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Doha: still breathing?

There seems to be efforts to revive the Doha Round. This is good news but how good?

Since I last wrote about Doha I have been asked why Doha? The idea of ‘rounds of trade negotiations’ is an outcome of the way in which the General Agreement on Tariffs and Trade (GATT) worked. The rounds were named after places where the meetings that initiated the talks were held. The World Trade Organization (WTO) has continued this. The Doha Round is named after the capital of Qatar (a Gulf emirate).

The talks were recently suspended. Since then a number of different countries and institutions have called for the re-start of talks. Chancellor Gordon Brown (UK and Chair of the IMF’s policy steering group) has expressed a high level of optimism about the re-start and likely progress of the talks. The Australian Treasurer (Peter Costello) also called recently for the re-start of the Doha Round, stressing to other members of the Asian-Pacific Economic Cooperation (APEC) that the talks ought not to be allowed to fail. United States Trade Secretary Henry Paulson has also stated very clearly that the re-launch of the Doha Round is an important priority area for his activities. The United States is accepting that in part of the global adjustment to imbalances (including that of the United States); letting markets work may be a significant part of the process. The aim seems to be to re-address the question of agricultural subsidies in Europe and the United States and so work further towards the liberalization of trade in agricultural produce. What the developing countries want is for the EU, for example, to raises its average tariff cuts to match the expectations of the developing world and of other exporters. This means an offer in excess of the present offer of 39% average tariff reductions. The United States has offered cuts in subsidies but the overall package of subsides provided by the United States is currently contentious. Large developing countries object to the United States stance as does the EU. The G20 group (with India and Brazil as prominent members) has undertaken a review of the state of play and has called for the developed countries to reconsider their position. Some member of the European Parliament (albeit British members) are calling for a New Zealand type adjustment leading to the removal of all subsidies to European farmers, irrespective of Doha.

There is a lot on the agenda if the talks re-start (perhaps sometime after the US mid-term elections). New Zealand removed agricultural subsidies in the mid-1980s. This led to adjustments within the sector and the adoption of a ‘business’ approach by New Zealand farmers leading to significant growth in the agricultural sector. It is interesting that New Zealand’s approach was recently discussed at an Economic Policy Program meeting in Washington D.C. This may not amount to much but the re-start of Doha raises questions about the type of adjustments that are likely to be needed to satisfy all participants. World trade is always about domestic trade in the end and the adjustment of domestic markets and conditions in its light.

Good news then but how good? This depends on how far the talks go with respect to the issue of agricultural markets and domestic subsidies in Europe and the United States. The US wants access to European markets. It is faced with demands from India and Brazil to adjust its domestic subsidies. It is a question of how far all parties will be prepared to go. Even if successful, the actual gains world-wide are not expected to be massive in relation to the present volume of global trade. Nonetheless they are expected to be positive and available to the world’s poorest countries.

In an earlier report I asked ‘who cares’ about the collapse of the Doha Round. The answer seems, fortunately, to be rather a lot of people, institutions and countries.