Slow Doha talks hurt business planning

Trade matters: The contours of the trading systems are rapidly changing and a successful outcome of the Doha round is important to reinforce faith in global trade

This November marked 15 years since the Doha round of negotiations, under the aegis of the World Trade Organisation (WTO) began. An ambitious round of negotiation, the Doha Development Agenda (DDA) round addressed a plethora of concerns and envisioned a revamped global trade platform reflecting the needs of the developing countries. Initially, scheduled to end by 2005, the negotiations have been moving at a rather slow and uncertain pace. Deadlocks between developed and developing countries continue to persist over a number of issues; most notably in the areas of farm subsidies and tariffs.

Furthermore, global developments such as Brexit and the US elections have led to a profound power transitions, and perceptible changes in the foreign policy of major global players will determine the direction the trading regime is heading in. Today, the contours of the trading systems are rapidly changing and a successful outcome of the Doha round is important to reinforce the commitment and faith in international trade.

The DDA was an ambitious round of negotiations. Over 20 sectors were covered and since then negotiations have focused on reducing trade tariffs and re-drafting the rules of engagement. What have prolonged the negotiations are the principles of single undertaking and consensus. The former implies that all the concerned issues are viewed as a single package unlike previous negotiations (Tokyo round) where member countries could choose certain clauses and reject others. The principle of consensus has further compounded the laborious negotiations. Consensus means that the agreement requires passive support- no explicit opposition- of all member countries.

Negotiations, especially ones involving trade can be a tricky business. Successful outcomes stand to benefit all stakeholders but an impasse questions the authority and the survival of the institution. The slew of concerns by the developed and developing countries have prolonged the negotiation process and it is unlikely that stalemate will be resolved any time soon.

When member countries met for the fourth ministerial conference in Doha (MC4), the prospects seemed bright. The agenda was pre-negotiated as opposed to the fiasco in Seattle in 1999. The draft declaration has 402 square brackets in the text- which indicated differences between countries- whereas the Doha declaration had only thirteen pairs of brackets. Deliberations continued into MC5 (Cancun) but negotiations ended abruptly when the Mexican foreign minister who was chairing the meet halted the proceedings. The MC6 in Hong Kong, was a strenuous round of negotiations. Countries could not agree on the formulas and numbers required to address the chronic issues of subsidies and tariffs.Negotiations continued in Geneva (2009, 2011), Bali (2013) with no substantial results.

The last ministerial conference was held in Nairobi, Kenya. Deeply entrenched differences between developed countries (led by the US and EU) and developing countries (led by Brazil, India, South Africa) became more pronounced and contentious. The developed countries wanted to expand the ambit of the negotiations and incorporate ‘new’ issues. India strenuously opposed subtle attempts by the developed countries to abandon the Doha round. Concerns over subsidies given by developed countries to their farmer remain a lingering issue. Furthermore, India reiterated its stance on trade distorting export subsidies in developed countries and public stockholding for food security purposes.

The Brexit move has undermined the unity of the European Union and this is bound to have an impact on the grueling negotiation. The UK will now re-negotiate its trade polices irrespective of the EU. This is bound to weaken the EU bloc which represented itself as a monolithic entity. Furthermore, Donald Trump’s rise to presidency and the protectionist posture he has taken in the past adds more ambiguity to the precarious trajectory of international trade. The future of the Trans- Pacific Partnership, an agreement twelve countries in the Pacific region, is already looking bleak. America, as the preponderant power in the world, has a responsibility to integrate developing countries in the trading network and not look in-wards.

Frustrated by any tangible results from the Doha rounds many countries have started signing bi-lateral trade agreements and regional trading agreements (RTA). Although the conventional wisdom always held that RTAs undermine global trade by compartmentalising countries and introducing a different set of environmental and labour regulation, a lack of consensus at the global level is inducing countries to opt for the RTA route. Mongolia and Japan notified the WTO about a new RTA and with this move all members of the WTO have an RTA in force.

International trade has had a checkered history and, historically, political imperatives have dictated the pace of trade liberalisation. The international political economy is enduring a rather turbulent phase. But this is not the first time that the limits of the trading regime are being tested. The era of free trade began with Britain in 1848 when it repealed the Corn Laws which historically protected agricultural products. By the 1870s an industrial slump pressured European governments to succumb to protectionist policies. This depression, that induced a degree of fatigue in the trading environment, resulted in uncertainty till the end of world war two when the US assumed the mantle of leadership and as the preponderant power, championed the idea of free trade. The Marshall Plan was part of its grand strategy to rebuild Europe and create an environment which underpinned free trade. The period between world war one and two was a rudderless era with no world power capable of assuming the role of a hegemon. America continued pursuing protectionist policies and passed the Smoot-Hawley Act (1930) which raised US duties to historic levels. Since then world trade has come grown exponentially and come a long way.

The benefits of an open trading regime far outweigh the negatives. Protectionism does not yield tangible results

It is vitally important that the international trading system moves towards a liberal direction since the benefits of an open trading regime far outweigh the negatives. History is witness to the decision that overtly protectionist policies do not yield any tangible results and are only detrimental to the global trade. The profound malaise which continues to plague the trading system should be a cause of concern. GATT was created by developed countries after World War II, and developing countries were mere bystanders. In the decades after WWII, the trading regime evolved till the Uruguay Round which led to the formal creation of the WTO. Developing countries, today, stand to gain from the fruits of an open trading system.

Professor Robert Baldwin, a renowned professor of law at the London School of Economics and Politics Science, once gave a famous analogy. Trade liberalisation is like draining a swamp. As the water level (tariff level) drop, rocks and stumbling blocks become visible. The GATT began the process of draining the swamp. Regional trading agreements, hawkish protectionist policies, a fractured EU and diverging concerns are the new stumbling blocks. Surmounting these formidable obstacles it is crucial to bring the Doha round to a successful conclusion. Deliberating new issues without resolving outstanding differences will only add to the labyrinth of criss-crosses. This should be the mandate for Buenos Aires in 2017.