Doha Round at crossroads

Multilateralism has to prevail over knee-jerk protectionism if the world has to achieve sustained economic progress

By Pradeep S Mehta

"The Doha Round is not an island in a sea of alternative opportunities -- failure on Doha would spill over into other present and future cooperation efforts, and not only in the trade policy domain. In our joined-up world, countries simply cannot go their own way and disregard the costs of neglecting international cooperation," remarked the WTO Director General, Pascal Lamy in a recent meeting in San Jose, Costa Rica. The imperative of concluding the Doha Round could not have been captured better.

2010 is a make or break year for the Doha Round. The initial euphoria of many members was dampened as far back as August 2003 when the US and the EU brought forward a small package on agriculture to take to Cancun. It has further waned since the Hong Kong Ministerial Conference in 2005 and the stalemate after the July 2008 package. Countries need to put in significant political capital to conclude it even if the gains at the end are modest. The negotiations have clearly waned in ambition since the Hong Kong meeting and are still in 'intensive care', being watched carefully and with great anxiety.

However, despite the anxiety of nations about the sustainability of negotiations, some significant technical work has been accomplished in the last few years. 'Geographical indications' is an example on which there has been forward movement. In the area of non-tariff barriers, which will be the major agenda in the future, there is a good hope of progress with the Chairman of the Negotiating Group on Market Access for industrial goods, identifying several common (or horizontal) issues across proposals regarding non-tariff barriers on the table.

In the same vein, scheduling of agricultural tariffs is progressing while even on the extremely contentious issues of 'cotton' and special safeguard mechanisms in agriculture there are forward movements. A similar story of dynamism emerges in the matter of service sector negotiations.

Such progress on technical issues could not have been possible without the investment of significant political capital by nations and the leveraging of collaborative synergies. This spirit of cooperation has again been captured well by Lamy through his remarks on the occasion of the Trade Negotiations Committee meeting on March 22, 2010: "We will be able to send a strong signal to the outside world and focus the political energy that is needed to move the Round into the concluding phase."

The moot question is why countries have not been able to utilise this readiness to invest political capital to conclude the Doha Round and take the world economy to higher levels of well-being and productivity. Prima facie it may appear puzzling as studies have revealed that the overall expected gains from the Doha Round will result in a much bigger stimulus package than all bailout packages taken together. This is strongly contested, but everyone agrees that the failure can be harmful.

The answer to this puzzle lies in the greed of nations overriding the option of bringing about a win-win situation with modest gains. The Doha Round if concluded would produce a miniscule increase in exports, far short of the US administration's target of doubling exports over the next five years. Instead of the Doha Round, the US administration has signalled its intentions to follow a weak dollar policy to meet its targets. Other countries trying to recover from the financial crisis and its recessionary effects have resorted to protectionism to rule out the import of adverse influences from the rest of the world.

Protectionism is clearly not the cure for recession; rather it can trigger the collapse of economic recovery that many countries (including some rich countries) have started experiencing since the last quarter of 2009. Moreover, such protectionism by developed countries will spell ruin for the poorest countries of the world in Sub Saharan Africa by denying them the use of trade as an engine of growth at a crucial juncture in their development process.

Multilateralism clearly has to prevail over knee jerk protectionism if the world has to achieve sustained economic progress and not get tied up in knots. The conclusion of the Doha Round thus marks the end of a new beginning instead of the beginning of the end. We cannot wait forever to conclude the Doha Round as otherwise other more contentious and unresolved trade-related issues will continue to produce negative energy.

Positive developments are afoot in all major capitals except Washington where Obama has unfortunately but temporarily exhausted his finite political capital in successfully pushing through a historic initiative on healthcare reforms. However, Obama's tenacity signals good times for multilateralism. Having achieved a major victory in the domestic reform arena, the time has come for him to marshal his political capital for the facilitation of a major triumph in the multilateral arena by convincing his domestic constituency of the imperative of concluding the Doha Round. Such conclusion alone would provide the window of opportunity and create the necessary goodwill to address domestic concerns on other trade-related issues.

The conclusion of the Doha Round in 2010 is imperative for success on many fronts -- global welfare reaching a new high through better exploitation of comparative advantages of countries and the reversal of decline in faith in trade as an engine of growth. The collaborative spirit needed for its conclusion has been displayed by WTO members in the past while addressing the development concerns of medicine patents and public health linkages.

Finally, the conclusion of the Doha Round is essential as it will herald a new era of multilateralism which might see the appreciation of new linkages -- between trade and finance; trade and climate change etc. Lamy was right -- the Doha Round is not an island in a sea of alternative opportunities; rather it is the channel which has to be negotiated and crossed if a more prosperous and better aligned world is to be reached.