Seeds
sown for future growth
Nov
15th 2001 | DOHA
From The Economist print edition
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Despite their
reservations, the launch of a new multilateral trade round this week is a boost
for poor countries
HALFWAY through this
week's tortured negotiations to launch a new round of trade talks, Robert
Zoellick, America's senior trade negotiator, bumped into two officials from the
Vatican in the lift. Never one to miss an opportunity, he quickly suggested “a
little divine intervention” to get the negotiations over. Fortunately, the
heavens eventually listened. In the evening of November 14th, more than 18
hours after their original deadline and after numerous last-minute panics
triggered by the intransigent Indians, the World Trade Organisation's 142
members announced that they had agreed to launch a new round of trade talks.
They promised to
liberalise trade further, even in agriculture, and to make improvements to
today's rulebook in areas such as anti-dumping, as well as to develop rules in
several new areas. Mr Zoellick was jubilant. “We have sent a powerful signal to
the world,” he said, adding that a new trade round would deliver “growth,
development and prosperity”.
The European Union, long
the sole champion of a “comprehensive” trade round, was also happy. Although
forced to accept a stronger commitment to ending trade-distorting farm-export
subsidies than its members, notably France, would have liked, the EU pushed environmental issues further on to the
agenda than it had expected. And it won a commitment to future negotiations on
rules about foreign investment and competition.
Poor countries were much
less excited. India tried long and hard to block a deal, worried about its
incursion into new areas and determined to press for more concessions on
textiles. Although less persistent than the Indians, Africans too feared the
prospect of expanding the WTO's remit further. Their worries
are understandable. In the previous Uruguay round, poor countries got few trade
benefits and signed up to agreements in areas such as intellectual property
that hurt rather than helped them. But, on the face of it, the Doha deal is
still a big win for poor countries.
First, they scored a coup
with a declaration that intellectual-property rules should not stop poor
countries gaining access to cheap medicines. Although the declaration is
political and not legally binding, it sends a strong message about how poor
countries can deal with epidemics such as AIDS.
In a sign of their increasing clout, poor countries won a clear victory over
the drug makers. As one activist admitted, “Two years ago you would never have
got anything like this through the WTO.”
Help aimed specifically
at the poorest countries goes well beyond patent rules. They are to have longer
time-frames for implementing agreements; lots of assistance in “capacity
building” (in other words, cash); and numerous special trade preferences. Rich
countries are desperate for this trade round to be seen as a “development
round”, and the agenda is full of commitments to help the poor.
Even more important, the
basic barrier-bashing agenda should also disproportionately help poor
countries. About 70% of the exports of the poorest countries are in farm
products and labour-intensive manufactured goods, such as textiles. The WTO's members have promised to push for “substantial
improvements” in market access for farm products, including the “phasing out”
of export subsidies. The habit of subsidising the export of surplus food, a
favourite of the French, is pernicious for poor countries, since it undercuts
local markets. As one African said at Doha, issues that “may lose elections in
France are life and death in Tanzania.”
Long-term prospects
Although poor countries
did not get the immediate concessions on textiles that they had been demanding,
the Doha round offers the prospect of big long-term gains. The commitment to
reduce barriers on industrial goods, particularly “peak tariffs”—the top rates
that countries use to protect their most sensitive industries—should imply more
access for poor countries' textiles, since the quota-driven system that now
governs trade in textiles is to be phased out by 2005.
Developing countries will
also benefit from negotiations to clarify and improve the rules on
anti-dumping. Within the WTO framework, countries can protect
themselves against goods that are sold below cost. But this right is often
misused as a tool of naked protection, particularly by America. Unfortunately,
anti-dumping provisions are extremely popular among America's lawmakers, and Mr
Zoellick's courageous decision to put them on the table will not play well at
home.
Just before he arrived in
Doha, the House of Representatives passed a resolution urging him not to mess
with America's trade defences. Mr Zoellick can claim, correctly, that the
language he has agreed at Doha is consistent with this resolution, but his
concession will infuriate politicians back home. Sander Levin, the only
American congressman in Doha, was blunt. “Renegotiating anti-dumping is not a
viable approach for the United States.”
The fight for fast-track
negotiating authority—which the American administration needs to win from
Congress to finish, even if not to start, new trade talks—has been made much
harder. Many trade insiders now reckon there is no hope of success until after
America's 2002 mid-term elections, particularly since the Doha agenda offers
nothing on labour issues, another key priority for many Democrats.
For developing countries,
the lack of any commitments in the area of trade and labour is another victory.
The failure to launch trade negotiations at Seattle two years ago had much to
do with poor countries' fears about the rich world's desire to use labour
standards as a protectionist tool. That fear should now be put to rest (at
least for a while).
The environment, in
contrast, is on the agenda. There are (narrowly defined) commitments to
negotiate, particularly on the question of the relationship between the WTO and international environmental agreements. Taken
literally, the agenda poses no risk that rich countries could misuse environmental
concerns for protectionist ends (which is the poor countries' greatest
concern). The danger is that this could become the thin end of a wedge.
Poor countries, however,
are not powerless to stop that happening. The lesson of Seattle's failure and
Doha's success is that they have a real strength in the WTO because of the organisation's requirement for
consensus. By working together, poor countries can force rich ones to make
concessions. As the multilateral system takes on ever more issues, this
structure may become unworkable. But for now, contrary to much conventional
wisdom, the WTO is the poor countries' friend.
Five
minutes to midnight
Apr
27th 2006
From The Economist print edition
Will politicians
realise the global trade round is worth saving before it is too late?
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TRADE ministers look upon
negotiating deadlines much as Italians treat the rules of the road: useful in
principle but almost always worth ignoring in practice. So a depressing
inevitability hangs over negotiators' scorn this week for yet another
self-imposed deadline in the Doha round of global trade talks. No matter that
at their gathering in Hong Kong last December ministers solemnly declared that
by April 30th they would agree on a framework to free farm trade and slash
industrial tariffs. April 30th is here and a deal is still as remote as ever.
At what point does the
inability to strike a deal mean the Doha round has failed? History is a poor
guide. Previous trade rounds have all eventually succeeded, often after
dragging on for years. But the Doha talks do not have this luxury. To negotiate
a deal that cannot immediately be picked apart by Congress, George Bush needs trade-promotion
authority. TPA runs out in June 2007 and
congressional scepticism about globalisation means it is unlikely to be
extended. In short, any Doha deal must be ready by the end of 2006.
Pessimists reckon the
Doha round is already dead. The differences between America and Europe are
“irreconcilable”, says Bill Thomas, the most influential Republican voice on
trade in the House of Representatives. Mr Bush's decision to move Rob Portman,
his main trade negotiator, to another job running the budget is a signal to
some that the White House has abandoned all hope of a Doha deal. Many gibe,
with some reason, at Peter Mandelson, Europe's main trade man, for spending
more time dishing out blame for the impasse than suggesting ways out of it.
In fact, it is not too
late for Doha to succeed. Although time is short, the negotiators probably have
until the summer to thrash out the framework of a deal so as to settle the
details by the end of the year. The technicalities prevent presidents and prime
ministers from clinching a Doha deal at a single sitting, but the technocrats
in Geneva cannot get much further without a big political push. Doha's
prospects, therefore, depend on politicians shaking off their complacency.
Do the Doha shuffle
The stakes are high, but
subtle. The world economy will neither collapse if the Doha round fails, nor
will poverty be eradicated if it succeeds. The direct economic gains from Doha
are well worth having, but the long-term consequences of failure should give
the politicians most reason to act. If Doha fails, the world will, at best,
shift towards bilateral and regional deals. At worst, the multilateral system
would wither.
This threat alone ought
to dispel today's reckless complacency. Some emerging economies, such as
Brazil, have much to gain from freer global farm trade. India could be a big
winner from freer trade in services. Both will lose from a tangle of regional
deals. The cuts in industrial tariffs asked of them are not politically
hard—and would be economically good. India and Nigeria have been slashing their
tariffs unilaterally, rightly recognising the gains from openness. It is
brinkmanship more than scepticism about trade that has driven the emerging
world to demand the right to keep high tariffs.
America's reason to rescue
Doha is different, but no less powerful. Since its tariffs are already low,
America's main contribution to this round is to cut farm subsidies. The need to
cut government spending means these handouts are likely to fall anyway over the
next few years. Moreover, the Bush White House needs an economic-policy
success. With entitlement reform dead and tax reform going nowhere, a Doha deal
could be one of the few achievements of Mr Bush's second term.
Europe—and especially
France—poses the biggest problem. After Jacques Chirac's recent retreat over
labour-market reform, there is little political appetite to take on French
farmers. The best hope is for other Europeans, led by Britain and Germany, to
join America and the big emerging markets to isolate France and shame it into a
deal. That will take courage; and the clock is ticking.
A
darkening mood over Doha
Apr
24th 2006
From The Economist Global Agenda
Efforts to
liberalise world trade have suffered a setback, after large trading powers
admitted that a self-imposed deadline of April 30th for preparing a deal on
farm and industrial goods will be missed. Ministerial talks planned for this
weekend have been called off. Although more negotiations are expected in May
and June, and there will be renewed efforts to get a deal by the end of July,
there is every reason to be gloomy about the Doha round
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THE gloom is gathering
over the Doha round of trade talks. It may be in the nature of such protracted
negotiations that they all seem, at some point or other, to be doomed to fail.
But this time the signs—many in the past few days—are consistently gloomy. The
main negotiating partners have acknowledged that a self-imposed deadline for an
early agreement on farm and industrial goods, set for April 30th, will not be
met. A ministerial meeting scheduled for representatives of 25 countries later
this week has been cancelled. This week Pascal Lamy, the boss of the World
Trade Organisation (WTO), was expected to ask members of the group to try for a
deal by mid-summer instead.
Europe and America are
both to blame for the latest setback, and each is making strenuous efforts to
hold the other responsible. But the failure to get a deal on the controversial
question of cutting subsidies for farmers casts doubt on the chances of getting
agreement in other areas. Negotiations on the liberalisation of trade in
services may prove as impossibly tricky to achieve as a deal on farm and
industrial goods.
There are other
indications that major trading powers do not expect the Doha round to be a
success. Free traders cheered in March last year when George Bush named Rob
Portman as his trade representative. Mr Portman, then a Republican congressman,
was expected to be an able promoter of free trade with his former congressional
colleagues. He was also expected to push hard for freer trade in international
negotiations, notably in the Doha round. But last week, as part of a general
reshuffle of White House staff aimed at rescuing Mr Bush’s foundering second
term, Mr Portman was shifted to manage the White House Office of Management and
Budget. Moving him after less than a year in his office suggests, to
pessimists, that Mr Bush has given up any hopes of rescuing the round.
If so, there is every
reason to be gloomy. Despite early protectionist moves, such as introducing
steel tariffs, the Bush administration has pushed hard for trade liberalisation
in the past few years. In contrast the European Union has appeared divided and
ineffective. Its trade commissioner, Peter Mandelson, has so far failed to
persuade sceptical member states that the benefits of new export markets will
outweigh the costs of allowing greater competition at home, especially in
agriculture. Though some members, notably Britain and other north Europeans,
favour a more liberal approach, it has proved all but impossible to get
agreement from France and other more protected economies with vociferous
farmers. Europe’s general position has been to refuse any more lowering of
agricultural barriers until poorer countries agree to liberalise trade in goods
and services.
Nor is the G20 group of
developing nations giving much impetus to the talks. Led by India and Brazil,
the G20 is refusing to negotiate without deeper concessions on agriculture.
India, with its large population, may turn out to be a big problem. Its
government worries that competition from Chinese factories and American farms
represents too great a threat, while gaining more access to world markets is of
only limited attraction.
Other poor countries are
also unsure what they would gain. There is general talk of hopeful prospects
for poor farmers gaining greater access to rich-world markets. But the benefits
will not flow evenly from rich to poor. The World Bank estimates that removing
current agricultural distortions would produce a general benefit of more than
$300 billion a year. Relative to national income, poor countries would enjoy a
third more of this benefit than rich, industrialised, ones. However, nearly
half of that benefit would come from reforms by the developing countries themselves,
something governments might do anyway were it not for the serious problem of
the political pain the reforms are bound to cause.
The impasse first led to
the deadline for an agreement, which was originally supposed to be settled at
the Hong Kong ministerial meeting in December last year, to slip to the end of
April. Now, in theory, this is to be resolved by the middle of the summer.
Missed deadlines may be nothing new for the WTO, but these ones matter. There
is no further room for them to slide. The American government’s Trade Promotion
Authority, which forces Congress to accept or reject a trade bill without
introducing amendments, is thought to be essential if America is to take part
in talks. That authority expires in 2007 and few expect it to be renewed. Too
many American politicians are once again turning protectionist. Congress only
barely passed the Bush administration’s Central America Free Trade Agreement,
even though its impact on the American economy will be tiny compared to the
ambitions contemplated for Doha. And as it will take roughly a year to work out
the finer details of any world trade agreement, the outstanding issues must be
resolved early enough so the Bush administration can get a deal through
Congress.
What comes next?
In America, the
administration has nominated Susan Schwab, who was Mr Portman’s deputy, is to
take over. An experienced trade specialist, she says the American government
still considers Doha and other trade negotiations matter greatly. But some
observers suspect that Mr Bush’s team is worried, given already low poll
ratings, that talk of removing agricultural protection could prove unpopular in
some states ahead of mid-term elections this year. The chance for a significant
deal on agriculture may have been lost.
If Doha does die, the
focus of attention may switch to regional trade talks instead. But these are a
poor substitute for global deals reached through the WTO; indeed they may
distort markets in much the same way as national protectionism. The EU has
struggled to absorb its ten new members, for example seeing its services
directive—which was supposed to free up trade in services the way the EU has
already done with goods—considerably weakened. The prospects for regional
co-operation in the Americas are limited. Several Latin American governments
are now promoting a form of leftist nationalism that would not sit easily with
wider liberalisation. The gathering clouds, it seems, have no silver lining.
Doha's
last stand
Jun
22nd 2006 | WASHINGTON, DC
From The Economist print edition
Critical days for
the global trade talks
“WE'RE committed to a
successful round. And it's going to take hard work.” George Bush's comment this
week on the Doha round of global trade talks sums up the official line in most
capitals. Of course Doha must succeed, goes the mantra; yes, it will be a hard
slog.
The next few weeks will
determine whether this mantra means anything. Trade ministers gather in Geneva
on June 29th for a last-ditch attempt to agree on a “framework” for freeing
trade in farm and industrial goods. Negotiators have been haggling over such a
framework, which will define just how tariffs and subsidies are to be cut, for
more than four years. They have set themselves—and missed—endless deadlines.
So why expect a
breakthrough now? The only reason for hope is that all sides may finally
realise that they can procrastinate no more. Most trade talks drag on for
years. The Doha round cannot, because Mr Bush's fast-track negotiating
authority, which prevents a trade deal being unpicked by Congress, expires in
June 2007. To meet that deadline, an agreement must be reached by the end of
the year; its broad outlines need to be in place before negotiators pack up for
the summer (note that no one has suggested cancelling any holidays).
The trouble is that the
important parties are still miles apart. The path to a deal is no secret. The
European Union must offer bigger cuts in farm tariffs; America must promise to
slash subsidies more; and big emerging economies must reduce their industrial
tariffs. No one has yet offered anything new, but there are rumours that
America will offer bigger cuts in subsidies in Geneva next week.
Less noticed but equally
worrying are chasms between other countries. Among emerging economies, for
instance, there is a big row about how much special treatment to demand for
farm tariffs. Countries such as India and Indonesia want lots of exceptions for
their farm goods. Others, such as Thailand and Argentina, want far fewer.
In all, the latest draft
agreement on farm trade has around 700 pairs of square brackets on language
where there is still disagreement. Unresolved issues abound. Add in the World
Cup and the lure of the beach in August, and you have to be starry-eyed to give
the Doha round much of a chance.
An old
couple still rubs along
Jun
22nd 2006
From The Economist print edition
Europe and America
can't save the world together, but they can do useful things
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FIFTEEN years after the
cold war ended, the transatlantic alliance is often said not to be realising
its potential. America and Europe must act in step to do great things for the
world. This week's summit between the United States and the European Union in
Vienna fitted the pattern: “The world needs us to work together,” declared
George Bush, grandly. But there were also more realistic signals: Europeans and
Americans may be making their venerable partnership more modest, less
messianic—and possibly more effective.
Mr Bush left the Hapsburg
capital a bit like a ridiculed rich uncle at a family reunion, welcomed
insincerely to his face and belittled behind his back. Impossible though it
sounds, America's reputation has deteriorated with the European public in the
year since the president last visited the EU,
vowing to mend fences. And there are only fitful signs of renewed amity among
diplomats. American foreign-policy types have gone out of their way to be nice
about Europeans (“America supports a strong Europe because we need a strong
partner,” said the president's national security adviser recently), but most EU members have not returned the favour.
At the summit, the EU complained about America's human-rights record and
about Guantánamo, about American lectures on democracy and democracy-building.
Don't expect us to make the next offer to save the Doha trade round, said the
president of the European Commission, José Manuel Barroso: it's up to you.
How undiplomatic. Some
Europeans explain the mismatch— America is all smiles, Europe all frowns—by
saying America needs Europe more than Europe needs America (it has mistakes to
atone for, they say, so it must be a supplicant, while Europe can afford to be
brusque). Knowing the Bush administration, that is not a very plausible
argument. Anyway, there is another way of looking at things: Europeans are
being dragged kicking and screaming towards a new partnership in world affairs.
That is primarily because
both sides are facing similar economic challenges from emerging economies—and
are reacting in similar (sometimes similarly self-destructive) ways. For
Europeans, last summer's bra-and-textile dispute with China was a turning
point. Despite its comic-opera quality, it was the first time China's economic
impact on Europe became such an acute matter of public concern—as it has been
in America for years. Last winter's move by Russia's Gazprom to turn the gas
down during its dispute with Ukraine gave Europeans a harsh experience of
energy being used as a tool of power politics. That, too, is something America
understands perfectly well.
Meanwhile, under pressure
from their business lobbies, Europe and America have also emerged as the two
places with the biggest stake in setting global regulatory standards. At the
summit they agreed to push for stricter enforcement of intellectual-property
rights in third countries. They will not always see eye to eye. America, for
example, is furious about a recent EU
law on the chemicals industry in Europe which has consequences for the whole
world because of Europe's importance as a market. Depressingly, the two seem to
be making little headway in the Doha trade round, either between themselves or
with the Group of 20 largest developing countries. But Brussels and Washington,
DC, remain the twin regulators of
the global economy; that means they have as big an interest in co-operating to
modernise the rules as in competing to impose their own standards.
What about old-fashioned
diplomacy? Despite public differences, each side thinks the other is becoming
more like itself. Americans say Europeans are more aware of the advantages of
firmness: hence their refusal to fund Palestine's Hamas government directly.
Europeans think a chastened America is realising the advantages of soft power
and diplomacy. One example of working together is Iran—arguably the world's
biggest foreign policy challenge. Europe (or, to be more precise, Britain,
France and Germany) and America have played “good cop” and “bad cop” in
pressing Iran to forgo its nuclear programme. So far, they have managed to
ratchet up pressure on the Iranians without cracking their own alliance,
although it has not been easy.
Everyone knows, of
course, that their co-operation will last only as long as diplomacy does—if any
question arises of using force against Iran, the transatlantic chasm will open
up again. And there are other issues where Americans remain the ones from Mars.
The Bush administration wanted NATO to take
the first steps towards letting Ukraine and Georgia into the alliance;
Europeans said no. Vice-president Dick Cheney excoriated Vladimir Putin for his
anti-democratic impulses in Russia and Russia's “near abroad”; Europeans say
they have no choice but to keep in with the Kremlin which supplies two-thirds
of their gas.
Still worth the candle
But that does not mean
transatlantic co-operation is a sham. The old partners have to accept that they
can no longer set all the rules of the game—that is, make agreements that
everyone else must abide by. But as the world's largest trading powers, Europe
and America can still do a lot about economic regulation; along with the G20, they can set the world's trading rules—if (a big
if) they can agree. And in traditional foreign policy, they can at least
co-operate in a reactive way; the two can respond together to Iran's nuclear
programme, or Hamas's election victory. This is not trivial; it helps to build credibility
and momentum, which matters at lot in diplomacy.
Because of the cold war, the
old partnership is still held to an impossible standard: when Europe and
America co-operate, “we can do our best to make the world a better place,” said
Mr Barroso at the summit. In fact, with China, India and Russia as global
powers, the world no longer works that way. But where Europe and America do
co-operate, they can at least make themselves better off—which is hardly to be
sneezed at.