Trade talks crisis

The suspension yesterday of the Doha round of trade talks under the auspices of the World Trade Organisation does not signify…

The suspension yesterday of the Doha round of trade talks under the auspices of the World Trade Organisation does not signify complete collapse, but it will be very difficult to reactivate them in the short or medium term. This matters for international economic growth, global trade and world development aimed at eliminating poverty.

The three dimensions are intertwined in the talks, and some of them will continue to be negotiated, even if they cannot be implemented short of an overall deal. In the same way, growth and development have a life of their own independent of the WTO bargaining. One estimate says worldwide merchandise exports (excluding services) increased from $6.45 trillion in 2000 to $9.12 trillion in 2004. A successful round would certainly sustain that rate of increase. It would give underdeveloped states greater access to world markets, and a much better chance of escaping poverty than relying on development aid. And it would stimulate economic activity by reducing subsidies and extend existing markets. These are all desirable and necessary objectives.

The talks, which began in the Qatari capital of Doha in 2001, have failed to deliver on this promise. Much progress has nevertheless been made towards an agreement, including reduced agricultural subsidies among the richest states, lower tariffs on a large range of commodities and an intensive effort on development issues. What has been put on the table is likely to remain there awaiting the renewal of negotiations.

The failure to conclude them now is above all a failure of political commitment and will. The group which concluded in Geneva over the weekend that a deal is not possible now, comprised the European Union, the United States, India, Brazil, Japan and Australia. It had been summoned in the expectation that the Group of Eight industrialised states meeting in St Petersburg would have given it a mandate to conclude. That did not happen. Largely this is because the US side in the talks insisted there was not enough reciprocal advantage, especially in access to EU markets, to justify politically sensitive cuts in their system of agricultural subsidies. Looming congressional and presidential elections in the US make an early renewal of the talks unlikely.

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The danger is that inter-regional trade disputes will intensify without an agreement and that bilateral deals between the EU, Asia and US will bypass the WTO. Despite the shortcomings of the Doha round in terms of substance and priorities it remains the most important and inclusive framework for dealing with these issues.