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Economics

The Doha Round is Dead, Long Live Free Trade

It is now official. The “Doha Round” of  WTO trade talks has collapsed. Again. The supposed culprits are, to varying degrees, the USA, India, and China. It appears these three could not, for reasons best known to themselves, compromise on the fairly obscure clause of a “special safeguard mechanism,” designed to protect poor farmers from a sudden surge in cheap, subsidized farm imports from abroad.

Of course, the Doha Round has collapsed repeatedly in the past, only to be resurrected by countries eager for a multilateral agreement. However, that they have collapsed on a point so seemingly trivial suggests this must really be the endgame. The USA, China, and India may simply be positioning for a better outcome when they return to the negotiating table.

But this latest failure also puts into immediate perspective the choice most developing countries face when negotiating with “the West.” Immediately following the collapse of the talks, the EU reneged on a deal with Latin American exporters of bananas that, the EU says, was effectively tied to the Doha round. As this illustrates, most developing countries are better off negotiating as a group.

That said, some countries are more equal than others. India and China fall into that category, and must ask themselves two questions. First, if this failure is simply a negotiating tactic, will the rest of the developing world hold the line? Not likely. Instead, this failure is likely to give a fillip to bilateral trade agreements that have ballooned recently (see chart) with the US in the lead. Such a spaghetti bowl of agreements may be great for trade lawyers, but will do less to serve the people in the developing world.

More important, are farm subsidies or safeguards really the key issue that Indian and Chinese diplomats should be worried about? In a world where food prices are rising and expected to stay high, and where more and more European and American consumers are turning to locally grown organic food, India and China seem to be fighting yesterday’s battle. Are there not other issues on which the two can stake their negotiating position? Some obvious candidates spring to mind to tackle critical, and future, public good challenges: a food security fund; a technology transfer agreement for cheap renewable energy; a climate change adaptation fund; a medical research or procurement fund for tropical diseases?

No doubt India and China have earned the right to be bull-headed about the current round of trade talks. Previous rounds have come and gone and much has been given away by these countries. At the same time the American farm lobby is as important for American politicians, as the Indian farm lobby is for Indian politicians. Netherless this stalemate is unfortunate at best. There are more important issues out there that deserve at least as much attention.

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Discussion

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  1. “livelihood security” as stated by the Indian minister, is what at stake for India and China and other developing nations here. And US and EU know clearly about it and specifically target it in order to strike it down. Or why don’t US and EU just accept it? Are they not bull headed?

    Food is another weapon of US and EU in addition to oil. Once US/EU can strike down this particular defense, they can flood the developing nations with their hugely subsidized cheap farm products and totally seize the control of the developing nations livelihood. And after that they can pretty much make up any prices they name.

    Posted by Sean | July 30, 2008, 4:42 am
  2. Complex though these negotiations may have been, they were flawed because the obligations of governments to deliver and protect the right to food was ignored. For all the talk of open markets cutting the cost of food, case studies have shown terrible suffering resulting – Haiti being a recently cited example. In addition, it is shocking that the whole issue of international trade – the movement of goods over sometimes huge distances – should take place without consideration of a climate-change framework and shows the danger of compartalised thinking in global policy making. The Simultaneous Policy campaign is aiming to overcome these shortcomings (and others) by breaking free of corporate lobbyists protecting vested interests and by developing coherent, cross-cutting policies in a transparent and democratic way. See:
    http://globaljusticeideas.blogspot.com/2008/07/wto-joined-up-thinking.html

    Posted by Mike Brady | July 30, 2008, 6:04 am
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