Wed, Jan 16, 2013 - Page 9 News List

WTO’s next director-general will face a multitude of problems

The world’s trade ‘policeman’ will soon be looking for a new leader, but after the failure of the Doha talks and a boom in bilateral pacts, its relevance is in question

By Heather Stewart  /  The Observer, LONDON

This trend for “insourcing” means that many of the world’s powerful businesses no longer see much to be gained from pressurizing politicians to tear down the barriers to trade in a new set of international negotiations.

Global businesses were one of the key lobby groups pushing for an ambitious resolution of the Doha round of international trade talks, which outgoing WTO director-general Pascal Lamy has spent his eight-year term nagging, cajoling and bullying global politicians to try and complete.

When they started in 2001, in the wake of the attacks on the World Trade center, the negotiations were meant to result in an all-encompassing new settlement that tore down trade barriers and gave developing countries fairer access to the international marketplace. However, talks broke down in acrimony in Geneva in the summer of 2008 and the bravado of the early 1990s has been replaced by a growing sense that trade liberalization on the grand scale envisaged in the Doha talks has had its day.

“The high water mark of the WTO was probably in 2005-06, before we realized that Doha wasn’t really do-able,” Evenett said.

Part of the reason the Doha negotiations failed was that they were simply too ambitious, many observers said, relying on a so-called “single undertaking” approach, which sought an across-the-board agreement on the markets for agriculture, goods and services.

Emerging economies, which had been promised “special and differential treatment” in the talks, also became frustrated as the rich world sought to exact more and more concessions, wary of giving rising trade powers such as Argentina and China a greater competitive edge.

“Trade has a fundamental role to play in development, but it’s full of rigged rules and double standards, and the Doha round had the possibility of resolving some of that,” said Phil Bloomer, trade campaigner at Oxfam.

However, Melendez-Ortiz said Doha was also asking the wrong questions, focusing too much on tit-for-tat bargaining over import taxes and quotas and too little on the wider context.

“It’s an agenda that was defined back in the 1980s,” he said.

Heiner Flassbeck, professor of economics at Hamburg University and until recently chief economist at the UN’s trade arm, UNCTAD, believed that even now, when few people expect Doha to be revived, the WTO remains stuck with an outdated mindset, in which “free trade” is just about domestic subsidies and taxes on exports.

“We don’t have the conditions for free trade,” he said. “What we have is terribly distorted trade, driven by terribly distorted currencies and financial markets. Yet people run around with the fiction that this is somehow efficient and if you ended protectionist measures it would somehow be even more efficient.”

He said that the WTO just “doesn’t want to talk about” questions such as whether world exchange rates are fair; or whether globalization delivers for the poor, while even the IMF, usually considered the bastion of the Washington consensus, has overthrown conventional wisdom by questioning the impact of austerity, and throwing open the idea of “capital controls” to limit cross-border investment flows into vulnerable economies.

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