The collapse of the Doha deal was a major blow to the WTO’s attempt to liberalise trade. Charles O’Donnell explains why we must get it back on track.
In July this year, after seven years of debate, and extensive talks in Geneva, the World Trade Organisation’s Doha deal collapsed.
The deal arose from the 2001 WTO conference in Doha, Qatar, after which the agreement was named Doha Development Agenda. The basis of the agreement was to encourage global negotiations about the opening of, among other things, agricultural and manufacturing markets.
Those propounding the agreement maintain that by freeing trade, it would give the world’s poorest nations greater access to economic markets. Opposers of the Doha Development Agenda argue that any enforcement of such an agreement would unduely affect countries internal policies.
Doha was born from the argument that globalisation was not bringing every country into the 21st Century. By reducing protectionist policies like tariffs, quotas and subsidies, the hope was that the poorest nations would have a greater chance of competing in the world market, which would have a knock on effect that the economy of these countries would gradually improve.
It has been pointed out that to believe free trade agendas are primarily about developing nations however is naïve and that these agenda suit wealthy countries more. At least with the Doha deal, the poorer nations were included this time.
Hammering out a multilateral deal given such competing interests was always going to be a big task. The agreement had to pull all the nations together. When the discussions eventually failed, the fears that certain groups would exert political pressure on their leaders to protect their interests were realised.
Having already caused international chaos over Lisbon, Ireland seemed to be gearing up to disrupt a major political process for a second time this summer in the Doha Agreement.
Even the Irish government seemed split as to whether a deal should be vetoed to protect Irish agriculture. As it happened, India, China and the US did the dirty work and Irish farmers held on to their prized subsidies – for now at least.
Perhaps it can be said that the widespread hesitance was due to the timing of the deal. India and the US are facing elections in the near future and an agreement on the reduction of subsidies could have been political suicide. Who wants to do a deal with an outgoing US President? This is apparent from the Irish farmers’ stance to the Lisbon Treaty.
To abandon the Doha deal to the history books however may not be the best option. This deal was to be a development round, and if the world’s leading countries cannot pull together on this, how will they pull together on even broader issues such as climate change?
So what now is to become of this Doha Agreement? Apart from the consequences for poorer nations, an interesting scenario has developed. The balance of world power has shifted. It appeared that China and India had joined forces and flexed their influential muscles. This is a long way from the days of European and US dominance.
Not long after the collapse Doha, its supporters’ worst fears were realised when India struck a trade deal with ASEAN, a regional trading bloc of ten Asian nations.
This ASEAN deal poses a big problem. This alliance will appease India’s exporters who want freer trade, meanwhile making them unlikely to push for a further Doha deal. With Indian farmers rigidly opposed to the Doha deal, there does not seem much political will for a resolution within India on this front.
As well as India, New Zealand, Australia and China have recently concluded agreements with ASEAN. In fact during the last seven years, over 100 bilateral and regional deals have been signed despite the existence of the Doha Agreement.
One wonders whether these countries have any real intention of acting multilaterally. With India in talks about free trade deals with China and the EU, it seems bilateral agreements are continuing to flourish.
It has been highlighted that Preferential Trade Agreements (PTAs) and Regionalism pose certain problems both of an economical and ethical nature.
To begin with the former, regionalism and PTAs offer discriminatory favouritism. This can result in trade diversion, where a country that is more productive and specialist in production of a product can be excluded because they do not belong to a certain trading bloc. The result is that the consumer pays more for a product of equal or inferior quality.
PTAs also pose a threat to future multilateral action. With so many different trade agreements, they become so intertwined and conditional that they will become harder to unravel. The more PTAs there are, the harder it is for multilateral action.
Yet perhaps PTAs are the only way to get the ball rolling on the issues of global concern. In the case of South America, initial PTAs eventually led to tariff reductions for all. Maybe with these PTAs they will create stepping stones towards eventual multilateralism.
The other major problem is an ethical one. By not acting in a multilateral manner, it could be argued that the poorer nations will be exploited by more powerful ones by bilateral agreements.
A vivid example of this is the relationship between Japan and the Philippines. A trade agreement between the two (JPEPA), is currently being hammered out.
Initially appears that while the trade deal will offer some benefit to the Philippines, it will really just act to serve the Japanese corporate interests, primarily cheap labour. The former Philippines Secretary for TradeMar Roxas admitted that “no deal is better than a bad deal”.
It seems that the only option is to resuscitate the Doha Development Agreement. Although it has clear difficulties, the progress that had been made in the discussions was significant, and should not be disregarded.
Doha translates from Islam into English as ‘Big Tree’. If one were to think symbolically, the seeds planted in 2001 may eventually grow bear fruit to all.