Multilateral trade agreement and the Doha Round.
There is little doubt that the WTO is struggling with respect to securing closure of the Doha Round. Unlike earlier ‘rounds’ of multilateral trade liberation, the Doha Round was intended to focus on issues relating to economic development. The Round was supposed to have been concluded by January 2005. Attempts to ‘kick-start’ the process have stuttered. Why is it proving to be so difficult to achieve agreement? What are the implications of failure?
The really significant issue is trade in agricultural produce. For many reasons, some beyond the reach of reason, agricultural sectors in most countries are subject to subsidies and protection. This is true of the United States. This is true of the European Union. This is true of India. The subsidies to agricultural production in both Europe and the United States seriously distort international markets by preventing imports and the export subsidies paid to dispose of unsold surpluses, cause problems for producers elsewhere. Agricultural subsidies in total are vast. India has started to successfully open up its domestic market in other commodities and has reaped the benefits of growth. When it comes to agriculture the old concerns of self-sufficiency in food stuff (held by some to be the essence of ‘national sovereignty’), fear of insecurity in rural areas, fear of foreign corporations in agricultural development have all lead to popular political skepticism about the Doha proposals. The EU and the United States have agreed to cut tariffs and eliminate export subsidies and to allow more competition in their domestic markets: in neither place has this been an easy process. This is good for domestic consumers and good for exporters from the global south (less protection, say, for maize and maize extracts opens up the possibility of increased importation of cane sugar). Their domestic agricultural sectors are also politically sensitive areas but some cuts in subsidies are better than no cuts. For this to go through the developing countries must also open up their markets. India and Brazil have rejected this proposal. India is very unwilling to face the changes in rural areas that trade would bring in its train. Few countries accept the idea that agriculture is a business like any other. There are some valid reasons why this is so though much of the special pleading for agricultural protection is emotional. The reality is that if world trade in agricultural produce is to increase then each country will need to make domestic adjustments of one sort or another.
India and Brazil are not willing to have the US-EU agreement simply imposed on the global south. At the same time, the problem is not so much with fundamental issues but with achieving closure. If the Doha Round fails then what is at issue is the whole notion of multilateral trade negotiations. There are huge advantages to multilateralism including simplicity and the promotion of better resource allocation world-wide. A net-work of bilateral trade agreements is costly and cumbersome. The United States has indulged in the creation of such a net-work regionally in an effort to protect itself from any failures at the multilateral level. It is not really in anyone's interests of the Doha Round to fail. At the same time the negotiations require a number of decisions and changes to take place simultaneously.
If no country or group of countries is willing to own the process of finding a basis for closure then it is up to Pascal Lamey, Director of the World Trade Organization. The WTO is the outcome of a reform of the GATT. The GATT was established as a result of the Breton Woods agreement and it’s the first of the major institutions to be fundamentally reformed. If it fails to achieve the developmental aims of the Doha Round, this would be a serious failure. Lamey has come up with strategies in the past including suspending the talks (a high risk strategy) and holding regional and technical meetings out of the public eye, in order to keep the negotiations away from sudden death. He will need to do the same again. His credibility is at risk as is that of the WTO, an institution not popular with those who are against globalization (whether this be those India politicians in favor of quantitative restrictions or anti-capitalist groups or alliances supporting sustainable development). He cannot do this alone.