I am in contact with leaders and officials both from the world's most developed nations and from developing countries. When the Doha development round talks collapsed in July, I was struck by the gap between what officials say when they meet at the Organisation for Economic Cooperation and Development (OECD) in Paris and how they define their positions in the World Trade Organization talks in Geneva.
Opportunity to progress
The Doha Development Agenda is an opportunity to rebalance trade rules in favour of developing countries while boosting the world economy. The Doha talks reportedly collapsed largely because of disagreements over agriculture, but clearly that is not the whole story. Indeed, some rich countries were not ready to accept larger tariff cuts or bigger reductions in trade-distorting domestic subsidies for farm products. Emerging market countries, meanwhile, offered what some saw as only modest improvements in market access for goods and services.
The present impasse is a lose-lose situation, in which all countries suffer but where the poorest will suffer most. The OECD has estimated at nearly $100 billion the gains in terms of increased economic activity--and hence prosperity--that could be obtained from full tariff liberalization for industrial and agricultural goods. The benefits from liberalizing trade in services--the fastest-growing sector of the world economy--could be five times higher, at around $500 billion. A Doha agreement on trade facilitation, by clearing away procedural barriers, could contribute at least $100 billion more. Developing countries are projected to reap as much as two-thirds of these gains.
The failure of Doha would mean that these benefits are lost. More importantly, it risks undermining the multilateral trading system and unleashing a wave of protectionism that reasonable politicians will find hard to counter.
Support for weaker nations
Trade has been a powerful engine of growth in the past 50 years, contributing to lift millions out of poverty. But trade liberalization causes short-term pain, as some countries and workers face disproportionate adjustment costs. Open markets, supported by policies which facilitate adjustment, are crucial to ensure that those who suffer short-term losses can also participate in the overall benefits of globalization.
The multilateral trading system plays an essential function in this regard, defending and promoting the interests of all trading nations. By building on the principles of national treatment and non-discrimination, the WTO provides a forum for negotiating. By providing recourse in cases of violations, it embodies a rules-based system that helps international trade work as an engine of growth and development.
The alternative to a Doha agreement is bleak. There is a danger that the WTO will proceed by litigation instead of legislation, that dispute settlement will take the place of rule-making. Existing distortions to trade and economic activity could become entrenched, making it increasingly difficult for developing countries to compete fairly in world markets. …