SUCCESS OR FAILURE AT HONG KONG ?

Early next month Trade Ministers from 148 countries will meet in Hong Kong to try and make progress on the Doha Development round. A new round has the potential to add the equivalent of another China to the world economy and lift hundreds of millions out of extreme poverty. Brazil alone would gain a quarter of a million new jobs, half of which would go to the poorest third of its workers. Despite the obvious gains for everyone, the talks are in trouble. Agriculture is the issue as always. Rich countries spend a billion dollars a day in subsidies, it devours half of the European Union’s budget.

Europe has offered its biggest cuts yet but these are seen as not enough and has been. Recently leaders and Trade Ministers from Asia and the Pacific recently called for progress that read well in the newspapers, but what does it mean? Bluntly, APEC declarations are not binding, are vague enough for those members like Japan and Korea who are reluctant to substantially change agricultural policies to let the European Union feel the heat and offer little. APEC was supposed to have free trade for developed countries in 2010, and developing countries by 2020. Not a chance of happening, it’s embarrassing to even remind leaders of their previous promises. APEC was to be WTO compatible and lever its reforms into a global deal. The opposite is happening. Leaders talk tall of the WTO and the Doha round, then go into small huddles to advance bilateral and sub-regional deals. Hell, I’d be doing the same if I was a Minister and leader. But let’s remind ourselves of what’s happening in Asia and the Pacific. All roads lead to China. China, plus ASEAN, Australia and New Zealand, studies with Korea, hints about Japan and India. What’s wrong with this picture? It’s APEC without the Americas! The U.S. administration has now conceded failure in doing a deal in the Americas. Meanwhile Venezuelan populist President Chevez talks boldly and for hours about an Americas deal without North America. All these regional and bilateral deals actually distort trade, create new barriers, exemptions, privileges, rules and conditions that raise prices and will cause heartache and political tension in the future. No regional or bilateral deal has ever handled agriculture fairly or established an open, binding disputes system. Everyone wants to do a deal with China, U.S. and Japan, but who wants to do a deal with Malawi, Papua-New Guinea, Bolivia? It’s the small and poor who will again be cut out.

The Doha Development round offers the greatest opportunity in history to redistribute wealth and opportunity. That’s why at the moment I don’t think the Ministerial in Hong Kong will collapse. There doesn’t seem to be a Plan A, but Plan B will be to ensure that the cracks are not allowed to kill the round. Look for words like ‘redoubling efforts’, calls for ‘more flexibility’, perhaps even telling the truth that the meeting ‘has not narrowed differences and that Ministers should meet again.’ Here’s the problem. French election next year and a U.S. Congress that may not extend authority for the President to negotiate which expires in 2007. Everyone in a deal like this needs to take something home to claim a victory. Nothing in the WTO is ever agreed until everything is agreed. When you are cornered in negotiation you need to enlarge the context. This means giving those who have the most problems something to take home.

Unhelpful are the shallow crowd-pleasing comments from the Commonwealth attacking the WTO for not doing enough for the poor countries and threatening a walkout. The WTO can only do what its members let it. The Commonwealth once did constructive diagnostic studies and capacity-building, now it acts like an NGO, like protestors at the gate. I was an economic nationalist, actually a protectionist, until the late 1970’s and it was a Commonwealth study and research on New Zealand’s closer economic agreement with Australia that changed me. They should say this round will not be cost and change-free to developing countries, some progress must be reported in opening services, this is in their interests and gives the agricultural protectionists something to bank in their capitals. That’s the deal-maker.

Smart people will be working on this, but too late, it appears, for the Hong Kong meeting.