Kent Jones is Professor of Economics at Babson College and the author of The Doha Blues: Institutional Crisis and Reform in the WTO. The book highlights the real stumbling blocks to trade liberalization and highlights the way around them, in light of the collapse of the Doha Round. Jones outlines the practical steps that must be taken before the World Trade Organization can achieve accord. In the excerpt below, Jones begins to outline the problems the Doha negotiations have faced.
Why have the Doha negotiations been so painfully slow and unsuccessful so far? A review of recent commentary and analysis seems to indicate that the difficulty has many roots, as shown by the following list of contributing factors:
- -Multilateral trade negotiations have become too unwieldy to manage effectively. Membership in the GATT grew dramatically from the 1960s to the 1980s, and the WTO as of 2009 had 153 members, a large number to manage in a consensus-based decision process. In addition, the number of issues has grown with the expanded scope of the WTo coverage into agriculture, services, and “behind-the-border” trade issues.
- -The single undertaking was a good idea in principle, but it doesn’t work in practice. In order to provide the widest possible scope of trade-offs that would provide each member with a stake in the negotiating outcome, and to avoid the fragmentation of the GATT system of codes, the WTO was founded on the principle that “there is no agreement until everything is agreed.” In conjunction with the unwieldy scope of membership and agenda issues indicated in the first item above, some argue that forcing the negotiating outcome into a single, balanced package for all members is virtually unachievable.
- -The balance of power in trade negotiations has shifted in favor of large developing countries. The United States and the European Union had dominated trade negotiations for many years, and while they remain the world’s leading traders (both in imports and exports), their relative importance in trade has diminished, and many faster-growing developing countries, such as India, Brazil, and China, are now asserting greater influence over the WTO negotiating process.
- -The Doha Development Round was oversold as a trade negotiation to promote development. Leading developed countries agreed to present the Doha negotiations as a “development” round in order to provide developing countries with a strong incentive to participate. Yet the WTO is not a development agency, even if it plays an important part in development. It was impossible for the Doha Round to fulfill the expectations of a trade round presumably focused on development goals.
- -Developing countries are “mad as hell” and won’t take it anymore. In conjunction with the previous item, many developing countries were disappointed in the outcome of the Uruguay Round, in which they expected large gains from liberalization of textile and clothing trade in exchange for commitments on the protection of developed countries’ intellectual property and on other “behind the border issues.” The delayed textile/clothing trade liberalization, in which China won the lion’s share of gains, combined with the potentially large costs of intellectual property protection and the financial cost of compliance with the new WTO commitments, led many developing countries to view the Doha Round as an entitlement to receive compensation for the raw deal they felt they go in the Uruguay Round, with few or no concessions on their part.
- -Multilateral trade negotiations have run out of easy “fuel” and political support for reciprocal bargaining. The trade negotiations previously depended largely on tariff bargaining, and the low-hanging fruit of high manufactured goods tariffs had already been harvested before the Doha Round. The natural political allies of such liberalization, industrial exporters, have subsequently lost the strong interest that often propelled the negotiations. Remaining bargaining issues in areas such as agriculture and services have much more intransigent domestic support for protection.
- -Many countries are either economically or politically unprepared to benefit from trade liberalization. Many developing countries suffer from a lack of sufficient market institutions, critical trade infrastructure, government capacity, and safety nets to promote adjustment to increased trade competition. These factors may be hindering the efficient allocation of resources and the ability to gain from trade. Many developed countries may also be suffering from a failure to deal with increasingly acute domestic adjustment pressures, which is usually a political prerequisite for achieving domestic consensus on trade liberalization.
- -The world is distracted by other crises. Global terrorism, global warming, and the financial crisis of 2008 have drawn attention and energy away from trade negotiations. In some quarters, these crises have even been cited as arguments against trade liberalization, presumably because trade contributes to these negative outcroppings of globalization.
- -U.S. leadership in global trade liberalization has diminished. During the cold war confrontation with the Soviet Union, the United States viewed the trading system as part of its economic bulwark against Communism, and the expanding U.S. economy provided a strong domestic political base for taking a leadership role in it. As U.S. economic growth has slowed in comparison to other countries, economic adjustment problems have arisen especially in its manufacturing sectors, the cold war threat has diminished, and the U.S. trade deficit has grown to unprecedented levels, so has U.S. enthusiasm and political support for trade liberalization declined. Another take on this problem has appeared in the criticism of former president George W. Bush, whose foreign policies, particularly regarding the war in Iraq, were unpopular in most of the rest of the world and prevented the United States from taking a leadership role in the Doha negotiations.
- -Business interests in global trade have shifted to regional supply chains. For multinational corporations, the globalization of production has increased the importance of establishing smoothly functioning supply chains internationally through accommodating investment provisions and regulations in host countries. As far as these companies are concerned, the focal point of negotiations has therefore shifted toward bilateral investment provisions. The relative importance of tariffs and other WTO market access negotiations has declined.
This long list of factors working against the Doha Round is sobering, and might cause one to wonder how any global trade liberalization agreement could be achieved in the current economic and political environment…Yet there is something missing in all this pessimism. If it is still possible to negotiate further gains from trade, why would any of the factors listed above…ultimately block a new global trade agreement? In fact, one indicator of continued interest in trade expansion has been the proliferation in bilateral and regional trade agreements, driven partly by the lack of progress of the Doha Round.