Examination of Witnesses (Questions 460-479)
Professor Jean-Pierre Lehmann
11 JULY 2008
Q460 Chairman: Thank you. Unfortunately,
that does sound realistic. Given all that, do you believe participants
would consider an agreement that simply locks in existing tariffs
as success?
Professor Lehmann: I used to be opposed
to this but I am rather favourable to it now, it probably is important
to get an agreement. There is probably quite a lot on the table
and it is better to have something that could be concrete in terms
of a conclusion. It would be rather good to conclude the Doha
Round because it has got mired down in all sorts of problems,
including the problem of definition from the very beginning, what
is a Doha Development Agenda, how do you calculate it, what are
the metrics, what are the parameters, and so on. It was really
very woolly thinking to have produced this. It would be good not
to make it continue on life support, which is what it is now.
It would be better to have it declared concluded and take the
gains that exist and then quickly move on in 2010 to a new Round.
Q461 Chairman: I guess that would
fundamentally be your Plan B?
Professor Lehmann: Yes.
Q462 Chairman: Stop, lock in the
gains and start again?
Professor Lehmann: Yes.
Q463 Lord Haskins: On the issue of
the lack of political momentum you mentioned, there are two conclusions
I come to on that. First of all, unlike Uruguay, the business
community is not hugely enthusiastic, whereas the American business
community was enthusiastic then, and American Presidents tend
to listen to that. The other one is are people making a judgment
that if we do not get a settlement this is not the end of the
world, as it were, and is that a proper assessment?
Professor Lehmann: I agree with you totally
on the first point. The role of the business community has been
extremely disappointing. I am one of those, along with Jim Rollo
and others, who have tried to galvanise them. The problem has
been partly that times have been too good. We have had the last
15 years of high growth, everything goes, low inflation. At the
meetings I go to at the World Economic Forum, for example, Davos
or others, there has been a sense of bullishness, at least until
this year. Who cares about Doha? Who cares about the WTO? One
of the things I notice, for example, in Davos is when there are
the trade ministers' meetings with Lamy, et cetera, nobody shows
up. The business community is conspicuous by its absence. It is
partly because it has been very boring, they have been saying
the same thing for seven years. The other thing is business has
lots of problems. I teach in a business school and I can see this
rather closely. There is a lot of short-termism. There are exceptions,
including an exception in France. A guy like Carlos Ghosn, the
Chairman of Volvo/Nissan, is quite a visionary guy and he speaks
up. There are others, Neville Isdell of Coca-Cola and so on, but
you can probably count them on the fingers of three hands, not
more. There has been an absence of this kind of support. There
has also been an accommodation. For example, I am told that the
big German Federation of Industry has pushed for accelerating
bilaterals saying, "Doha or WTO, the multilateral system
is hopeless. From the German industry point of view what we want
to have is good bilateral deals with India, Korea, countries of
this nature". There is a lack of constituencies and this
is partly due to a lack of understanding of what the issues are
and also the fact that the weather has been so sunny over the
course of the last 15 years.
Q464 Lord Haskins: And they got a
very good deal in 1992.
Professor Lehmann: They got a very good
deal in 1992, absolutely.
Q465 Lord Maclennan of Rogart: Professor
Lehmann, you opened by saying that symbolism was as important
as substance, but is there any one symbolic move that the United
States' President could make at the beginning of this Ministerial
or in his instructions which would help to unlock responses, for
example, from India, which is perhaps a key player on the other
side? What might be said?
Professor Lehmann: This is where it gets
bogged down. I remember one of the questions is it has to be clear
that if we look at the G8 players or the European Union, the US,
Japan and Canada, there has really been a quite appalling lack
of leadership. On the other hand, it is true that the Brazils,
the Indias and Chinas have not been particularly helpful in this
exercise. India has been obstructionist. China has been very absent
from a lot of the discussion. The Brazilians have been more aggressive
and I guess more constructive on many issues compared with the
other two. It is the same thing you are getting that you have
at the G8 over climate change, to say, "We are prepared to
do X, Y and Z but, beforehand, you, China, India and Brazil, have
to commit". I do not think that rhetoric is going to get
us anywhere. I can see this kind of argument going on until my
grandchildren reach retirement age. The heroic thing, or very
symbolic thing the United States could do would be to assume leadership
and announce unilaterally that it was undertaking the kinds of
decisions on agriculture that are being asked for, in other words
you would have the reciprocity. I would have to add that some
day pigs might fly; I really do not see this happening. What concerns
me is I have a feeling that we are not really going to get anywhere.
I have a rather bleak view of the future of the global trading
system, frankly. I am not happy with what I am going to say now.
Short of a crisis, and a rather profound crisis, I do not see
getting back on track. If the leadership can be sufficiently persuasive
in terms of trying to avoid a crisis then this could be salutary.
I have to say in saying what I think President Bush might say,
and this is what the President of the United States might do,
one has to remember who the individual is and you realise there
is very, very little prospect of it happening.
Q466 Lord Maclennan of Rogart: I
tremendously respect your crystal ball gazing and so forth, but
what I am really trying to elicit is not whether it is likely
he might say something, but what could he say specifically and
precisely that would actually get the sides talking?
Professor Lehmann: Agriculture.
Q467 Lord Maclennan of Rogart: Within
that? That is a very big subject.
Professor Lehmann: I know it is very
big, but I would have to have more details of what is on the table
and what is being requested. It would have to go the extra mile
in terms of meeting what the Brazilians and others are asking
the United States to do in terms of agricultural support and agricultural
tariffs.
Q468 Lord Trimble: In your comments
a moment ago you mentioned China, India and Brazil. We had evidence
given to us at an earlier stage suggesting that the goals and
ambitions of those three countries were not being fully accommodated
by the current negotiations. Would you share that view?
Professor Lehmann: Yes, I would share
that view in the sense that I come back to what I was saying earlier
on. It is not just crystal ball gazing but also getting some historical
perspective. In a way, Doha should never have happened. There
are all sorts of people I respect who may have different views
on this. There was Seattle in 1999 and those who were tracking
the developments post-Seattle leading on to Doha were pretty unanimous
in expecting that Doha would not succeed in terms of launching
a new Round. What happened was in the interval there was 9/11
and that had a huge impact and gave Doha, I would say, an unnatural
birth. Given the fact that the relationship between the so-called
north and south had become very, very hostile in the course of
Seattle in the previous years, there was a sense of solidarity
which fleetingly existed that led to this Development Round. Subsequently,
as I said, I do not think it was properly defined or stated. There
are still a lot of anomalies that exist insofar as the conditions
are concerned for the developing countries in general, whether
it is Brazil, China, India or others on issues that are related
not just to trade but things like intellectual property and so
on. This Doha Development Agenda, rather than solidifying, improving
and creating a greater sense of global solidarity between north
and south, has tended to result in the opposite. There is a strong
degree of hostility. When we are talking about the political positions
that the people in the so-called OECD countries or rich countries
find themselves in, the same applies to many of the developing
countries, there is a sense that the trade regime is, whatever
you want to call it, neo-colonialist or whatever.
Q469 Lord Trimble: I think people
use the term "unbalanced".
Professor Lehmann: You see how things
have been exacerbated. For example, we have done a certain amount
of work on the Economic Partnership Agreements and this has further
envenomed the atmosphere and the environment. Having said that,
as I said, this is an unsatisfactory deal, it has not been a particularly
fruitful process of negotiation, to put it mildly, but I still
feel it would be great if it could be concluded because I do not
see it improving over time necessarily. It would be really good
if we could conclude it successfully, even if it is with a very
small `s', and then move on to something where we would draw the
lessons from Doha more properly defined. The south has to be brought
into this. It has to be a south-oriented trading regime because
the south is going to be increasingly active in trade.
Q470 Lord Trimble: When you say "the
south", do you mean just India and Brazil or something more
than that?
Professor Lehmann: Much more. I mean
Kenya, Mexico, Bolivia, Colombia, et cetera. This is where there
remains a lot of work to be done.
Q471 Lord Trimble: This little constellation
of countries, Bolivia, Kenya and all the rest of it, are their
interests radically different from those of India and Brazil?
Professor Lehmann: I think the interests
of India and Brazil are quite different. If I have given the impression
that there is a cohesion in the south, there is not, there are
many, many differences. Brazil is very successful as an agricultural
"power", I suppose you could say, and India is not.
They are many different kinds of environments. Between Brazil
and India there is quite a lot of tension because they have found
themselves in different positions on a number of sensitive issues.
On services there is a big difference between Brazil and India
with the Indians being much more progressive and the Brazilians
far less so.
Q472 Lord Moser: You have made it
fairly clear that you are a bit gloomy about the chances of a
breakthrough, however much you may want it, and you have given
a number of specific reasons why there might be obstruction from
various quarters. I think I also heard you use the word "boredom".
Doha has been going on year after year, no very new arguments,
a new world situation but no new arguments, the same negotiating
faces, et cetera. Do you think there is a real danger amongst
countries that might otherwise have something to gain that they
are just a bit cynical about the prospect and also they might
feel that they can do better by dispute mechanisms processes,
so the whole thing is slightly discouraging, or is that too gloomy
a picture?
Professor Lehmann: I think it depends
on what is going to happen in the general context so far as the
world economy is concerned. As things currently stand, I do not
think it is too gloomy a picture, it is a reasonably realistic
one. When I say, for example, that when the trade meetings take
place at Davos there are very few people who show up, I remember
on one occasion two or three years ago they were all there, it
was a huge hall which was about two-thirds empty, and Celso Amorim,
the Brazilian, at one stage was addressing one of his counterparts,
I cannot remember which one—they had just had a bit of an
argument about some seemingly trivial pursuit—and he looked
up and said, "Look, the room's empty, we are going round
in circles". I think when one attended year after year there
was nothing new. It was the last year or the year before when
Peter Mandelson said at one point, "There, it took 40 years
to succeed in more or less the elimination of industrial tariffs,
you cannot expect us to do agriculture in a matter of a few months".
Was it necessary to be engaged in negotiations for seven years
to come up with that startling conclusion? I sense there is an
enormous amount of cynicism. I have said one way to empty a room
is to come in and say, "I'm here to talk to you about WTO
or Doha". This has been exacerbated. There are some criticisms
that have been made of the WTO which I think are fair. The PR
has been terrible. This is one of the things that the veterans
of the negotiations in the past talk about. They talk about the
days of the UR, the Uruguay Round, but for most of the Uruguay
Round the internet did not exist, you did not have the NGOs, the
political awakening and so on. Part of the problem is that politicians
now find themselves in a situation where globalisation, global
trade or whatever, is not supported by the populations, or at
least not to a significant extent, but nothing has been done in
terms of selling it. This is the case even with the jargon. I
was at a meeting in Washington when somebody was talking about
NAMA, and what a very unattractive term to use. There should have
been a greater sense of reaching out to the public. One of the
questions was what do I think about the rhetoric in the US. A
real crisis in US-China trading relations could occur. If you
look at the scenarios, things could go very wrong here. There
is a sort of underlying tension. That could lead either to a deterioration
and potential collapse of the system or to having the kind of
impact that would help in terms of getting us back onto the multilateral
trading system.
Q473 Chairman: We have got a crisis,
have we not? We have got rising food and rising fuel prices. This
is not the kind of thing you think would help get us back?
Professor Lehmann: I guess it is not
deep enough. It is not deep enough in terms of perceptions. I
have not seen any evidence yet, if you like. You have had declarations
from leading personalities, eg Zoellick, President of the World
Bank, about the world economy, the rise in inflation and all the
rest of it, but I do not think it has hit the consciousness yet
to quite the extent that is necessary. I agree with you that we
have a crisis.
Q474 Chairman: I think that is fair.
I am surprised in talking to people in Geneva about the negotiations
how much the increase in food and fuel prices is a side issue,
it does not seem to bear absolutely directly on what we are trying
to do.
Professor Lehmann: This comes back to
the question that Lord Moser was asking me about the cynicism.
There is a lot of thinking that will need to be done when this
is over. One of the things we are going to have to think about
is Geneva. This is a very incestuous world. The fact that the
negotiators are not necessarily aware of the broader picture is
not surprising because they spend all their time together and,
the difficulties with negotiations notwithstanding, fortunately
they get together for barbecues, receptions and all the rest of
it, but they are very, very far from the real world. To my mind,
this has been one of the problems in negotiations that have been
going on and with a sufficient lack of interest on the part of
the capitals, that is why it has always been said at the end of
the day it is the capitals that are going to count and not just
the trade ministers, it is the finance ministers, prime ministers,
foreign ministers and so on.
Q475 Lord Moser: Your point about
PR is interesting. It must be quite a challenge to produce sexy
PR about trade negotiations, I do not know where I would start!
Since you mentioned Peter Mandelson, I have been very struck in
all our talks round this table within the last 24 hours that we
keep talking about America and how important it is, et cetera,
China, Brazil, India, but hardly any mention of Europe. Is Europe
important?
Professor Lehmann: There was an article
you may have seen in the Financial Times a few weeks back
by Kishore Mahbubani and the theme was "Is Europe relevant?"
or "Europe is no longer relevant". That was perhaps
a little bit hard. My sense, if you like, is the European trade
policy is almost an oxymoron. I do not know how long it is going
to be able to be sustained. The trade instincts of the south and
the north are really quite dramatically different. I am talking
about the south of Europe, not the south of the world. I remember
the so-called "bra war" in 2005 just after the Multi
Fibre Agreement between China and Europe and I think it was very
tough for Mandelson because, on the one hand, you had the French,
the Portuguese, Italians and Spaniards shouting to protect the
dwindling number of textile workers they had and, on the other
hand, you had the Danes, the Swedes, the Dutch and the Germans,
I guess the British also, who were saying that they needed to
have access to cheap, good quality garments because of their retail
industries being much more important and they do not manufacture
any more. This tension is always there, in a sense. Look at how
much difficulty he is having now with Sarkozy. This spat is certainly
not very helpful. The Japanese trade policy has to take into account
various kinds of lobbies and interest groups, and so does the
American, the Canadian, the Australian, et cetera, and I think
Europe has a common trade policy but not a common trade ideology.
This is going to be a major obstacle.
Q476 Lord Woolmer of Leeds: You touched
on bilaterals earlier, could I ask you two or three questions
on that theme. Why do you think there has been almost an explosion
in the number of bilaterals and do you think that will continue?
What impact do you think that increasing bilaterals has had on
the appetite or necessity to conclude a Doha Round? A second theme,
if I may. Do you think the growth in bilaterals is ultimately
a threat to the relevance of WTO or will an increased very large
number of bilaterals at some stage lead to a desire to multilateralise
them all because of the sheer complexity of hundreds of bilateral
relationships? There are two different themes there, why the growth
and its impact on Doha, and, looking for the longer term, what
is its relevance to WTO, is it an alternative and a threat or
something that will lead eventually to a desire to multilateralise,
or re-multilateralise I suppose?
Professor Lehmann: That is a very critical
question. It is implicit in your question rather than explicit,
but I think it is important in terms of context. When we are talking
about the bilaterals we are usually thinking in terms of, say,
US-Australia or US-Israel and these kinds of bilateral deals,
US-Korea, US-Colombia, Europe-India and so on. There is a tendency
for persons like myself to be very critical of bilaterals. I have
consistently been saying that we must focus on the multilaterals
and the bilaterals must be a side-product, not the other way around,
which is what it has become. I was very critical of the position
taken by Bob Zoellick after Cancun when he introduced this term
of "competitive liberalisation", which has not happened
and was a problem from the beginning. I do not think it was conceptually
correct. There are aspects of his competitive liberalisation that
are very dangerous. You can see, for example, that China is now
getting into the business of looking at bilaterals and you can
see a tension, a competition, a rivalry taking place in the world.
Having said that, there are some bilaterals where if we could
get a bilateral between Morocco and Algeria that would be fantastic.
This is a little bit self-confessional. One has to be careful,
as I have not been, for example, in making it clear that some
kinds of regional agreements, bilateral agreements, are very healthy.
I mentioned Kenya earlier on because I spent 12 days there recently
and I am quite convinced that part of the objectives for that
region will be to consolidate this east African community and
develop greater trade and so on. The same is true in north Africa.
Why has there been an explosion of bilaterals? I suppose there
are several answers to that that converge. Some of the things
I am going to say are a little bit cynical, but they are correct.
One is to keep people busy. This has always been denied but I
think it is quite true that in the European Commission office
here the number of people working on Doha was reduced because
there was very little to do. To have a raison d'etre for
officials you have to keep people busy. All of these reasons overlap.
As I suggested earlier on, and this goes back to the question
that Lord Maclennan asked about the lack of business support,
there has been a lack of business support for the multilaterals
but there has been a great deal of business support for some of
the bilaterals. The business people I speak to, who are among
the "villains" of the piece, tell me, "Look, Jean-Pierre,
we have to be realistic. We are not going to get anywhere with
the multilateral trading system, so let's go for second best rather
than some idealistic objective which will never be realised".
There is also a political element in here, and a political element
in both senses of the term. For example, personally, in spite
of being rather allergic to bilaterals, I regret that the Colombia
deal with the US was rejected, I think it would have been a good
thing to have had for political reasons. Some people say the FTAs
should more properly be called PTAs, either preferential trade
agreements or political trade agreements, and in some cases I
think from a political point of view that would make sense. The
comment that is also made very often is that so far as the legacies
are concerned it gives a politician kudos to be able to be in
Capital X, Y or Z and hold up their hand and say, "We have
successfully completed a bilateral deal". I was in Australia
at the beginning of last year, I think it was, and the Australians
get nothing out of this trade deal with the United States except
it is good for Michael Howard to be seen to be consolidating his
ties with the United States. I may be missing something in this
but that was the feedback I got. I would say there are prestige
issues, political issues, lobbying issues. Professor Rollo and
many others know these things much better than I do, but in terms
of trade creation I think the bilaterals have had a very limited
impact. They generate an enormous amount of input and relatively
weak output. There is a risk that we could be talking in terms
of blocs that are going to be generated by these regional bilateral
deals, whatever. There is a whole issue about the Sub-Saharan
African continent. We should be worried about Sub-Saharan Africa.
I am very pessimistic about its prospects on the basis of current
governance in most of the countries concerned and at the same
time we have a population explosion that is in the process of
taking place, so we should be looking at having a global framework
that is going to be conducive to Africa being as economically
efficient as it can be. Just as we had the Cold War being fought
in Africa in a geopolitical sense, we could have an economic trade
war or conflict going on between China and the West on African
soil. These are some of the costs of not having a proper multilateral
trading system. I was asked a question about whether the dispute
settlement mechanism could act as a substitute for the negotiations
and my view is not. My view is it has functioned quite well, it
is a good thing, but, ultimately, if the institutional framework
is not going to be solid then I do not think that the court, so
to speak, the DSM, is going to be able to function properly. Of
course, in the bilateral deals that is one of the aspects that
is significantly lacking.
Q477 Lord Woolmer of Leeds: One witness
said to us that if Europe and the United States did a bilateral
deal in the absence of the Doha Round being concluded positively
that could almost spell the end of the WTO. Is that an overstated
view?
Professor Lehmann: That would be my view.
Whether Europe and the US would go for an FTA in due course is
a separate issue from the one of timing. If you look at what happened
when the Europeans and Americans had some preliminary discussions
on a common position before Cancun, that resulted in a very violent
reaction with people saying, "This is no longer a world where
you guys can go behind closed doors and determine what the fate
of the planet is going to be". Although it could be a good
idea, it would be a terrible idea in the current context. You
have talk about a free trade area of the Asian Pacific which,
again, is not necessarily a bad thing. The Asians are talking
about trying to look at the European Union as a model for their
own development. This is where I come back to the issue that in
the absence of a strong multilateral framework and also the spirit
of the multilateral framework this may not happen. On the point
you make about the difficulty on the PR, this is something we
are going to try to do, to reach down to popular levels. We are
working with an Indian company on this to develop software and
IT programmes, et cetera, that look at the history of trade, the
beauty of trade. There was a book recently by William Bernstein,
I do not know if you have seen this, called A Splendid Exchange.
It is magnificent, it could be made into a film. If you stop and
think about it, trade connotes a lot of romantic imagery, the
Silk Road and so on. What we are lacking now is not just the politics,
it is the whole spirit of the global environment in terms of trade.
As I say, I am probably a little bit jaundiced by virtue of being
French, and although I live in Switzerland, I go to France quite
frequently and have a house in Vendée with Philippe de
Villiers as our head of region, one of the most protectionist
Frenchman, and that is saying a lot, and neighbours say to me
things like, "The future is to be clothed by the Chinese,
fed by the Brazilians and our plumbing done by the Poles".
There is a sense that we are victims of this globalisation. There
are a lot of popular attitudes that need to be addressed to get
a greater sense that there are a lot of benefits to be had from
the environment that we have and from what is being tried.
Q478 Lord Haskins: I am getting more
and more gloomy the more I listen to you!
Professor Lehmann: Sorry.
Q479 Lord Haskins: Mr Lamy was more
optimistic than you, but I suppose he has to be doing his job.
He was saying yesterday that the leaders of the world need the
WTO privately more than they are prepared to admit publicly. That
seems to be an area that one could work on. Your PR point is very
well made and is one of the reasons why business people are keeping
their heads down because the NGOs have done a very effective PR
job and business people do not want to be seen to be taking on
the NGOs in public and that is a real problem. You have also said
that bilaterals do not really work. If that is the case, eventually
they will be exposed and there will be a time when people say,
"What are we getting out of this?" It seems to me there
are two issues which the WTO might have to consider which business
people certainly would see only global institutions can deal with.
One is energy, which nobody mentions at all, and, indeed, one
of the large energy producers, Russia, is not even a member of
the WTO and is unlikely to become one. If the WTO was able to
come up with some serious answer to the energy problem that would
have a huge resounding impact on global business public opinion.
The other one is climate change where, again, I think people realise
this cannot be done by bilaterals, this has to be done in a multilateral
way. Is the WTO the institution to be taking those on and is there
any way of achieving that?
Professor Lehmann: First, that Pascal
Lamy should be more optimistic than I am, I certainly hope so!
He has to be. These are very, very fundamental questions. My short
answer is yes. This would be in the context of a renewal of institutions.
People are talking about another Bretton Woods, and maybe that
is too much, but there has to be a very, very profound assessment
of the degree to which the institutions that we have at present
are conducive to the challenges that lie ahead. I realise that
it is going to be extremely difficult when we look at trying to
reform the UN Security Council or whatever. Issues like energy
and climate change are ones that are recognised as having a huge
impact on absolutely everybody. One of the things that has been
very much talked about is the absence of any sense of coherence.
The Economist's front cover with the Tower of Babel as
a system of global governance was really quite effective. If the
WTO were able to take on these two issues you are talking about,
if not the WTO then who? These are very related to trade and at
least as important, if not more so, than, say, intellectual property
or other things that the WTO has gone into, rightly or wrongly.
This should be something that is on the agenda. Coming back to
the question Lord Maclennan was asking about what Bush could do
in terms of a breakthrough, as I say I am very sceptical that
there could be anything at all. You could say that somebody bringing
in the energy and climate change issues would say, "We have
to complete this Round as best we possibly can, we, the United
States, and the European Union hopefully, but with a perspective
of what next". We could say the "what next" has
to include climate change, trade and energy, and trade and a number
of other issues. Another one is immigration, which does not feature
yet. Mode 4 is a very small element.
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