Tuesday, August 01, 2006

[world] doha soon to be a dodo

Doha explained, a summary for the non-economist

The Doha Round is close to total collapse – the first major multilateral trade talks to fail since the 1930s. All major global trade negotiations flirt with collapse and succeed only at the last possible moment but not this time.
Doha is much more difficult than the Kennedy, Tokyo, and Uruguay Rounds, especially as there are 149 nations now to consider in the template.

Its participants represent 5.5 billion of the world's 6.5 billion people, and produce 97 per cent of the world's annual $13 trillion in exports. So far there’s been agreement only over the principle of eliminating export subsidies for agriculture but these are unresolved:

· policy changes deeply political and now deeply impinging on the process
· nothing signed concerning the crucial services sector
· no negotiating procedures for agricultural and non-agricultural market access
· removal from the agenda of two critical issues - investment and competition policy
· no attempt to seriously address security concerns since 911
· absence of effective control over the increasing number of preferential pacts
· entrenched local interests
· massive current account imbalances
· currency misalignments pushing trade politics in dangerously protectionist directions
· strong and growing antiglobalization sentiments
· absence of a compelling reason for the political leaders of the chief holdout countries to make the necessary concessions
· import surcharge on all Chinese products
· fierce congressional hostility to any relaxation of US antidumping and immigration laws
· deep popular unwillingness to significantly alter the EU's protective agricultural regime.
· large, fast-growing developing countries often tougher on the poor eg. India on Bangladesh, Nepal and Sri Lanka.

Implications
· Trade policy must move onwards and upwards or else revert to protectionism and mercantilism and its corollary - bilateralism.
· There are huge international security concerns.
· Basic economic relations around the world will descend to the primitive.
· The world's poor, of course, now see hopes for fairer trade put off for many years.
· Richer countries, deprived of a chance to find new markets, are starting to argue over old markets.

Measures which would help
· mini-package that would achieve modest real liberalization
· monetary adjustments leading to global trade liberalization
· greater balance of US /China imports/exports [now a ratio of more than six to one in favour of China]
· dollar/euro currency misalignments probably now near their bilateral equilibrium
· undervaluation of Asian currencies [kept artificially undervalued, including the yen and the Indian rupee because governments were afraid to let their competitive positions deteriorate against China], could be eased, negotiating step by negotiating step
· major currency realignments, beginning with the undeveloped and developing nations
· substantially enhancing the skill level of the work forces in UD countries
· expanding the safety nets that cushion transitional cost of trade-related job dislocation
· extending all deadlines for at least six months, [which I posted as a comment on Tim Worstall’s article]
· appreciating that tariffs are simply ways of shifting tax burdens from the rich to the poor, "taxing want rather than wealth"
· reducing special bilateral arrangements eg. American tariffs on Asia and the Muslim world; European tariffs and subsidies excluding farm products produced from the Middle East, Latin America and Asia
· allowing the poor to sell the items they make and grow without complications [World Bank idea]
· lowering tariffs on t-shirts, shoes, rice, butter and orange juice, thereby opening export opportunities in markets for services and technology products
· eliminating the "Special Safeguard Mechanism."
· aligning the business sector with government policy and establishing government policy based on the needs of the private sector eg. Brazil’s private sector saying one thing but the government saying another.

Slow process
WTO Director General Pascal Lamy likened the negotiators' task to building a gothic cathedral, in which domestic support for agriculture and market access represent two columns, and reduction of duties on industrial goods a third. The gothic imagery he utilizes is apt, for it is also the imagery of the 4th player, [China being the 3rd].


My take
Doha will collapse irrevocably. It's not just brinkmanship any more because there are clear national interests perceived as greater than the interest of global world trade. The implications are major for the world's poor in the short term but it does have the effect of slowing the globalization process, which I see as fundamentally unsound.

Acknowledgements
· Inter Press Service News Agency (IPS)
· C. Fred Bergsten December 2005 Policy Council - Institute for International Economics - Rescuing the Doha Round.htm
· YaleGlobal Online, (
http://yaleglobal.yale.edu)
· Edward Gresser, Progressive Policy Institute's Project on Trade and Global Markets

1 comment:

Tim Worstall said...

The sadness is that your last paragraph is probably correct. But that the truth is there should be no Doha at all for there should not be any trade restrictions to have talks about.