Doha round autopsy

The Doha round has seen more col­laps­es than an Eng­land test innings. It would be easy to miss its sig­nif­i­cance as a dou­ble blow to coop­er­a­tion in the man­age­ment of the glob­al econ­o­my.

The WTO’s trad­ing sys­tem reg­u­lates the indis­pens­able glob­al growth ‘con­vey­or’: trade in goods and ser­vices. When 150 or so gov­ern­ments try, but fail, to agree on improve­ments to the sys­tem they all say they want, some­thing is bad­ly wrong. It sug­gests we might need to think twice about the strength of their sup­port for the rules that con­trol trade con­flicts, keep mar­kets rel­a­tive­ly open and reg­u­la­tions min­i­mal­ly fair.

Sec­ond, the ser­i­al col­lapse of the WTO talks points to prob­lems that almost cer­tain­ly run wider than the trad­ing sys­tem, affect­ing oth­er glob­al man­age­ment regimes like the UN cli­mate-change regime. The futile bar­gain­ing in Gene­va reminds us that the eco­nom­ic pri­or­i­ties of the demo­graph­ic giants (Chi­na, India, Indonesia)—all of whom are poor coun­tries by most measures—are not eas­i­ly aligned with those of Europe, North Amer­i­ca, Aus­trala­sia or even of rich­er devel­op­ing coun­tries (Brazil, Argenti­na).

What will be the impact of this uncer­tain­ty? Will there be a rush to fix up bilat­er­al or region­al trade deals? Prob­a­bly not, because the rush already took place. It’s like­ly that there will be some increase in FTA activ­i­ty but, as Australia’s expe­ri­ence shows—particularly in FTA nego­ti­a­tions in Asia—it is dif­fi­cult to nego­ti­ate dis­crim­i­na­to­ry agree­ments with real trade val­ue. Besides, no num­ber of them adds up to a tru­ly glob­al trad­ing sys­tem so no gov­ern­ment seri­ous­ly con­sid­ers them an alter­na­tive to WTO.

For­tu­nate­ly the impact on the real mar­ket will prob­a­bly be small. The deal that might have been done this week was a poor one in many respects. WTO Direc­tor Gen­er­al Pas­cal Lamy says the final ful­fill­ment, some­time after 2015, would have seen import tax­es fall by $130 bil­lion, or only about 1% of the val­ue of mer­chan­dise trade val­ue.

In agri­cul­ture the draft on the table at the end fell far short of the ‘sub­stan­tial improve­ments’ that gov­ern­ments sought in 2001. Aus­tralian live­stock and dairy exporters were look­ing at slight­ly big­ger cracks in tar­iff walls around a few mar­kets. But with export mar­ket prices at high or record lev­els and tipped to stay there in the medi­um term, the agri­cul­tur­al sec­tor should be able to con­tain its dis­ap­point­ment.

Options for devel­op­ing coun­tries to manip­u­late the appli­ca­tion of the tar­iff cuts and to take advan­tage of broad excep­tions to tar­iff cuts offered lit­tle joy to exporters of man­u­fac­tures. The motor vehi­cle man­u­fac­tur­ers and assem­blers will be hap­py that their pro­tec­tive tar­iffs are no longer under the threat from WTO cuts. But much good that will do them at cur­rent exchange rates.

The ser­vices sec­tor has strongest cause for dis­ap­point­ment. After sev­en very lean years in the Doha talks, the last days saw the dawn—false, as it turns out—of new hope. There was a sur­pris­ing indi­ca­tion from both devel­oped and devel­op­ing coun­try gov­ern­ments of will­ing­ness to open ser­vices mar­kets includ­ing in areas like tem­po­rary move­ment of labour. Details from the con­fi­den­tial ‘sig­nalling’ con­fer­ence held in Gene­va are scarce, but the state­ments made lat­er were so pos­i­tive that it seems like­ly gov­ern­ments will try to get back to the table on Ser­vices soon.

It is not clear if the ‘Doha’ round will be revived. The Unit­ed States is now unlike­ly to par­tic­i­pate in nego­ti­a­tions until after the next Pres­i­dent and his admin­is­tra­tion is installed. There will still be some diplo­mat­ic ‘momen­tum’ behind the last-minute com­pro­mis­es reached this week in Gene­va, so gov­ern­ments may try to hold onto the Doha man­date and the draft ‘texts’ that they labored over for the past eight years. That would only show, how­ev­er, that they had missed the point.

What should Kevin Rudd and Simon Cre­an do now?

First, they should use this peri­od of uncer­tain­ty to renew their offers to Japan and Chi­na on the more-or-less-stalled bilat­er­al free trade agree­ments. They should try to close the deal, final­ly, with ASEAN, and should urge Pacif­ic island coun­tries to move more quick­ly, too, toward nego­ti­a­tions on a region­al ‘clos­er eco­nom­ic rela­tions’ pact.

Sec­ond, they should uni­lat­er­al­ly make the cuts to goods and ser­vices pro­tec­tion that Aus­tralia would have made had Doha suc­ceed­ed. Doha made it clear that our own tar­iff reforms such as cut­ting motor vehi­cle tar­iffs won’t buy us ‘sub­stan­tial’ improve­ment in export mar­kets. So we will not be los­ing valu­able ‘coin’ by cut­ting import tax­es uni­lat­er­al­ly, espe­cial­ly if we’ve already agreed free trade with Chi­na and Japan.

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