regional trade deals, but these have all along been galloping. If all the RTAs that are being negotiated or proposed were to be implemented, there would be nearly 300 RTAs in force by 2008.

Since 2000, the US has concluded 14 RTAs and is negotiating 11 more. The EU intends to pursue bilateral deals in Asia following the failure of talks.

There is an unmistakable trend here. Developed countries have been effectively using the regional and bilateral route to extract commitments that developing countries collectively refuse at the WTO.

In fact, the regional route has been used to either make the existing commitments at the multilateral level more stringent or to facilitate the entry of non-trade issues. .

IPR negotiations

When negotiations on Intellectual Property Rights got tough in the Uruguay Round, the US took the bilateral and regional route to conclude stringent and `industry friendly' agreements with developing countries.

Similarly, all the US FTAs after 1995 contain rules on labour standards that are even more stringent than what the International Labour Organisation (ILO) prescribes. The delay in completing the Doha Round will give more time to the US to broaden the ambit of the WTO by bringing in non-trade issues such as labour and environment.

RTAs are fashionable between developing countries too. Optimists believe that the spaghetti bowl of developed-country-led RTAs and the noodle bowl of intra-developing country RTAs will lead to a complex maze of trade discrimination that will ultimately push countries back to the negotiating table. Aid for trade is another tool that might be effectively used by developed countries to get at least the LDCs to come to the table.

Optimism and tactics aside, the WTO requires a big helping of political will from the key member countries.

The spectre of terrorism that launched the Doha Round perhaps competes with it for political attention among world leaders in the rich and poor world. Political commitment to make the rule based multilateral trading framework that the WTO offers work needs to be prioritised before trade slips back to becoming a game with two star players and lot of caddies.

(The authors are, respectively, an economist based in London and a trade researcher with the Centre for Trade and Development. The views are personal.)