WTO's future in jeopardy

The World Trade Organisation in Geneva has a self-imposed trade-talks deadline to agree to the framework of negotiations mandated by the launch of the Doha Development round. That deadline is this Saturday.
As I say, these are not the negotiations, just the boundaries of the negotiations. Of course, all this should have been decided by the Cancun ministerial meeting in Mexico last year. That unfortunate failure has cost the negotiations at least a year, maybe two years. The round can't possibly conclude this year as planned.
But the round will not fail, no trade round has ever failed, they just take too long. However, this time some things are a little different.

Multilateralism is giving way to regional and bilateral deals. Trade ministers will not sit still if negotiators in Geneva can't make progress. It would be a tragedy for all if the talks remain stalled and we lose another three or four years. That puts a system in peril that has helped drive up the most successful global economy in history.
If I were a trade minister, I would be cutting regional deals wherever I could. National interests don't stand still. However, these deals do create trade diversions, distortions, and privileges for some. I have yet to see a non-WTO deal that has an independent, credible disputes system or one that handles agriculture effectively.
Outside the WTO, negotiations are staggering on for an Americas deal. China is negotiating with Asean, India, Korea, and flirting with Japan. New Zealand hopes to conclude a China deal next year. Europe marches eastwards. Open, WTO-compatible regional deals can be helpful.

But what's wrong with this picture? The very poor in Africa and the Caribbean are largely marginalised. The WTO was, in part, created to prevent the rise of potentially hostile trading blocs. Special deals create privilege and give levers to politicians who eventually find that power irresistible to use.

Agriculture, as always, is the greatest hurdle, which also provides the greatest opportunity to lift incomes of poor developing countries. Africa would get four to five times more out of freeing up agriculture than all the overseas aid given by rich countries. Workers in rich countries pay up to $30 a week more, per family, for their food and textiles because of subsidies. Rich countries spend $1 billion a day in food subsidies.

The chairperson of the agriculture committee in Geneva is the NZ ambassador, Tim Groser. His paper on the next step forward has been circulated. It doesn't go as far as some agricultural exporting nations may want in market access. It has attacked dramatically the promise at Doha to eventually eliminate export subsidies, and has very useful language on export credits and monopolies that control exports.

The predictable wailing from some non-government organisations has surfaced. This is ironic because many of them cheered the collapse of talks in Cancun. It is as though, somehow, the present injustices in the system are better not attacked by negotiations. Of course, the cotton subsidies that rob $250 million a year from the poorest countries are wicked, as are the tariffs that escalate upwards whenever a poor producer of coffee wants to add value and jobs. But that's why we have a trade round so there can be trade offs.

The Europeans and Japanese have shown leadership by dropping their demands for a regime in investment, competition and transparency in government procurement. They still want a negotiation on trade facilitation. Good for them, this is an area of inefficiency. Good governance will benefit all.

The Groser paper hits the mark. I suspect there will be a grumpy consensus to accept the paper as a basis for negotiation that will allow the work to continue. The WTO generally does the right thing, the wrong way and the long way. However, in an organisation where everything must be done by consensus, it's always unpredictable.

The world economy needs the confidence progress will give and the multilateral system needs to show it can work. Otherwise less palatable alternatives will be pursued, the WTO becomes a league of nations, sidelined for another few years until another generation of ministers rediscovers the virtues of multilateralism.

Dangerously, in the meantime, the WTO's jewel, its bidding disputes system, will be put under perilous pressure. Imagine a world economy without a trusted dispute system to handle trade differences - that's too dangerous to contemplate.