Supplementary memorandum by Professor
Simon J Evenett, University of St Gallen, Switzerland
What is your assessment of the likelihood of completing
the Doha Round?
In the coming 12 months the probability of completing
the Doha Round is close to nil. Fundamental political constraints
have not been relaxed in recent months, such as the run-up to
the Indian elections, the entrenched US Congressional lobbies
in favour of farm subsidies, and the majority of the EU member
states reluctant to take on cuts in agriculture beyond agreed
CAP reforms etc. These are unlikely to change much before the
middle of the next year. An optimist could hope that fresh ministerial
"eyes" next year will look at what was tabled in July
2008, that the associated gains while positive are seen to be
too small to fight much over, and that the perceived political
costs of failing to conclude this round are even greater. In this
scenario, ministers may conclude a deal just to get it done (and
wonder why their predecessors spent so much time fighting over
something that was likely to yield so little). Such clearing of
the decks might take until mid-2010, especially given the time
it takes to do the necessary legal drafting.
The current financial turmoil is unlikely to
alter the calculations of senior officials and political leaders
much. Some will argue that the Doha Round was born in exceptional
geopolitical circumstances (the September 2001 attacks on the
United States) and that a similar impulse may help conclude the
negotiations. It is unclear how such arguments would persuade
Indian politicians and Chinese leaders to fundamentally change
their positions on safeguards for their very large agricultural
populations, especially when those countries appear to perceive
the financial crisis as having Western origins (conveniently overlooking
the home-grown collapses of their respective stockmarkets!).
Another, more compelling argument is that a
global slowdown in the growth of international trade may redouble
policymakers' interests in opening up foreign markets and accepting
more own liberalisation in return. Since the Round was launched
in 2001 most WTO members (including the EU but with the exceptions
of Japan and the United States) have seen faster export growth
than during the period between the Uruguay Round's conclusion
and the Doha Round and during the Uruguay Round negotiation. If
exporters no longer take robust export growth for granted they
may adopt a higher profile in the Doha Round than hitherto.
To the extent that the current turmoil induces
governments, particularly those in emerging markets, to raise
their tariffs up to the maximum rates permitted in WTO agreements
then OECD nation exporters will no longer take for granted the
generous market access terms that they have enjoyed in recent
years. Exporters may then rediscover the value of WTO accords
that lock-in previous foreign tariff cuts (which have often been
substantial), rather than demanding more tariff cuts as a pre-requisite
for concluding the Doha Round. It should be said, however, that
the trade growth slow down and tariff hikes necessary to induce
substantial exporter re-engagement has yet to occur, but that
may change over the next six to 12 months.
There will undoubtedly be calls to complete
the Doha Round in the run up to the 15 November 2008 G20 summit
in the USA, not least from the Prime Minister and Lord Mandelson.
While this is a laudable goal, for the reasons I have outlined
above it is unlikely to come to pass. In contrast, a commitment
to a standstill on tariffs, unfair trade actions, and measures
against import surges may gain some traction. Rather than try
to bring trade and the WTO into the 15 November 2008 summit, one
could argue to keep trade out of it—and a commitment to
a standstill could be a tangible counterpart to this line of argument.
G20 countries could commit to address the current financial turmoil
and its consequences with national fiscal and monetary policies
and refrain from resorting to commercial policy.
Will further significant delay to, or a complete
failure to complete, the Doha Round wound the WTO? Can the rule
making and dispute settlement functions of the WTO remain relevant
and effective if the liberalising function fails?
Any significant delay in the Doha Round could
result in several far-reaching dispute settlement cases between
WTO members, most likely in the fields of agriculture and taxation.
Some countries will try to obtain through litigation what they
could not get through negotiation. Certain potential disputes
involve such national sensitivities that this will put enormous
pressure on the WTO's juridical bodies. Many analysts regard the
Boeing-Airbus disputes as "too hot" for the WTO to handle;
after a delayed Doha Round the same lack of restraint that resulted
in the aircraft cases being brought to the WTO may spill over
to other equally provocative policy domains.
Too much emphasis is put on the WTO's liberalisation
function—as a matter of history it's contribution has been
oversold and now unfortunately some do not see the point of WTO
negotiations without liberalisation. However, for all but the
largest countries (that erroneously feel they can fend for themselves),
the core rules remain the principle reason for WTO membership.
(Even the largest countries benefit from the reductions in uncertainty
generated by WTO accords.) This point, plus consideration of the
potential costs and benefits of additional multilateral trade
rules, should receive greater attention from the trade policymakers.
From time-to-time Mr Lamy has referred to redressing the WTO's
"missing middle" of deliberative functions, without
spelling out precisely what that might involve. In a recent paper,
I described four types of deliberative initiative that WTO members
could pursue. In addition to reinforcing the WTO's negotiating
and dispute settlement functions, such deliberative initiatives
would have systemic value in their own right.
What does the present situation in financial markets,
and the possibility of a deep global recession, mean for the future
of the WTO?
I have given much of my answer here when answering
the first question. There is a real risk that some governments
will resort to beggar-thy-neighbour policies in response to a
deep global recession and the WTO rules will be tested in two
respects. First, governments may resort to the numerous loopholes
in the WTO's rules that allow for temporary increases in protection.
Second, governments may go further and set tariffs about maximum
agreed levels and impose quotas, where they have been previously
banned. Fortunately, the latter has yet to come to pass, as it
would represent a substantial rejection of some of the core principles
of the WTO. Here policymakers should be encouraged to fight nationwide
recessions with economy-wide tools such as fiscal and monetary
policy, and not single out the tradable sectors for differential
treatment.
In the short to medium term, attention will
shift away from the WTO as one of central places where economic
governance is determined in the world economy. Without the financial
crisis this was inevitable. Even if the Doha Round were concluded
in 2009 or 2010, it would take five to ten years to implement
its obligations. If history is anything to go by, the WTO membership
would not launch another trade round for a five to seven years.
Add another five to ten years to complete such a negotiation,
then with its current mantras and operating procedures, the WTO
will not have another opportunity to substantially influence the
rules of the global economy until 2020 at the earliest and more
likely 2030. These observations highlight what a failure the Doha
Round has been: a missed opportunity to shape the rules of the
world economy of monumental scale (at a time when China and India
are reintegrating into world commerce). The current financial
crisis must not be allowed to obscure this failure on the part
of business, trade negotiators, and ultimately their political
leaders.
2 November 2008
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