VoxEU Column International trade

The Doha Round: No more delays

Another suspension of the Doha Round is the likely outcome of the upcoming meeting. This essay argues that such a failure is now more dangerous than ever. For domestic political reasons unrelated to trade, the US will be in no position to lead on international trade issues for some years. As the US is still the “indispensable nation” for WTO talks, this means 2011 is the last good opportunity for many years.

At this point, there is virtually no chance that governments will act to prevent another breakdown or suspension of the Doha Round at the 29 April 2011 meeting of the WTO’s Trade Negotiating Committee. So I see little profit in reviewing the intricate details of why this is the case for each of the major areas – goods, services, agriculture, rules, etc. Or even why, as some have noted, there would be real benefits in salvaging less controversial pieces of the negotiating agenda.

The negative political implications of a failure or suspension

I would, however, like to point out some of the possible negative political implications, particularly with regard to the US political situation in coming years.

  • First, failure to reach some accommodation this spring will inevitably push off serious negotiations until 2013 at the earliest.

President Obama’s Democratic Party remains deeply split on trade and globalisation issues, with labour unions, the foot soldiers of Democratic election armies, adamantly opposed to new “Bush era” trade agreements.

Though WTO negotiations such as the Doha Round have traditionally not drawn the heavy fire attendant to free trade agreement negotiations, the White House will not risk further alienation of the leftwing of its party until the election next year. Its belated support for the Korea, Panama and Colombia agreements is as far as it will go.

  • Then in 2013 and for some years beyond, the US is in for a highly contentious and deeply divisive debate and battle over how to deal with the looming budget crisis and, ultimately, over the size and role of government; this hold regardless of which party wins the presidency or controls Congress.

While I doubt that the country will turn protectionist in a major way, the time and attention of both political leaders and the electorate are not likely to be focused on international economic and trade issues – barring the not remote possibility of another 2008-style financial crisis.

In addition, in this political scenario, there is no reason to believe that the major economic sectors and interest groups will change their unified position. Manufacturing, service, and agriculture all believe that what is on the Doha-Round table does not achieve even modest gains in market access (indeed, this have been the reality since the closing months of the Bush administration in 2008).

The bottom line is that failure to reach an agreement this spring means that the US may well be largely distracted and in no position to lead for some years to come. The US is still the “indispensable nation” for WTO negotiations, so if Doha does not get done this year, it will not get done for many years.

The China issue

One final point with regard to the other “indispensable nation” in Doha negotiations – China.

  • It is an open secret that for some time, other major developing-country WTO members – Brazil, India, Indonesia, Argentina, Mexico, just to name a few – have suddenly become gun-shy when it comes to the industrial-goods tariff-cutting that is on the Doha negotiating table.
  • Behind the scenes, they candidly admit that fear of the consequences of major Chinese import competition and competition for third-country markets is causing them to pause and reconsider the consequences of further market opening.

Question to them: Do you really think the situation will improve in coming years in a WTO without further rules and obligations for reciprocal market access from China?

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