Irish interests are best served by Doha round being rescued

Any kind of uncertainty surrounding global trade is bad news for Ireland,which is so dependent on a stable world economy, writes Cliff Taylor, Economics Editor

As a small open economy, the Republic benefits from a stable and growing world economy and increasing trade and investment flows.

The failure of the World Trade Organisation talks in Cancún now raises questions about the future rules governing trade and could damage international growth prospects, depending on what happens over the coming months.

And ironically the talks collapsed on the same time Sweden voted no to the euro. By postponing possible British entry, this provides another long-term uncertainty for Ireland, which entered the euro zone in the expectation that our biggest trading partner would follow before long.

Periodic crises are not unusual in world trade talks - the last round went on for eight years and appeared to be on the brink of failure on a number of occasions. However, the Doha round of talks, launched in 2001, now appears to be in real danger of collapse.

The prospects for saving the round will only become clear over a period of months, with the next major assessment due in mid-December. Irish negotiators will hope that any effort to restart the talks does not involve further concessions being offered on the reform of the Common Agriculture Policy.

The Cancún talks demonstrated clearly the pressure on the CAP - with the developing countries pushing for an end to export subsidies and deep cuts in other supports. Yesterday Canada was suggesting that big farm exporters and developing countries put further pressure on the EU and US to reform in this area. This threatens farm incomes in Ireland and could hit exports from parts of the food sector - such as the beef industry - to non- EU markets.

For the wider economy, the threats from Cancún are also significant. A Forfás report on trade issues pointed to the "subtle but profound" impact of the trade process under the GATT, WTO and EU membership. Trade has grown from 80 per cent of GDP in 1973 to 180 per cent now - driven by exports both to other EU countries and outside the EU. In turn, this has attracted huge flows of inward investment, with 140,000 people now employed in multinationals here.

The failure in Cancún does not mean that this process of globalisation of trade and investment flows is going to grind to sudden halt. However, it does raise fundamental questions about the way international trade is overseen and about whether the process of gradually opening up markets on the basis of multilateral agreements - which has continued for more than 50 years now - can be continued.

These are obviously central issues for our long-term economic interest and create an unwelcome uncertainty both in terms of the overall economy and for different sectors.

Businesses here - both multinational and indigenous - had hoped that Cancún would clear the way for the reduction of a range of barriers to trade, many of which hinder those exporting outside the EU. Now the danger is that instead of more liberalisation, we head towards a new trade environment based on bilateral haggling and possibly threatening increased trade disputes and more barriers in some areas.

This may be avoided, if the round can be rescued, but the odds on this are not yet clear.