As the ‘mini-ministerial’ negotiations broke down on 29 July, the future of both the World Trade Organisation (WTO)’s Doha Round of trade negotiations and the multilateral system of trade in general look more uncertain than ever. Meanwhile, elections in the US this fall and India next year seem set to prolong the negotiations even further. Conceived in November 2001 at the fourth WTO Ministerial Conference in Qatar, the Doha Round has thus far been marked by minor breakthroughs and major breakdowns. The developments of late July, however, marked the most significant setback yet.
In the politically charged atmosphere of the Cold War, most countries in Southasia, like developing countries the world over, were split between the East and the West in their political alliances, while attempting to achieve rapid economic development and global redistribution of wealth. Moreover, during the 1960s, the challenges in international trade – economic integration with the rest of the world, and assistance in addressing their ‘developmental concerns’ – led them to seek justice under the shade of ‘rules-based’ multilateral institutions. But the WTO, established in 1995 (as the successor to the General Agreement on Tariffs and Trade) to provide the legal basis for such rules of trade, has thus far failed to provide economic justice to its less-powerful member states.
The Doha Round had the distinct potential to benefit Southasia. This could have happened if these countries were provided substantial market access in developed countries, and allowed to protect sectors affected by import surges through the implementation of safeguard mechanisms. This was partly recognised through the Doha Ministerial Declaration of November 2001, which also acknowledged special treatment for developing countries to be an integral part of the negotiations. But what has been lacking over the past seven years has been the commitment of developed countries to fulfil their obligations to the Doha mandate.
Safeguarding and protectionism
From a technical perspective, concluding a deal at this year’s Doha Round should have been much easier than in the past, as substantial ground-level progress had been by trade negotiators thus far. But when the mini-ministerial meeting in late July began, besides major differences on cuts to industrial tariffs and continued spending on trade-distorting farm subsidies (mainly by the US and EU), political conditions in some of the key countries had been unfavourable. The administration of George W Bush lacked a mandate to negotiate from the US Congress; France and other EU member states warned that EU Trade Commissioner Peter Mandelson did not actually have the broad base of support that he was claiming; and even as the negotiations were taking place in Geneva, the Indian government was facing the parliamentary confidence vote over the US-India nuclear deal. In retrospect, the most astonishing thing about the mini-ministerial meet was not that it failed, but rather how close it came to striking a deal at all.
Indeed, of some 20 issues in the talks on agriculture and non-agricultural market access, 18 are said to have reached convergence. But differences persisted on the ease with which developing countries ought to be allowed to raise tariffs beyond current WTO limits, in order to protect their farmers from import surges under special safeguard mechanisms that can restrict import increases to protect domestic industries. The disagreement over these safeguards actually exposed a much deeper ideological divide between those WTO members that believe free markets will solve everything, and those that feel that protection mechanisms are still at times necessary.
In this, it is nothing less than shocking that developed countries, led by the US, remain completely unwilling to publicly acknowledge that tariffs may be the only policy tool available to resource-constrained governments in Southasia – both to assure poor farmers that they will not be wiped out, and to attract much-needed agricultural investment. Furthermore, it is this hawkish pro-liberalisation notion of gaining unfettered market access, by overlooking the need to address disruptions to domestic markets, that has been and will remain the basis of significant international trade-related discord.
Given the centrality of Washington, DC in international trade discussions, the US elections this fall could prove to be a watershed. The next US president might well want to continue participation in multilateral trade negotiations; but what is unclear is whether he will want to continue with the Doha agenda itself. He could declare it dead, and move to start over. One of the first things on the new president’s agenda would be to reach out to the rest of the world, to make up for the disturbing era of George W Bush. Trade could certainly be a way of doing so. But how long India, China or Brazil, as the emerging economies of the South, will continue to take their current stance on behalf of less-developed countries will ultimately hinge on the social and economic bilateral arrangements they pursue with developed economies such as the US.
In the aftermath of the breakdown of the talks, Southasia’s least-developed WTO member countries – Bangladesh, Burma, the Maldives and Nepal – are now caught between opting to pursue bilateral and regional trading arrangements, and the perceived safe haven of multilateralism. One option they could now pursue would be to shift their focus to bilateral and regional deals, but with more improved terms and conditions than their current WTO commitments allow for. This type of approach would do much to strengthen regional groupings around the world, which could subsequently empower them to engage with other groupings at a multilateral level in the distant future.
What the current stalemate tells us is that economic globalisation through multilateral institutions such as the WTO can bring positive results only if the institution can enforce the resolution of development concerns – of countries in Southasia and elsewhere – prior to enforcing trade liberalisation. Unfortunately, under its current mandate, the WTO is in no position to do so.