Tuesday, July 25, 2006

How to Revive the Doha Round of Trade Talks

Susan Ariel Aaronson

Trade talks between the 150 members of the World Trade Organization, (WTO) broke down again last week. Disappointed trade negotiators left Geneva mumbling that that the Doha Round was at death’s door. But shrewd policymakers can turn this crisis into an opportunity. The Round can be revived if WTO members focus their efforts on a promise they made to developing countries: to place their needs and interests at the heart of their negotiating efforts.

The Doha Round was a product of public concern about poverty and terrorism. When the members of the WTO launched the round in November 2001, the delegates acknowledged a link between poverty, political and economic instability, and terrorism. They vowed to find ways to help citizens in the developing world reap the benefits of trade and promised to focus this round of trade talks on the problems and needs of developing countries.

But national policymakers did not alter their strategy for achieving trade liberalization. They proceeded as they had always done before. Instead of limiting the negotiations to the issues directly of interest to developing countries such as agricultural trade liberalization, market access, and trade facilitation, the members of the WTO agreed to discuss a much larger set of issues including services and competition policy. These officials presumed that the only way they could sell a new round to their constituents was to create a grand bargain: where local beneficiaries outnumber trade losers. But industrialized country demands rather than developing country needs became the focus of these talks. Not surprisingly, developing countries walked out at the Cancun Ministerial. When the talks recommenced, developing country officials were determined to ensure that this time the round would address their problems. Ever so gradually, the negotiators narrowed the purview of trade talks. Yet in 2004-2006, the negotiations again veered from the issues of immediate concern to many developing countries.

However, developing country policymakers held fast to a vision of a development round. That vision remains possible if the 150 member states agree to narrow their objectives and be honest about what that means for local producers and consumers.

First, in order to achieve a round centered on development, the industrialized countries must make a commitment to such a round and devise a strategy to achieve it. A true development round would focus on cutting barriers to trade for the goods and services developing countries export. It would mean postponing trade talks on key items of interest for many industrialized countries for another separate round. In addition, it could entail that industrialized countries reduce longstanding protection for influential special interests.

Thus, in order to achieve legislative support for such a new round, policymakers must make a different case for multilateral trade liberalization under the WTO. It will not be easy. In many countries policymakers defend trade talks by arguing that trade creates high wage jobs and yields domestic economic growth. But they barely explain how imports as well as exports stimulate economic growth. Moreover, by using mercantilist terminology, they have made it harder for their constituents to support bargains which require unsettling trade offs. They don’t defend the WTO by explaining how it creates global rule of law: regulating trade between nations with different economies, political systems and norms.

But it is possible to argue that a development round is in everyone’s interest. Citizens around the world recognize that trade is more effective at promoting growth than taxpayer funded foreign aid. A trade round is a cost effective way to achieve that growth. And that growth will not be confined to the developing world. As citizens in the developing world participate more in trade, these citizens will purchase more goods from other countries, including industrialized countries.

Trade liberalization under the WTO is a means to achieving a larger goal of sustainable economic development. If policymakers, particularly industrialized country policymakers, are more honest about that end, their citizens may be more willing to accept the sacrifices that may come by accepting more developing country imports. That is the only way to meet the promise WTO members made at Doha.

No comments: