Just when the global economy could do with a confidence-builder and the increased wealth creation that trade liberalisation always brings, a meeting of Trade Ministers at the World Trade Organisation in Geneva failed, again, to make progress. More Trade Ministerial’s fail than succeed, from Montreal, Brussels to Cancun; and most spectacularly, under my watch in Seattle. Finally we launched at Doha, 7 years ago, what was to be a ‘development round’. All trade rounds are.
President Kennedy, who launched the Tokyo round, famously said; “This will lift all boats and help developing countries like Japan.” Case made, I would have thought.
Trade Minister meetings fail often because ‘it’s real’.
Leaders’ meetings and meetings of Ministers in other disciplines can release splendid communiqués that can mean different things to different capitals, they are never binding. WTO agreements must be ratified by Parliaments and are subject eventually to a binding disputes system.
Although this meeting narrowed differences to a remarkable degree, they just couldn’t swallow the final differences.
Matters of process and transparency were unusually not such an issue, nor were there any protests. Amazing! The desire of India and China to have special safe-guards against so-called surges of imports from agricultural exporters was a difficult issue.
This would have undone previous WTO trade rounds; and the severe conditions of China’s membership of the WTO in my time. The US couldn’t sell that at home and, as usual, many other countries hid behind the US.
This will be the conventional wisdom for the collapse of the talks. It’s true, but not the whole truth. Negotiation never got to other serious issues, such as cotton.
Observers suspect that both China and India, WHO have made spectacular progress under the old conditions, have difficulty accepting new conditions.
Elections in the US and India are not helpful because they restrict negotiation space to move. China is seeking new protection against ‘export surges’ in her bilateral trade deals, so will India, by carving our sensitive areas.
Not good. The big guys always have the power, that’s why the multilateral system is the best hope for the small and poor.
Trade openings will continue on a regional and bilateral basis, but they seldom advance the issues that stall WTO talks, they create trade diversion, new privileges, and new, dangerous levers that politicians will be tempted to use.
None have a binding disputes mechanism. Commentators still talk as though it’s the old struggle between rich and poor countries. North versus South. Still a little true.
But for many smaller players, the battle is as much with major developing countries, as it is with their old colonial masters.
Europe’s Common Agricultural Policy (CAP) and USA, Japanese farming subsidies do much violence to unsubsidised producers everywhere.
They hurt poor consumers in rich countries, and a direct transfer from the poor to rich producers who harvest the overwhelming majority of subsidies. But this is also true of Indian agricultural subsidies.
For the bottom billion, things have changed. The historic pathway followed by Britain, US, Japan, Korea, now China and India, of textiles to low-cost manufacturing and electronics, and then up the value chain, is not as easy.
Big developing countries vacuum up this business that years ago would have gone swiftly to poorer countries. This will still happen, and is happening, very slowly as wages and costs rise in India and China.
It’s not over, too much is at stake. No trade round has ever failed, they just take too long and are too shallow.
It’s iron diplomacy at its toughest. What now? Even a reckless optimist like me can’t see much happening until there are new administrations in the EU, US and India.
We do need greater co-operation, down to country-specific programmes, to build capacity and assist in the transition period for more vulnerable countries. The European Union is the best model to examine.
When the poorest countries in Europe, Ireland, Spain and Portugal, joined, assistance was directly given by the richer EU members to smooth the transition. This needs to be a global strategy. It works. Ireland is now among the richer countries in Europe, and Spain is now richer than Italy.
Look now for some very lop-sided bilateral trade deals as countries continue to gear up to deal with the major economies.
I hope those who used to abuse the WTO now realise that the status quo (Latin for “what a mess we are in”) further locks out the poorest, and keeps injustices in the system.
In the end, whenever that is, the deal will be done. That it’s hard is only a tribute to its importance.
Mike Moore, former Prime Minister of New Zealand
former Director-General of the World Trade organisation
Adjunct Professor, La Trobe University, Melbourne, Australia