Global Economic Viewpoint |
|||
GLOBAL VIEWPOINT GLOBAL ECONOMIC VIEWPOINT EUROPEAN VIEWPOINT NOBEL LAUREATES PLUS |
06-26-2006 FAILURE OF DOHA ROUND WOULD THREATEN WTO ITSELF Ernesto Zedillo, a former president of Mexico, is the director of the Yale Center for the Study of Globalization. WTO trade ministers meet in Geneva this week to discuss the Doha round. By Ernesto Zedillo NEW HAVEN, Conn. - Repeatedly, each of the Doha trade round's deadlines concerning market access for agricultural and non-agricultural goods has been missed. Despite rare and brief episodes of progress, the story of Doha has been, to paraphrase Gabriel García Márquez, a chronicle of failure foretold. This round of trade negotiations, which began in 2001, encompasses a hazardous paradox: It was launched mainly because geopolitical factors and global public-goods considerations came into play, transcending purely mercantilist incentives; however, both the round's agenda and negotiation dynamics have obeyed the logic of mercantilist liberalization. It should have been evident that the pure logic of mercantilist negotiations could not make the Doha round succeed. The approach of negotiating reciprocal concessions - which in the past usually led to win-win outcomes - could hardly achieve further trade liberalization when the priorities and interests of so may varied parties were brought together under the WTO (World Trade Organization). Deepening global trade liberalization thus became less of a traditional mercantilist undertaking and more about providing a multilateral trade system with full reciprocity and non-discrimination among all trading partners. This endeavor to create a "global public good" entails overcoming sovereignty issues and the temptation for some countries to wait until the others negotiate and then claim most-favored-nation treatment -- that is, the temptation to free-ride on the system. If every country tries the same tactic, then collective agreement is impossible. In the absence of an otherwise undesirable global government with the capacity to coerce countries into international agreements, creating conditions for the provision of global public goods depends not on sheer authority, but effective leadership. This stems certainly from power, but also from legitimacy grounded on clarity of purpose, willingness to move toward that purpose without waiting for others, and sometimes the willingness to contribute incentives for others to follow. So far the U.S., Europe and Japan have been reluctant to provide that kind of leadership. On this side of the Atlantic, President George W. Bush's recent indication that the U.S. might be flexible on agricultural subsidies was very welcome. Yet, with the president suffering in the polls and facing midterm elections, the issue of agricultural liberalization will more likely alienate rather than galvanize the electorate. So, it remains to be seen if it will be reflected in the U.S. negotiating stance. Retiring chairman of the House Ways and Means Committee, Bill Thomas (R-Calif.), foreshadowed the election cycle free-trade discourse - certainly not favorable to agricultural liberalization - when in April he urged the Bush administration to shift focus to bilateral and regional trade agreements. Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, offered a latent threat to developing countries, stating that they "should know that a failure to reach an agreement in the Doha round would further dampen enthusiasm in Congress for extending U.S. preference programs." Further securing the cover on the round's casket is the mid-2007 expiration of the president's trade-promotion authority, or "fast-track" authority, which will expose any multilateral trade agreement to the notoriously protectionist American Congress. Plenty of reasons for pessimism also emanate from Brussels. All other things being equal, the E.U. will continue to resist major cuts in agricultural tariffs and ask that a large number of products be designated sensitive, exempt from the general rules to reduce protection. The virtual straightjacket imposed by the Franco-German pact on the E.U. Common Agricultural Policy (CAP) reforms and the fall 2004 pact on the E.U. agricultural budget further dampen prospects for success. British Prime Minister Tony Blair admitted that the CAP is a major obstacle to progress but called for parallel American and Japanese reviews of agricultural subsidy programs. However, we should know better than to accept blindly the empty promises that have produced so little action since 2001. Even in a fantasy world, where negotiators could miraculously overcome these obstacles, the light at the end of the Doha tunnel would still be far away. If the E.U. and countries in the G-10 (which are net food importers) were prepared to relent on agricultural protectionism, the G-20 group of developing countries would have to follow suit with painful sacrifices. Is Brazil, for example, ready to slash industrial and agricultural tariffs? Is it ready to make ambitious offers in services? Is it ready to give some preferences to less-developed countries? Beyond these issues, there's the task of establishing a temporary "aid for trade" fund, satisfying poor countries' need to address adjustment costs associated with the implementation of a truly reformist Doha round. The greatest long-term harm could be the reversion to regional trade agreements. If we head in that direction, the debate might shift from how the WTO can save the Doha round to saving the WTO from the Doha round. I cannot think of any WTO member that would win, now or in the foreseeable future, from a weakened WTO. Yet this is the reality to which world leaders must awaken while they still can. (c) 2006 YaleGlobal and 2006 Global Economic Viewpoint |
||