The Doha round of global free-trade negotiations is on the brink of collapse after 10 years of talking. This is a tragedy in the making, because the gains available from what has already been agreed upon in the negotiations are considerable and they would provide a major boost to the global economy.
Failure would constitute a serious indictment of political leaders in major trading countries in both the developed and developing worlds, possibly costing the global economy US$700 billion in additional annual income.
By contrast, if the round is completed, aside from this generalized gain, specific and important improvements would benefit the world’s least developed countries. The EU, for example, has already agreed that all such countries will be afforded duty-free and quota-free market access for their exports. Furthermore, EU export subsidies for agricultural products will be abolished from 2013.
Other such examples abound, but probably none will be realized if the general agreement completing the round is not concluded. For the rule governing global trade rounds is that nothing is deliverable until everything is agreed.
Moreover, completing the Doha round is crucial for the WTO. Brazilian WTO ambassador Roberto Azevedo said recently that his country “rejects the notion that this organization’s credibility and legitimacy are in a death embrace with the round. The WTO is bigger than the round and transcends it.”
Of course, he is right — even if the Doha round fails, the WTO will survive, but it would be no minor event and it would take years for the organization to recover.
Indeed, all previous trade rounds — even the Uruguay round, which took eight years to complete — concluded favorably. To pretend that the Doha round’s failure would not have negative and lasting effects for the WTO betrays a profound lack of understanding of the risks we run, as well as of the round’s vital importance for weaker and smaller states.
So, what will happen?
Either the round will fail outright, or some parts of it will be salvaged, with the rest (most of the areas under negotiation) put to one side amid promises to return to them after next year’s elections in the US. Either way, the consequences promise to be far-reaching.
During the past 20 years, the world has witnessed dramatic proliferation of regional and bilateral preferential trade agreements. Indeed, bilateral trade flows covered by such agreements now amount to roughly half of the world’s imports and they have contributed significantly to the dramatic growth of trade.
Yet such agreements pose great dangers if they are not subject to effective WTO oversight. For one thing, they are largely negotiated by states with great asymmetries of power. There is a big difference between multilateral negotiations of universal rules and the effective imposition of rules — and even concessions — in a negotiation between the EU or the US and a smaller trade partner. While large developing countries — such as Brazil, Russia, India and China — can avoid such impositions from developed economies, most others cannot.
Aside from the great damage caused by unequal bargaining power outside of the multilateral framework, the path of bilateral negotiations threatens to remove the focus from universal outcomes, which are the bedrock of globalization. The basic principle of non-discrimination is at risk — once trading countries negotiate separately with each other, various forms of discrimination become inevitable, giving rise to various kinds of conflicts. A focus on preferential agreements would fragment the global trading system, rather than integrating it.