IT’S NOT OVER YET

News out of the World Trade Organisation in Geneva that the Doha Development round has reached a deadlock was hardly new or news. The Director-General’s statement to WTO Ambassadors that he feels obliged to suspend activities over Europe’s summer break because there was no mood to compromise by leading nations after the Group of 6, the EU, US, Japan, Brazil, India, and Australia spent another 14 hours in deadlock, was a sad announcement of an obvious reality. Despite some media reports, the round has not been cancelled. Frankly, the momentum created by the Doha launch of the round was lost, then it went backwards at the Cancun Ministerial in Mexico. Scared by that unnecessary failure, expectations were so lowered that by the Hong Kong Ministerial, a success was achieved when no-one walked out and everyone went home with no real progress. A furious flurry of activity followed by the Director-General visiting capitals and many groups of Ministers talking and walking. A final meeting of the G6 over the weekend confirmed that it was all too hard. Ministers could not agree and thus were not prepared to tackle their local, vested interests. Elections loom in the U.S., Brazil this year, and France next year.

Summit after summit of leaders from the Group of 8 at St. Petersburg to APEC and the Commonwealth routinely call on each other to be more flexible but have not changed their rigid positions. It’s not over but the much-delayed round now faces a problem because, under U.S. law, the President can only negotiate with the approval of the U.S. Congress, that approval expires next year. This is not the end of it, but it’s difficult for negotiators to reach a deal if the U.S. Congress can cherry-pick it to death. But the Congressional approval to negotiate could be extended depending on the result of the U.S. Congressional elections in November this year.

This is the crisis every trade round goes through. What’s difficult this time is that there are alternatives and they are being pursued with vigour and purpose. Dozens of bilateral and regional deals are being negotiated, planned, studied and considered. This is an inferior, often dangerous, route, none have a formal, legally binding disputes mechanism, all have huge gaps that exclude sensitive products like agriculture, many create new privileges and will result in trade diversion.

Who’s to blame for the cul-de-sac the negotiators find themselves in? There’s enough blame for everyone to share. The U.S. will need to offer more cuts for its domestic subsidies, but it’s equally true that the EU and developing countries need to provide more market access for agriculture and non-agricultural products. How will serious negotiations restart in substance? Something has to give, it would be easy to do little and declare victory and agree to come back in a decade. That’s a danger and a minimum outcome has always been the maximum ambition for some.

Over the Northern Hemisphere summer break, officials will turn to how to kick-start the talks and rebuild confidence. But a Director-General cannot invent a common position when none exist. One area that could gain traction and attention is the timetable for change - would it matter if an extra 5 or 10 years was added to the implementation of subsidy cuts or market openings? This could push the decisions back past 1 or 2 elections, so long as the cuts were phased in without loopholes, such as sensitive products, were nailed down. I find it hard to believe that multilateralism, that has done so much for the growth of the global economy, will perish, nor do I believe that the precious, binding disputes system, unique in the global institutional architecture, could be bypassed. Imagine a world of reactionary, poll-driven impulses that could mean instant political gratification to appease populist pressures by stopping competitive exports. How would China respond? At the moment too many governments, knowing their actions are illegal and not economically rational, say they will complain to the WTO, win a few headlines, and when rulings go against them, attack the WTO. This could overwhelm the system, destroy confidence, the WTO cannot continue to be like a Mexican piñata which children hit with sticks hoping for sweets to emerge from the beaten, hung body. They may hit it once too often. Destroying by bypassing the WTO will make a dark world darker, more dangerous and less predictable.