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Ignore the urgent rhetoric surrounding the Doha round of trade talks. It's time for a rethink, says Paul Rayment.

22nd July 08 - Paul Rayment, The Guardian (UK)

We are being warned, yet again, by leaders of the G7, their trade officials and sundry commentators that failure to reach a successful conclusion to the Doha round of trade negotiations will put the entire international trading system at risk and with it the continued economic growth and prosperity of the world economy. Gordon Brown has described this week's special meeting of trade ministers in Geneva as a "make or break" event taking place "at one minute to midnight" with billions of dollars on the line for the world's poorest people.

There is a large dose of irresponsible rhetoric in all this, no doubt intended to alarm the negotiators. Max Corden, a distinguished and level-headed trade economist, noted many years ago that most economic policy changes other than macroeconomic ones have only small effects on GDP and "the effects of trade policy changes are often overrated".

Charlene Barshevsky, the former US trade representative has said she does not believe a failure of the Doha negotiations will have "any short-term negative effect" although she does worry that protectionism could increase if there is any weakening of international rules.

She also admitted that there was never any real enthusiasm for the round in the first place: it was launched more as an emotional act of solidarity with the US after 9/11 than a carefully thought out policy initiative with development objectives.

As to the promises of poverty alleviation, the World Bank's own estimates of the gains from complete trade liberalisation vary between $80bn and $800bn with some of their latest estimates for the partial liberalisation of the Doha round dropping to as little as $7bn for developing countries. And, as studies by the Carnegie Endowment have shown, the highly uneven distribution of the gains could mean, contra Brown, that some of the poorest countries would be among the likely net losers.

Still, a failure of Doha leading to a collapse of the present system governing world trade, painstakingly put together over the last 60 years, would be a serious matter. Recall that it was created to avoid a recurrence of the breakdown of international trade in the 1930s. But how would such a collapse come about today? Would the G7, in a fit of pique for not getting its way, tear up the existing agreed rulebook and try to pursue their objectives by other means? This implies such a complete abnegation of responsibility and leadership that it is barely credible.

Market fundamentalists, however, point to the dangers of subversion by rent-seeking politicians and protectionist workers running roughshod over the principles of comparative advantage and the open economy; they urge greater flexibility and mobility by those whose livelihoods are disrupted by trade shocks and promise "win-win" outcomes if they comply.

But their homilies to the efficacy of unregulated markets stand in sharp contrast to the generous protection extended to intellectual property owners, bankers and foreign investors that has been the hallmark of policy in the current era of globalisation.

More egregious still, they deny any connection between premature trade liberalisation and a lop-sided macroeconomic policy agenda that has hindered employment creation and placed most of the burdens of adjustment and downside economic risks on individuals and communities, especially those in the lower income groups.

Such double standards continue to mark the Doha negotiations, where G7 countries have been pushing their own corporate interests with little regard for those of others or for the broader interests of systemic stability. They continue to demand that, in return for reducing their agricultural protection, the developing countries should make major concessions in opening their domestic markets for manufactured goods and services.

Such demands are little more than chutzpah: not only have the developed countries' agricultural policies caused considerable damage to developing country exports over many years but the developed countries agreed in the Uruguay round to reform their agricultural support systems in return for the developing countries accepting new commitments such as the agreement on trade related investment measures (Trims), trade related aspects of intellectual property rights (Trims) and the General Agreement on Services. That is a done deal and the developing countries should not have to give any more for it.

Systems of multilateral cooperation ultimately depend for their effectiveness on the most powerful members exercising a degree of restraint in the pursuit of their particular objectives in the larger interests of systemic stability and the public good. This implies that the rules be set with the interests of all members in mind, that the agreed rules be applied fairly and predictably, that there safeguards against abuse of basic principles, and that there is respect for the interests of the weaker members.

For those ministers gathering in Geneva, the voice to listen to is still Adam Smith's: "Society may subsist, though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it…. Justice is the main pillar that upholds the whole edifice". The current state of the negotiations shows little sign of coming anywhere near this standard.

Far from being a disaster, a failure of the Doha round will provide countries, at all levels of development, with a much-needed incentive and opportunity for reflection and debate on how to restore and strengthen the basic principles of the world trading system in such a way that will not only meet Smith's criterion but also recover the broader and longer-term multilateral vision of those who shaped the original structure of international institutions in the late 1940s.

Paul Rayment is the former director of economic analysis at the UN Economic Commission for Europe. His book with Richard Kozul-Wright, The Resistible Rise of Market Fundamentalism, was published earlier this year by Zed Books.

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WTO Prescribes More Liberalisation

22nd July 08 - Gustavo Capdevila, IPS News

Link to the full report: "World Trade Report 2008: Trade in a Globalising World" 

The shortcomings of globalisation must be amended by more globalisation, according to the World Trade Report 2008, released by the World Trade Organisation (WTO).

In its report titled ‘Trade in a Globalising World’, the WTO recommends pursuing more open markets balanced by complementary domestic policies, a tacit recognition of a role for the state, "along with international initiatives to manage the risks arising from globalisation."

The combination of trade and globalisation, leading to greater integration and economic interdependency between countries, has made a significant contribution to bettering the lives of many millions of people around the world, WTO Director-General Pascal Lamy said at the launch of the report this week.

But the benefits of greater integration and interdependency have not reached everyone, Lamy acknowledged. "There are those that are excluded and left behind," he said.

For that reason, deeper integration into the world economy has not always proved popular. As a consequence, trade scepticism is on the rise in certain quarters, the report admits.

This is the global context for a decisive phase of the Doha Round of world trade negotiations, launched in Nov. 2001 to lower trade barriers between countries and free up markets.

The talks have frequently been on the verge of breakdown, mainly due to divergences of interests between industrialised countries and developing nations. Next week a crucial debate will be held with the participation of ministers from some 35 or 40 countries, out of the 153 members of the WTO.

Against this backdrop, Lamy seized the opportunity to examine a stark dilemma for the future of globalisation.

"What the ministers achieve together next week will be judged as an indicator of the international community’s willingness and ability to share in the management of globalisation in an effective and equitable manner," he said.

"I am not suggesting that any deal is better than no deal. But I am suggesting that on the basis of what is on the table, an inability to come to a mutually beneficial and substantive deal would be a dark signal indeed," he warned.

In the context of what the WTO is striving to achieve, the 2008 report could not come at a better time, Lamy said.

The document, presented by WTO chief economist Patrick Low, examines the gains from international trade and the challenges arising from higher levels of integration.

International surveys of public attitudes suggest that a majority of people recognise the benefits of globalisation, but this recognition is accompanied by anxieties about the challenges that come with it, the report says.

While large majorities believe that international trade benefits their countries, they also fear the disruptions and downsides of participating in the global economy, it says.

The report recommends adopting national policies to counteract factors that limit the potential benefits of trade, such as public investment in physical infrastructure, as well as cost reduction by reforming trade and regulations.

In the sphere of international cooperation, the document advocates negotiations to facilitate trade by reducing the costs of transporting goods and crossing borders.

It also refers to the Aid for Trade Initiative, which aims at providing financial assistance for trade capacity building in developing countries and ensuring that the opportunities and benefits of trade are more widely shared.

In Lamy’s view, trade can make a small contribution to solutions for the current international economic situation, "which is unprecedented," he said.

It is not that the factors involved are in themselves unprecedented, but what has not happened before is the concurrence of all those factors simultaneously, he said, in reference to escalating oil and food prices and economic slowdowns in many parts of the world.

More important still are the social and political effects of what is happening. This time the effects are greater than in previous crises, because they are basically hitting the poorest first, he said.

With respect to what trade had to offer as a solution to the crisis, Lamy mentioned soaring food prices, which he said originated in imbalance between supply and demand, the obvious solution being to increase supply.

Places where increased food production is possible -- at a low environmental cost -- are mainly in developing countries.

But it is also obvious that no one will invest in agricultural production if they have to compete against the financial resources that the U.S., Europe, Japan and others devote to subsidising their farmers.

Lamy was optimistic about the chances of closing a deal at the negotiations next week in Geneva. The chances now are better than they were a few weeks ago, he said.

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Doha timeline

21st July 07 - Angela Balakrishnan, The Guardian (UK)

November 2001: Members of the WTO meet in Qatar and agree to launch the Doha round of multilateral talks with focus on development and opening markets in agriculture, manufacturing and services. The talks are also intended to make trade rules fairer for developing countries and minimise the divide between richer and poorer nations. Countries set a goal to finish the round by January 1 2005.

January 2002: A negotiating group is set up in Geneva, the WTO's headquarters. Talks get off to a promising start.

October 2002: WTO director-general Supachai Panitchpakdi is concerned that talks have lost momentum.

March 2003: Deadlines to decide on a formula to cut agricultural tariffs, domestic support and export subsidies are missed. Countries also fail to meet a deadline for manufacturing talks, while services negotiations begin to slip behind badly.

September 2003: Ministerial meeting in Cancun, Mexico sees more setbacks after developing countries attack the US-EU agricultural proposals which give rich countries farm subsidies. After four days the talks, intended to forge concrete agreement on the Doha round objectives, collapse on this issue. A new trade bloc is formed, reflecting the opposition from developing countries. Led by India and Brazil, it is called the G20. Conference chairman Luis Ernesto Derbez says at the end of the acrimonious conference that it was impossible to bridge differences in the time left. Negotiations continue.

January 2004: US trade representative Robert Zoellick encourages countries to pick up pieces from Cancun and begin again.

July 2004: Talks in Geneva see a framework agreement on opening global trade. Some progress is made with the US, EU, Japan and Brazil agreeing to end export subsidies, reduce agricultural subsidies and lower tariff barriers. Developing nations agree to reduce tariffs on manufactured goods but gain the right to protect key industries. Some of the toughest decisions are put off again.

June 2005: Negotiators meet in Paris hoping to make progress before December WTO meeting in Hong Kong. They also hope to agree a deal before 2007 when the US fast-track legislation expires. Any declaration of the WTO must be ratified by the US Congress to take effect in America. But talks are still locked over a few issues - France protests moves to cut subsidies to farmers while the US, Australia, the EU, Brazil and India fail to agree on issues relating to chicken, beef and rice. These small issues raise concerns that reaching agreement on large politically risky issues will be substantially harder.

August 2005: Agreement needed by now to finalize negotiations for agreement in Hong Kong. However, nothing final is drawn up. Oxfam accuses the EU of using delaying tactics to try to spoil the round.

December 2005: The WTO holds its fifth ministerial meeting in Hong Kong. Countries agree to eliminate agricultural export subsidies by 2013 and also agree that industrialised countries should open their markets to goods from the world's poorest nations - a UN goal for many years. But again negotiators fail to agree on a formula for cutting domestic farm subsidies and tariffs.

January 2005: WTO members miss deadline for finishing the round.

April 2006: Negotiators miss new agriculture and manufacturing deadlines set in Hong Kong.

July 2006: At a meeting in Geneva, negotiators, particularly the G6 comprised of the US, EU, Brazil, India, Japan and Australia fail to reach an agreement about reducing farming subsidies and lowering import taxes. WTO director-general Pascal Lamy suspends the negotiations. A successful outcome of the Doha round looks increasingly unlikely because of the US fast-track legislation, which places additional pressure on the US and makes other countries less willing to participate. Hong Kong offers to mediate the collapsed talks.

February 2007: After months of bilateral and small group consultations, Lamy declares multilateral negotiations in Geneva back in full swing.

May 2007: Lamy warns Doha failure would mean "breaking the commitment for a more developing-friendly world trading system".

June 2007: US trade representative Susan Schwab, EU trade commissioner Peter Mandelson, Brazilian foreign minister Celso Amorim and Indian commerce minister Kamal Nath meet in Potsdam to see if they can break the impasse. The talks collapse with India and Brazil complaining the US and the EU were demanding too much new manufacturing market access in exchange for cutting farm subsidies and tariffs. The future of the WTO talks falls into deeper crisis.

June 2007: The US fast-track legislation expires and congressional leaders indicate their unwillingness to renew this for the current US president, George Bush.

July 2008: Negotiations start again at the WTO's HQ in Geneva. The conference, due to last a week, sees 40 ministers gather to try draw up an agreement. Lamy puts the odds of success at over 50%.

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