Why 10 years of Doha talks must end with free trade agreement

LONDON LETTER:Peter Sutherland and Jagdish Bhagwati say their review of the Doha trade talks is being published as an urgent warning of failure

IN THE eyes of admirers, Peter Sutherland is one of the architects of globalisation. Today, however, he is a worried man, believing that the rules built up over decades, slowly at first and then with greater speed in the 1990s, are in danger.

Known as the Doha Round of trade talks, the latest negotiations began in the Qatari capital in 2001, with three major areas of contention – agriculture, industrial goods and services. Ten years on, agreement still looks far off.

Four months ago, he and Prof Jagdish Bhagwati, the father of India’s economic miracle, were asked by British prime minister David Cameron and German chancellor Angela Merkel, along with their Indonesian and Turkish counterparts, to review the state of play.

Unveiling their report on Tuesday in London, the two men were blunt. “This was conceived four months ago as a mild corrective. It is being published as an urgent warning. They [the talks] have moved from lasting progress to imminent and permanent failure.”

The difficulty is that everything has changed since 2001. Back then, less than half of all economic growth came from the emerging world. Over the next three years, such countries will provide three-quarters of all such growth.

Western countries now badly want free or, at any rate, freer access to such markets. The priorities of developing countries have changed too, since they now fear food price increases more than they obsess about EU-US agricultural subsidies.

However, the old blocs have fractured too, bringing divisions between countries that would have been lumped together a decade ago. India and Brazil might be willing to trade concessions with the West, but they are petrified about giving the Chinese free rein.

Equally, Sutherland and Bhagwati warn that countries, scarred by the nightmare of the global financial crisis, have all simultaneously readopted the creed that manufactured goods are better than exports of services.

Describing this as “a manufactures fetish”, the two men also said that many involved in the trade talks believe free trade in services is not as important as free trade in goods, even though the former is technically far more innovative.

For Sutherland, who led the greatest transformation of world trade in the early 1990s during his time at the helm of the General Agreement on Tariffs and Trade and later the World Trade Organisation (WTO), globalisation is a force for good, despite the doubters.

“It has been abused and criticised, but it has brought two billion people out of abject poverty,” says the former Irish attorney general, who later went on to chair Goldman Sachs International and BP, along with the Royal Bank of Scotland.

Too often, he says, the WTO that he left behind “has managed to be regarded simultaneously – if not generally by the same observer – as both unaccountable and hopelessly democratic and indecisive in its decision-making”.

It has proved its worth though. Every major nation’s imports and exports between the end of 2008 and mid-2009 fell by double digits; recession affected everyone, but the world avoided 1930s-style protectionism that then drove the world over the edge of the abyss.

The Doha talks, if they can be brought over the line, offer “the most far-ranging and substantial package of trade liberalisation ever put within reach”, locking in and making “irreversible” the changes of the last decade.

However, if they fail, the consequences could be bleak.

Already, the United States has several bilateral trade agreements with Colombia and South Korea before Congress. Imagine the chaos, Sutherland warns, if one- to-one negotiations become the order of the day.

The isolationist tendency in Washington, never far from the centre, is now reviving, he fears, leading some there to put their faith in a free-trade deal with smaller countries in the Pacific Rim, “even though they do as much trade with the US as the Netherlands”.

Scathing about the lack of political leadership shown by the United States, Brazil, India and China, Sutherland says he is “for once” not critical of the European Union, saying that it had “gone as far as it could” on agricultural subsidies.

Bilateral deals, he believes, will exploit the poor, since the richer nations can always push for unfair advantage, but the practice is spreading. Last year, the EU signed a deal with South Korea. Others are in the works with Colombia and Peru.

Heads of state must become involved, he and Bhagwati now urge. “The Doha Round will die without explicit political leadership. Negotiators do not have the authority or legitimacy to make the final political compromises that are now required.”

Usually, such reports are dry affairs, but Sutherland and Bhagwati’s language reflects an almost missionary zeal and belief in free trade, mirroring the arguments made in the 19th century that it would promote “justice, fairness and peace”.

“Our leaders too often abandon the higher moral ground to the critics of free trade who arrogate to themselves the greater virtue when their opposition to free trade ought to cloak them instead in a mantle of unwitting wickedness.”