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.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher