Moving beyond Doha
One note of optimism that arose from the 2011 World Economic Forum gathering in Davos was a powerful manifestation of political will to close the struggling trade talks. Few expressed dissent on the benefits of concluding the decade-long Doha Round -- rather, the key message was to convey a sense of urgency by setting a credible deadline for the closing of the talks by the end of this year.
The belief that the Doha Round must and can be completed by the end of 2011 primarily reflects the political reality of the approaching U.S. presidential elections. If the deal is not done by the end of this year, the window of opportunity will have closed. And with that, the fear is that multilateral trade liberalization has reached its limit.
Compared with the sense of fatigue surrounding sessions on crucial topics including climate change, the session on “Revitalizing Global Trade” was almost upbeat. The room was full. Prominent speakers -- including German Chancellor Angela Merkel, British Prime Minister David Cameron and Indonesian President Susilo Bambang Yudoyono -- all agreed on the unambiguous benefits of further trade liberalization. Successful conclusion of the Doha Round would increase global trade by up to $500 billion and give duty-free access to 49 of the poorest countries. The speakers shared the view that no country -- developed or developing -- can forgo this “free stimulus” in the current state of economy.
Yet the list of Davos’s trade discussion absentees tells another story. Nonattendance of the U.S., China, India, and Brazil was palpable, leaving the attendees without reassurance that the political will of those who matter most will emerge. It was also indicative that President Nicolas Sarkozy made no reference to the closing of the Doha Round when discussing the priorities of the ongoing French presidency of the G-20 countries.
Ever since launching the Doha Round in 2001, there have been many “windows of opportunity,” all of which have closed promptly. Lack of political leadership has become a norm in the past decade of trade diplomacy. At the same time, the economic case for further trade liberalization remains unquestionable. So why has it been so hard to get the deal done? Obviously, the financial crisis and unprecedented unemployment figures across countries have worsened the political climate for further trade opening. Yet the WTO talks have been in trouble long before the financial crisis erupted. Three reasons explain this.
First, a fundamental shift in the balance of economic power has complicated the negotiations. The new trade powers, most notably China and India, have repeatedly shown their willingness to veto WTO deals that are inconsistent with their national interests. It is much harder to reach an agreement when the U.S. and the E.U. can no longer dictate the terms -- welcome to the “New Reality,” the theme of this year’s Davos gathering.
Second, consensus as the principle for decision-making has become unsustainable. Requiring that all states subscribe to all WTO agreements is increasingly unworkable within a 153-member institution consisting of heterogeneous countries with diverse interests.
Third, in order to seek this consensus, the prospective trade agreements have been stripped of any meaningful content. As a result, watered-down agreements have ceased to offer any net gains that would justify long, complex and costly negotiations. These difficulties combined have undermined efforts to multilaterally reduce remaining trade barriers, and shifted the momentum of trade liberalization toward bilateral and regional trade agreements.
If Doha talks have taught us anything, they have demonstrated that the era of “grand bargains” is over. A better strategy might be to pursue plurilateral agreements and sector-specific deals among the “coalitions of the willing” -- the like-minded trading nations. This would mean that all WTO members are invited to participate in negotiations but remain free to decline to join a particular agreement in the end. A further requirement could be that the agreement enters into force only when a critical mass of the WTO membership -- for instance, members representing 80 percent of world trade within the relevant sector -- has signed onto it. Reaching a meaningful agreement among a critical number of WTO members seems more promising than the decade-long efforts to reach all-inclusive, yet weak and fragile compromises.
Finally, perhaps the only way to restore confidence in the WTO is to greatly increase the economic benefits of the negotiations -- raising the stakes instead of trading them down. Finishing the current, much-diluted Doha round offers only modest welfare gains after a series of compromises across the complex agenda and diverse membership. However, closing it by the end of 2011 would allow for a long-denied opportunity to turn the page forward and reexamine the basis of the WTO system.
Perhaps future trade talks will allow for abandoning consensus and adopting new rules of engagement. In doing so, we can renew a powerful multilateral framework for more flexible, fast and spirited trade talks and, with that, ensure more meaningful gains from trade in the future.
Anu Bradford is an assistant professor specializing in international trade law at the University of Chicago Law School.
| February 1, 2011; 9:11 AM ET
Categories: Anu Bradford
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