So while the cable news guys continue to explore the intricacies of the Andrea Yates case and the sexual orientation of N’Sync members, there are a few minor issues going on elsewhere in the world, including the collapse of the WTO’s latest round of trade talks in Geneva. This didn’t come as an enormous surprise to the professional observers. In fact, delegates from one nation (India) declared the talks to be a failure before they even started. It was further unsurprising because it was a simple repetition of what’s happened at several recent rounds of trade talks, most notably at Cancun three years back.
Trade talks have changed. Back in “ye olden days” when delegates arrived on ox carts (about the early 1990’s or so) you could be sure that trade talks would succeed. That’s because the “Washington consensus” always won. The United States always got its way, with the aid of the European Union and Japan. Acting as a block, they managed to fight against subsidies and tariffs in poor countries, while maintaining similar subsidies and tariffs for themselves.
That system has broken apart these part few years for several reasons. One, the USA, the EU, and Japan are no longer cooperating with each other. Second, America’s foreign policy arrogance has created a remarkable level of hostility towards the USA. But the big reason is changing power dynamics. Countries like India, China, Thailand, and much of Latin America are more economically powerful. They won’t role over and obey the dictates of the first world anymore.
Anyone who believes in the principles free trade has to be happy that the power of the ‘axis of hypocrisy’ has been broken. Yet it’s unclear where we go from here. Clearly trying to make almost 100 countries agree is nearly impossible. There are too many conflicting interests, too many old hostilities. There’s no way that all those countries would agree to one set of rules and trust each other to abide by them.
The world can’t go on trying and failing at these talks. Trade is important. More important than gay rock stars, more important even than wars in the Middle East. The ability or inability to move stuff freely around the globe will determine the fate of the world.
I think you overestimate the importance of commercial policy. War is much more important.
The failure of Doha has been coming a long time. Some of this goes back to the damn fools who put services on the agenda in Uruguay.
PArt of the story is that for a lot of Western countries, protection is just not that important any more. As a BotE idea, look at the size of the distorted sectors, then look at the square of the wedge. These have fell a hell of a long way under the GATT. Those that are left are either trivial or have proved too difficult in the past.
But the general retreat from multilateralism is part of the story too. It is a crying shame to see the rubbish bilateral agreements proliferate.
Hmm, that post was made in haste. Sorry if it’s a bit cryptic - “BotE” means “Back of the Envelope”. Ask for a dejargoning if anything else is unintelligible.
Another important thing here in the context of Doha being the “development round” is that in practice most countries negotiate as though they were neo-mercantilist. That is, they think of exports as a good thing and imports as a bad thing. Economists - or at least the overwhelming majority of us - think that the only reason to export is to import.
It’s not hard to understand trade negotiators act this way, although it is a bit weird for the people who are behind the push for less trade intervention until they realise that the actual negotiations are usually conducted by lawyers/ diplomats who think in neo-mercantilist terms. From a political economy point of view, increased access for “our” exports creates obvious winners and non-obvious losers whereas “concessions” for imports create obvious losers and non-obvious (or non-powerful) winners.
The magic of multilateralism has been that everybody has to make “concessions” and that whilst the concessions can be politically sold as costs of doing the deal, they are really where lots of the benefits are. It’s a way of circumventing the power of import-competing vested interests. (In reality the actual cuts in protection have been rather less than you might expect, because the rates cut are bound rather than applied duties.)
It’s pretty plain how this makes the Doha agenda really tough: for developed nations it seems mostly “concession” time and the quid pro quo is tough for developing countries to swallow. Whilst cutting farm subsidies in rich countries might be a good idea for their domestic economies, it’s liable to be very painful politically. For developing countries, there are three problems:
- Because of various disciminatory agreements (between developed countries and their former colonies, for example) some developing countries would be losers from liberalisation in agriculture.
- They don’t want to give up their own protection.
- The perceived upside for developed countries has no hidden upside for developing countries. Whilst reduced import prices for manufactured goods in developing nations is politically painful, there are winners. That reduces the political cost of doing the deal. But when what is being asked involves intellectual property, that can mean than local producers are going to be hurt and local consumers will have to pay a higher price. If this is confusing, think pirated DVDs. If we were talking cutting tariffs on imports of DVDs, local producers would be unhappy but local consumers would gain from lower prices. But if we are talking intellectual property rights enforcement (or other things in the trade in services agenda) local producers would be screwed and local consumers face the prospect of higher prices: politically the pain of such a move is going to be higher.
Add to that the understandable feeling of developing countries that they’ve been royally screwed and an inflated sense of what they stand to gain from agricultural trade liberalisation; the EU’s inability to come to grips with the farm lobby; the US administration’s political debt to States with protected/ subsidised agricultural sectors; and Washington’s general abandonment of multilateralism in both economic and non-economic spheres - it’s just hard to see room for a deal.