Doha Round failure not an option for economic recovery

Shanghai Daily, China, April 06, 2010

By Pradeep S Mehta

THE imperative of concluding the Doha Round could not have been captured better by a recent remark by WTO Director General Pascal Lamy. “The Doha Round is not an island in a sea of alternative opportunities – failure on Doha would spill over into other present and future cooperation efforts, and not only in the trade policy domain,” he said at a recent meeting in Costa Rica.

This is a make or break year for the Doha Round. The initial euphoria of many members was dampened as far back as August 2003 when the Unites States and the European Union brought forward a small package on agriculture to take to Cancun. However, despite the anxiety of nations about the sustainability of negotiations, some significant technical work has been accomplished in the last few years. “Geographical indications” is an example on which there has been forward movement.

In the area of non-tariff barriers, which will be the major agenda in the future, there is a good hope of progress. In the same vein, scheduling of agricultural tariffs is progressing. A similar story of dynamism emerges in the matter of service sector negotiations.

The moot question is why countries have not been able to utilize this readiness to invest political capital to conclude the Doha Round and take the world economy to higher levels of well-being and productivity.

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Prima facie it may appear puzzling as studies have revealed that the overall expected gains from the Doha Round will result in a much bigger stimulus package than all bailout packages taken together. The answer to this puzzle lies in the greed of some nations overriding the option of bringing about a win-win situation with modest gains. The Doha Round if concluded would produce a minuscule increase in exports, far short of the US administration’s target of doubling exports over the next five years.

Instead of the Doha Round, the US administration has signalled its intention to follow a weak dollar policy to meet its targets. Some other countries trying to recover from the financial crisis and its recessionary effects have resorted to protectionism to rule out the import of adverse influences from the rest of the world.

Protectionism is clearly not the cure for recession; rather it can trigger the collapse of economic recovery that many countries (including some rich countries) have begun to experience since the last quarter of 2009. Such protectionism by developed countries will spell ruin for the poorest countries of the world in sub-Saharan Africa by denying them the use of trade as an engine of growth at a crucial juncture in their development.

We cannot wait forever to conclude the Doha Round as otherwise other more contentious and unresolved trade-related issues will continue to produce negative energy. As this article is being written, positive developments are afoot in all major capitals except Washington, where Obama hass unfortunately but temporarily exhausted his finite political capital in successfully pushing through a historic initiative on healthcare reform.

However, Obama’s tenacity signals good times for multilateralism. Having achieved a major victory in the domestic arena, the time has come for him to marshal his political capital for the facilitation of a major triumph in the multilateral arena by convincing his domestic constituency of the imperative of concluding the Doha Round.

The conclusion of the Doha Round in 2010 is an imperative for success on many fronts – global welfare reaching a new high through better exploitation of comparative advantages of countries and the reversal of decline in faith in trade as an engine of growth.

The author is the Secretary General of CUTS International. Bipul Chatterji of CUTS contributed to this article. The views are their own. Shanghai Daily condensed the article.

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