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Doha Round: Revival or Slow Death?

by maracatu Sun Jan 28th, 2007 at 08:21:39 PM EST

A week ago, the Financial Times reported that:

Trade negotiators from the US and European Union are edging towards a deal that could restart stalled world trade talks, according to people familiar with the discussions.

Upon closer examination, however, it does not seem likely a deal is forthcoming.  For those unfamiliar with the Doha Round (and the situation the US finds itself, in relation to it), please make the jump.  ...And to those of you that may have more up to date information, please join in the comments section.

It has been apparent for some time already that the so called Doha Round of multilateral trade negotiations in the World Trade Organization (WTO) will not be completed under President Bush's Trade Promotion Authority (TPA).  The current TPA required the President to notify Congress if he was going to propose amendments to trade remedy laws (laws concerning issues such as dumping, countervailing duties, among others) by December of last year.  He has not done that.  He has an approaching deadline of April to notify Congress of his intention to sign an agreement.  A Doha round agreement thus notified and signed before July falls under the so-called fast track features of the TPA.  In a nutshell:

Trade promotion authority, known as fast track, transfers the power to broker trade deals from Congress to the executive branch. Once a deal is signed, Congress then votes on it in its entirety.

But the authority, a tough sell in Congress in the past, expires in July 2007. That deadline is one reason why many believe President Bush's trade agenda may be in deep freeze.

This is much more the case now, given the current make-up of the US Congress following last November's elections.

Despite the alleged "progress" made between the US and EU, as expressed in the first paragraph of the FT article I quoted in the introduction, a further reading of the same seems to douse that prospect with cold (no!, ice) water:

The proposed outline of an agreement between the world's two largest trading blocs includes politically explosive concessions that are already causing rifts in Europe and alarm in the US farm lobby.

The fragile deal that is starting to emerge has yet to be finalised and comes amid tremendous uncertainty about whether negotiators can get the political backing to achieve a breakthrough in the Doha round of trade talks.

A 24 January report by John Miller in the Wall Street Journal seems to confirm the pessimism:

Global trade negotiators hope to restart the Doha round of world trade talks at the World Economic Forum in Davos, Switzerland, this week, but a return to the bargaining table will likely be more symbol than substance.

The key players -- the U.S. and the European Union -- remain unwilling to cut farm subsidies enough to satisfy emerging economies like Brazil and India.

Since it furthermore seems unlikely the US President will succeed in getting Congress to renew his TPA, what happens next?  We will probably see the demise of the world trading system and a return to bilateral and regional trade agreements.  In other words, the emphasis will shift (in our hemisphere) to agreements like NAFTA and CAFTA-DR as well as the bilaterals.  Such seems to be the outcome, as seen by Jeffrey J. Schott of the Institute of International Economics:

The WTO would not implode but rather begin a slow descent into oblivion.  The poorest and weakest members, who benefit the most from a strong multilateral rules-based system, would be the most disadvantaged. To be sure, members still would adhere to obligations under existing agreements. But there would be less confidence in using the WTO as a forum for trade negotiations--why spend the effort when the process yields so little?

Dan Ikenson of the Cato Institute's Center for Trade Policy Studies appears a bit more sanguine. He views the process as slipping into a "deep freeze" instead of dying altogether, but sees a continued pursuit of free trade by other means:

I am less inclined than most to view Doha's deep freeze as some colossal economic setback.  Certainly it is a(nother) foreign policy setback for the United States, which will undoubtedly be accused of perpetuating poverty and misery the world over.  To the extent there is some small truth in that (some U.S. trade policies have acute, adverse impacts on people in developing countries), Doha's failure carries real costs.  But by and large, there is no reason to assume that international trade and foreign investment will suddenly slow or reverse course.  In fact, trade and investment are likely to continue to grow handsomely and the world economy will continue to expand, as more and more people from more and more countries partake of the global economy.  And furthermore, I suspect that some, if not many, of the reforms and liberalizations proposed in the Doha Round will be adopted, ultimately, without need of agreement, by countries (including the U.S.) that recognize it is in their interest to reform regardless of what other countries do.

Both Schott and Ikenson view the reversal of past WTO agreements as the real danger.  Quoting just Ikenson here:

What concerns me more than the failure to reach a new accord is the potential for marginalization of the old agreements and institutions.  The agreements that culminated in the creation of the World Trade Organization in 1995 and the quiet success of its dispute settlement system (which has "handled" 357 disputes) have a lot to do with trade's contribution to world economic growth.  Long-standing rules and familiar processes have helped reduce and eliminate some of the uncertainties (and therefore, risks and costs) traditionally associated with trading and investing with foreigners.  If member countries were to begin questioning the efficacy of the system or the wisdom or propriety of its adjudication process when it becomes politically convenient to do so, calls to skirt the rules and ignore the verdicts might not be too far behind.  And that behavior could prove contagious, leading to new uncertainties, greater risks and costs, and ultimately, degradation and a potential collapse of the rules-based trading system.

What's changed? The rich countries willing to give up anything that will benefit the poor countries? (I'm not holding MY breath...)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Mon Jan 29th, 2007 at 09:43:48 AM EST
Doha, being dubbed the "Development Round" of negotiations, implied benefits to the poorest countries. However, the non-deliverance of these "benefits" is another reason for its failure (at least in some cases):

Yet, after a decade of damaging results, many people in the 149 WTO signatory nations have made clear their opposition to more of the same. This was before the World Bank dramatically revised downward its projections of Doha Round gains and revealed that a long list of poor countries would be net losers under the likely outcome. While U.S. and European editorials declared the Doha Round collapse as disaster for the poor, social movements and NGOs representing the populations of poor countries cheered.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Mon Jan 29th, 2007 at 11:21:31 AM EST
[ Parent ]
That's a vital point. Free trade may stimulate growth (i.e. increase the total take) but the distribution is skewed, there are winners and losers. The winners from the Doha Round would be the Cairns Group countries and "emerging" agri-nations like Brazil, India, Thailand, with little or no guarantee as to the beneficial effect for their own poor by a more egalitarian internal distribution. Next, big agri-business, including grain merchants, and the transport and financial industries associated with them.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 29th, 2007 at 02:39:54 PM EST
[ Parent ]

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