NEW YORK – The Doha Round, the first multilateral trade negotiation conducted under the auspices of the World Trade Organization, is at a critical stage. Now in their 10th year, with much negotiated, the talks need a final political nudge, lest Doha – and hence the WTO – disappear from the world’s radar screen.
Indeed, the danger is already real: when I was in Geneva a year ago and staying at the upscale Mandarin Oriental, I asked the concierge how far away the WTO was. He looked at me and asked: “Is the World Trade Organization a travel agency?”
The threat of irrelevance is understood by leading statesmen, who have committed themselves to putting their shoulders to the wheel. British Prime Minister David Cameron, German Chancellor Angela Merkel, and Indonesian President Susilo Bambang Yudhoyono have unequivocally endorsed the recommendation of the High-level Expert Group on Trade, which Peter Sutherland and I co-chair, that we ought to abandon the Doha Round if it is not concluded by the end of this year.
Our idea was that, just as the prospect of an imminent hanging concentrates the mind, the deadline and prospective death of the Doha Round would galvanize the world’s statesmen behind completing the last mile of the marathon. (The analogy is all the more appropriate, given that WTO Director-General Pascal Lamy, who has brilliantly kept the process going, is a marathon runner.)
But even as these efforts are gathering momentum, The Financial Times, which used to be a staunch supporter of multilateral free trade, dropped a cluster bomb on Doha, even congratulating itself that, in 2008 (when a ministerial meeting failed to reach closure), it “argued that leaders should admit the negotiations were dead.” But if skeptics forget Mark Twain’s famous response to a mistaken obituary – “The reports of my death are greatly exaggerated” – were the negotiators who have continued to work since then akin to Gogol’s “dead souls?”
The Financial Times recommends working out a Plan B here and now, which would sabotage the political efforts to conclude the Doha Round. Despite rhetorical bromides about requiring “ministers to unlearn ingrained habits and focus on substance, not rhetoric,” and about “business associations engaging with the granular detail of what companies want,” this proposed Plan B would strengthen the bilateral and regional trade initiatives that have diverted energy and attention from Doha and the WTO.
The irony here is that the proliferation of such preferential trade agreements (PTAs) is usually justified by pointing to the lack of progress in concluding the Doha talks. Never have cause and effect been so dramatically reversed in arguments over trade policy.
It has become increasingly obvious that such PTAs are what I call “termites in the trading system.” Indeed, evidence is mounting that they foster harmful trade diversion by increasing discrimination against non-members through differential use of anti-dumping actions. Thus, recent work by the economists Tom Prusa and Robert Teh has produced convincing evidence that anti-dumping filings decrease by 33-55% within a PTA, whereas such filings increase against non-members by 10-30%.
More importantly, PTAs are used by hegemonic powers to foist on weaker trading partners demands unrelated to trade but desired by domestic lobbies, at times in a markedly asymmetric way. Thus, Peru saw its labor legislation virtually rewritten by United States Congressmen indebted to American unions before the US-Peru PTA was concluded.
Similarly, Claude Barfield has documented how Colombia has been intimidated into making it a crime (with prison terms of up to five years) to engage in acts that “undermine the right to organize and bargain collectively.” Colombia must also pass a law dictating prison terms for anyone who “offers a collective pact to non-union workers that is superior to terms for union workers.” Will the US administration start filing criminal charges against the governor of Wisconsin and the many other Republican leaders who are doing precisely what the Colombian government is being bullied into not doing?
Such overreach is typical of what goes on in hegemon-led PTAs, unlike at the WTO, where stronger countries like India (which asked the European Union to take all non-trade-related measures out of the proposed PTA) and Brazil cannot be so intimidated. The danger is that overreach will lead civil society and voters in democratic developing countries to react against self-serving displays of hegemonic might by jettisoning free trade itself, on the assumption that such openness is little more than neo-colonialism.
Jagdish Bhagwati is Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations. He is the author of Termites in the Trading System: How Preferential Agreements Undermine Free Trade (Oxford, 2009).
Copyright: Project Syndicate, 2011.