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Doha talks deadlock puts a price on free trade

Talks aimed at removing trade barriers worldwide are going nowhere after a decade, documents due out on Thursday will show, raising fears of protectionism and questions over whether the rules of the game should change.

April 21, 2011 / 09:53 AM IST

Talks aimed at removing trade barriers worldwide are going nowhere after a decade, documents due out on Thursday will show, raising fears of protectionism and questions over whether the rules of the game should change.

Delegates and trade officials agree that the hundreds of pages of legal texts and backup documents that were meant to revive the ambitious but stalled Doha round of talks may well have the opposite effect -- showing how little has changed since the last attempt to strike a deal in 2008.

Global prosperity is at stake, the World Trade Organisation says. International trade traditionally grows about twice as fast as the world economy, and is one of its engines with USD 15 trillion of goods changing hands last year. Tariffs on imports, subsidies for exports, and quotas for both, restrict it.

Economists cite the depression of the 1920s and 1930s, when protectionism was rampant, and the long period of prosperity that followed early free trade moves in 1945, as evidence that free trade is indeed a force for good.

Free trade supporters say failure would particularly hurt poor countries, which rely on trade to lift them out of poverty.

"The consequences of a failure to conclude the Doha Round will be more detrimental to developing countries, particularly the least-developed among them," WTO Director-General Pascal Lamy said last week.

The China-US playoff

Farmers and industrialists want access to foreign markets, and a number of countries where those voices shout loudest signed up last week to a renewed effort to make Doha work.

"We are prepared to show further flexibility and to contribute to the successful conclusion of the round this year," said government ministers from Australia, Chile, Colombia, Costa Rica, Hong Kong, Indonesia, South Korea, Malaysia, Mexico, New Zealand, Norway, Singapore and Switzerland in an open letter.

"We call on all members to do the same," they said in a statement aimed at the organisation's heavyweights -- the United States, China, the European Union, and emerging export powerhouses Brazil and India.

In world trade talks though, the bigger they are, the harder they play. On industrial goods and services, the United States and China, the two biggest trading nations, are poles apart.

The Doha talks, named after the Qatari city where they began in late 2001, were officially called the Doha Development Round. They offered special treatment to developing countries, including a few that were included for the first time.

China was one of the developing countries, but the United States argues that having since become the world number one exporter and number two importer, it should offer more access.

So should Brazil and India, especially in the areas of chemicals, information technology and industrial machinery, Washington says.

"No three economies have benefited more from trade liberalisation over the last 10 years than China, India and Brazil. That's a good thing," said U.S. Trade representative Ron Kirk last week in a pre-emptive defence against any blame for the talks' failure.

"But with that blessing comes a responsibility."

China wants to keep the developing status it was promised in 2001 and argues that it has already done much to open its markets. Brazil, meanwhile, is one of a group of agricultural exporting countries that believes Washington should do more to open up its huge but heavily protected agriculture market.

The European Union has in the past been publicly critical of the hardline U.S. position with regard to China. Since 2008 though, it has been less vocal, and one EU source acknowledged that China's rapid growth has become an issue.

The EU sees itself as a middleman in non-agricultural talks. On agriculture, it has already agreed to take by 2013 the types of measures Washington is being pushed to agree now.

Plan B

Pushing into the void where the Doha agreement should be are an increasing number of bilateral trade agreements. Some see these as the future of free trade in a fast moving world where 10 years of discussions just cannot capture the moment.

EU trade commissioner Karel De Gucht talked of a "Plan B" earlier this month, and bilaterals are a big part of policy for all the big players already.

Others, including Lamy, however, fear the bilateral approach will hurt the weakest countries.

Bilateral deals leave no incentive for powerful players to consider, for example, exemptions on food export restrictions requested on April 5 under the Doha umbrella by a group of countries vulnerable to rising food prices.

Trade delegates also increasingly question whether Doha is simply too ambitious in scope with its attempt to draw in the complex services sector and address the development agenda too.

"There could be a smaller agreement that most countries could sign up to, or a smaller group that signs up to something others cannot accept," said one trade source. "The only thing for sure is that nobody wants to be the one to kill the round."

first published: Apr 21, 2011 08:16 am

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