the doha deal was at first a simple one

8/2/2019 The Doha Deal Was at First a Simple One

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The Doha deal was at first a simple one: the United States and Europe would open their markets to agricultural trade, and

in return receive better access to manufacturers and service providers in markets such as China and India. This simple

piece of accountancy drastically underplays Western reluctance to dispose of subsidies from their trade arsenal, which

have traditionally been used to keep prices down by providing financial assistance to national producers. It also fails to

take into account the anxiety of developing countries, which by opening up their markets, risk the unloading of hundreds of

millions of dollars in subsidized surplus commodities into their markets, essentially destroying prospects for local farmers

and the rural poor.

The backbone of the Doha deal involves breaching developing countries markets for mainly farm produce, while at the

same time cutting agricultural subsidies in rich countries and having the wealthier of developing nations, such as India and

Brazil, lower the industrial tariffs they presently charge. This would ultimately work to lift underdeveloped countries out of

poverty by increasing global trade and local access to the world market. The current deal on the table would see average

tariffs faced by industrial countries on their farm produce exports decline from 14.9% to 12.1% and on manufactured

products from 3% to 2.4%. Tariffs faced by developing countries would fall from 14.2% to 11.5% on agricultural goods and

from 2.9% to 2.1% on manufactured goods, compromising significant reductions.

According to the Heritage Foundation, two major obstacles stand in the way of achieving these goals. The first is the

continued disagreement over the special safeguard mechanism used to protect domestic farmers in developing countries

from agricultural import surges. This is exemplified in countries such as Mexico, where the loosening of trade restrictions

has often swept away small domestic farmers, inundating local markets with cheap food imports. The second major issue

deals with the voluntary sector specific agreements to make deep cuts in manufacturing tariffs. This points to the sectoral

agreements that developed nations are seeking to reach with developing countries in an effort to reduce tariffs on

manufactured goods. These proffered deals affecting specific industries would most likely result in major tariff reductions,

but by taking part in sector-specific negotiations, the danger exists that developing countries will commit to agreements

before becoming aware of all the underlying factors. Thus, developing countries are well advised to fear commitment to

such industry-specific arrangements before precisely understanding what they will gain.

The Agriculture Issue

These impediments point to the broadest and among the most important component of liberalizing trade: the reduction of

agricultural trade barriers. Agriculture is arguably the most important issue for the continent; Latin America is not only a

huge regional producer but also the fastest growing trade partner of the U.S. Over the past 15 years, the U.S. has signed

reciprocal Free Trade Agreements (FTAs) with 11 countries in Latin America and has implemented nine of them. These

include FTAs with the Dominican Republic, Chile, and Peru, along with the Central American Free Trade Agreement

(CAFTA) and the North American Free Trade Agreement (NAFTA). The U.S. is currently awaiting congressional approval

for hard sought agreements with Colombia as well as Panama.

The conclusion of the Doha round is the next step towards integrating the Latin American hemispheric market with the rest

of the world, and most importantly with the U.S. and European Union. In crafting agreements to eliminate tariffs and

subsidies in developing countries, negotiators must tread lightly and be alert to the specific interests of these nations. The

U.S. is pressing for large concessions to be made from developing countries, because, according to Islam Siddiqui,

nominee for the position of Chief U.S. Agricultural Negotiator, the significant cuts that the U.S. will have to make in

domestic support and export subsidies must be matched by providing commercially meaningful market access for U.S.

agricultural products into the markets of developed and emerging economies.

However, FTAs in the past have sometimes severely damaged the livelihoods of the rural poor in Central and South

America, making them vulnerable to the coming onslaught of cheap imports. If implemented with care, new trade

agreements have the potential to allow for increased production and trade revenue in rich countries while also boosting the

economies of less developed producer nations. If, on the other hand, new trade agreements are reached without adequate

concessions for rural farmers, they could prove devastating to local economic output and prompt illegal labor migration in a

desperate search for new sources of income.


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In Latin America, agricultural liberalization has both its critics and supporters. The region has gone a long way to reform

and liberalize its agricultural trade policies, perhaps more than any other area in the world. However, various policy

reformers are calling for Latin American countries to espouse more selective and cautious management of international

trade, especially when pertaining to agriculture measures. This stems from the fear that the terms of trade might not be

advantageous to the region. Agricultural trade liberalization has provided some Central and South American countries with

opportunities to drastically increase exports, but has largely failed to bring substantial economic growth in its wake,

especially to the rural areas that need it most. As the Doha round relies on agricultural policy reforms, now is a crucial time

to consider how liberalization may either relieve, or contribute to, the food crisis Latin America is currently suffering.

According to Vicki Gass of the Washington Office on Latin America (WOLA), Unregulated trade liberalization in Latin

Americas rural sector is clearly a contributing factor to the current food crisis hitting Latin AmericaThe new

administration and Congress will have the opportunity to reconsider U.S. support for trade liberalization policies and move

toward financially supporting small producers who supply local and regional markets. However, this view is contested by

the belief that trade liberalization is, in fact, the most important way to combat the hunger crisis, by providing access to the

markets and the opportunity for increased profit. The International Food and Agriculture Trade Policy Council (IPC), a

multinational agency created to aid GATT in its mission to promote liberalized trade policies for food and agriculture,

strongly backs the liberalizing drive behind Doha, trusting that increased market access will mitigate the hunger crisis and

support the economic growth of developing countries. Carlo Trojan, Chairman of the IPC, stated, an open trading system,

including improved disciplines on export restrictions, provides more affordable, reliable access to agricultural inputs and

food at more stable prices.

Before Doha can be adjourned, both sides must make concessions in the agriculture sector. The Geneva WTO session on

September 30 addressed the response of the attendees to issues regarding food security, climate change, and the re-

launching of the global economy. Ajay Vashee, president of the IFAP and moderator of the session, stated that, in

essence, an Agreement on Agriculture should not block development and it is very clear that if we do not address food

security and climate change from a trade perspective, comprehensive progress on these fronts is impossible. To progress

on agricultural issues and ensure that all countries involved are comfortable with the outcome, Doha must guarantee that

Latin American governments can protect vulnerable segments of their populations and resources, as well as regulate their

own imports and exports. As well, these countries must have the ability to support the development of their national

industries and assure protection for farmers rights. A package of agricultural trade liberalization measures responding to

these concerns could spur development, bringing increased political stability to Latin America-U.S. relations, reducing the

impetus for economically-motivated migration and offering alternatives to rural farmers. This is what Doha must strive to

achieve as a development round.

Bilateralism vs. Multilateralism

The complexities involved in all countries joining together in an agreement on the nature of loosening agricultural

restrictions, and the existence of a number of FTAs between the U.S. and Latin America, raise the suspicion that perhaps

multilateralism is not the most productive direction for global trade. While the FTA model often has been criticized for

allowing the U.S. to control too many aspects of the trade dynamic, by excluding agricultural subsidies and antidumping

policies, and limiting access to key import sensitive products such as sugar and apparel, both supporters and critics will

be able to better question whether bilateralism remains the most productive path to pursue. Supporters of bilateralism

argue that, at the very least, bilateral agreements are attainable. As proven by the lack of progress these past eight years,

multilateral agreements might not be feasible at this time. On the other hand, critics of bilateralism charge that it is far too

complicated and cumbersome to tally the agreements and restrictions decided upon by individual states. Economists

assert that bilateral agreements are often a faade used primarily to boost the popularity of local politicians by offering

favorable treatment to a few chosen companies at the expense of others.

The Underlying Obstacles


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The regression to bilateralism may be one obstacle, among many others, hindering progress on Doha. The breakdown of

the round in July 2008 was blamed primarily on the failure of the U.S. and India to make concessions. However, the world

community points to the U.S.s apathetic approach as the key impediment to seeing much needed results. In November,

Pascal Lamy, head of the WTO, stated that we are nearly there, but there remain a few nuts to crack, mostly the U.S. He

stated that the deal is about 80% complete, and the remaining part is achievable with the cooperation of the U.S.

However, the current issues facing the Obama administration, including health care reform, the war in Afghanistan, and

the economic recession, have taken precedence over the stalled trade talks. According to a senior negotiator at the WTO

forum, right now the U.S. has no trade policy. The consensus a mong negotiators is that the main obstacle to progress is

the lack of engagement by the U.S. which is unwilling to work with the text of the agreements that have been in the mix

since 2001, when the Doha round was launched. Obamas hesitant approach to free trade policy is exemplified by the

Buy American clause in the economic stimulus plan, as well as his decision to impose a tariff on tires from China. The

world community needs the U.S. to actively participate in the talks, a commitment that most doubt the U.S. is prepared to

make. In response to these fears, Washington has reiterated its desire to conduct one-on-one talks with emerging powers

such as Brazil, India, and China, to encourage them to further open their markets to U.S. goods and services, and thus

proving to Congress the benefits of the Doha round for U.S. trade. According to a senior U.S. trade official, the biggestmistake we could make is to come back with a Doha agreement that would be rejected politically by the U.S. Congress.

U.S. officials collectively maintain that current texts in the agreement do not create enough export opportunities in

exchange for the difficult subsidy and tariff cuts they would be forced to make. Clearly, the U.S. will not agree to a deal

unless other countries generate increased access to their markets . Michael Punke, Obamas U.S. ambassador to the

WTO, argues that no deal is better than a bad deal. On the other hand, developing nations stress that the pressure to

open their markets to U.S. products and services, as well as give up intellectual property rights, is too much of a sacrifice

when they are supposed to be the main beneficiaries of the talks.

The global economic downturn represents another large setback to a successful completion of trade talks. At a time when

nations worldwide are suffering a noticeable shrinkage in their GDP, rocketing rates of unemployment and sharp debt

accumulation, economic planners in the developed world are hesitant to open markets and introduce further risk.

Meanwhile, the global recession has triggered a heightened sense of protectionism, and while leaders are adamant about

the desire to reach an agreement, they rightfully acknowledge the difficulties involved in selling a deal to political leaders

whose main concern is protecting domestic farmers and business.

According to Brazils foreign minister Celso Amorim, at this point of the game, we all have empty pocketsMany of us

and frankly I see no exceptionhave difficulties to live up to the efforts and reforms that the new commitments will

require. As a result of the financial crisis, world trade has been hard hit and thus has had to retract by a greater degree

than was the case during the Great Depression. Doha seeks to alleviate fears that further negative consequences wil l

result with greater trade liberalization. Re-opening markets remains an especially difficult task given ris ing protectionist

sentiment across the globe.

Rejection of the Corporate-Led Globalization Process

Underlying the consecutive failures of the Doha round is the growing rejection of the corporate-led globalization model and

the role of the WTO as a reliable international governing body. Many accuse the talks of furthering the WTOs corporate

agenda, maintaining that the actual Doha texts are aimed a t broadening the organizations existing regime and its hold

over the developing world. Protestors of the trade talks have made it abundantly clear that they find it necessary to identify

the fundamental underlying causes of poverty, hunger and disease that exist alongside soaring corporate profits, in order

to begin addressing extreme income disparities. In this light, the creation of new trade deals would only serve to deepen

existing problems without tackling the root issues of massive inequality and suf fering now afflicting poor regions.

Protestors argue that Doha hardly resembles a discussion centered on development, and that by further liberalizing

trade, developed countries will have done almost nothing to help poor countries recover from the catastrophic food and

economic crises. The Commonwealth of Nations Secretary-General Kamalesh Sharma believes that the talks have been


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unsuccessful due to a lack of clarification on exactly what concessions and benefits should be made to poor and

vulnerable nations. He notes that the round could only be successful if based on the criteria of, legitimacy,

representativeness, balance, fair-mindedness, transparency, effectiveness and equal returns. Based on these criteria, the

round has been, and continues to be, a failure. In order to renew the talks, Sharma has noted that the developmental

dimension must clarify exactly what developing states stand to gain.

A Conclusion Must be Reached

Eight years of consecutive failures in completing the Doha talks have led to g reat uncertainty regarding what will happen if

the round never concludes. Some adamantly insist that an agreement must be reached to protect the future of free trade in

the global economy. Others argue that the Doha talks, if completed, would still fail to boost the world economy, and that it

should be abandoned in favor of new and more modern negotiations. In conjunction with this mindset, it is important to

recognize that the projected gains from the Doha round are often overstated.

According to Sandra Polaski in Winners and Losers: Impact of the Doha Round on Developing Countries, any of the

plausible conclusions to the round would only produce modest gains, about a one time increase in world income of

between $40 and $60 billion. This represents an increase of less than 0.2% in current world GDP. Additionally, according

to World Bank estimates, the complete elimination of all merchandise trade barriers would boost the income of developing

countries by no more than 1%, and even less for developed countries. Moreover, Doha would only reduce these barriers,

not eliminate them completely. Given the promise of only modest gains, the hesitancy of developing countries to become

fully engaged is reasonable, especially when the adjustment costs of new trade deals will likely exceed any anticipated

returns.

However, it is essential that Doha be concluded, if only so that the world can move forward in providing global free trade

initiatives, if they deserve to be achieved. If the round is not wrapped up, it will set a dismal precedent for future trade

agreements. A satisfactory conclusion will predictably require downsizing by getting rid of items on the agenda that are not

crucial to success. It will necessitate bona fide concessions by developed countries to developing nations that ensure the

latters ability to moderate the regulation of their markets and to establish poverty abatement programs. These conditions

are especially important in Latin America, where agricultural liberalization policies will likely have the largest impact. Most

importantly, a conclusion will demonstrate the international communitys ability to work together in battling the worldwide

economic clump by producing profits that can be shared by all. While few would not argue that the hand is presently

stacked against the poorer countries, the Doha round demands the willingness and dedication of the international

community to come to a fair-minded agreement, with such a pact spelling out the direction of mutually satisfactory global

trade for years to come.

Emerging-market economies are those that are undergoing rapid rates of growth and industrialization but have not yet

reached developed status. Developing countries have not yet experienced these transitions World leaders are frustrated that their mandates to negotiators have failed to translate into a successful conclusion to the

round. Meanwhile, the negotiators either cannot or prefer not to admit that Dohas flaws will prevent them from closing

the deal, let alone ever addressing that fundamental question.

To avoid that outcome, negotiators should salvage any partial agreements they can from the round and walk away from

the rest. World leaders and trade policymakers should then immediately redirect all the energy, initiative, and frequent-flier

miles devoted to Doha into launching new multilateral initiatives to restore trust in the WTO and preserve it as a dynamic

venue for both improving and enforcing the rules governing international trade

The use of trade liberalization and reform to generate economic growth and help alleviate poverty formed the core of the

initiative. Negotiators initially identified 21 subjects for negotiation, including reductions in agricultural trade barriers, the


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elimination of agricultural export subsidies, cuts in trade-distorting domestic subsidies, major improvements in market

access for manufactured goods, and more open trade in services. Although economists have shown that countries would

benefit from undertaking such actions unilaterally, most political leaders and negotiators would prefer to trade their own

countrys market reforms for better access elsewhere.

When the negotiations collapsed again in the summer of 2008, none of the administrations criteria had been met.From almost the start of the negotiations, the rapidly evolving nature of the global economy had rendered Dohasdichotomy between developed and developing countries outdated and its negotiating structure obsolete. And even as itbecame obvious over the decade that emerging economies had become a dominant force in global economic growth and

trade, those nations perceptions of their consequent needs and responsibilities had failed to keep pace.Another series of draft proposals is not the answer.

As they currently stand, Dohas negotiating texts create two main categories of obligations -- one applying to the

developed economies and another applying to those characterized as developing countries, which make up the majority ofthe WTOs members. In fact, over two-thirds of the countries in the developing category have special breaks

built into their obligations, so that their obligations are dramatically less than even those of the countries meeting theofficial developing-country criteria. These include groups such as those designated as least-developed countries

and small and vulnerable economies. To the extent that nations such as Brazil, China, India, and South Africahave taken positions against further market opening in the name of developing countries, they are actually taking positionsthat go against the groups interests.

At Doha, these emerging economies have minimized their own difficult market-opening decisions by seeking maximumflexibility for developing countries. And they have found it easier to avoid confronting their own needs for greater access toone anothers markets by focusing on what they can all agree on -- namely, the market-opening obligations ofdeveloped countries. The result is what one African ambassador to the WTO once described as the elephants hiding

behind the mice.

The dilemma facing Chinas negotiators has been particularly acute. Chinas manufacturing prowess and export

drive are a phenomenon never before encountered in a major trade round, and fear of increased imports from China may

be the most unacknowledged reason behind Dohas continued failures. Although Beijing stands to gain tremendously

from a successful Doha Round, internal critics resist liberalization by pointing to the significant market opening that thecountry undertook when it joined the WTO in 2001 as yet another unequal treaty imposed by foreign powers. Combined,

these factors have made it difficult for Beijing to break with the other major emerging markets in Doha -- even if it might

have meant saving the round

In an effort to move the Doha Round forward, the WTO leadership has worked to establish key agreement parametersthrough draft texts. These texts have progressively narrowed and in some cases precluded the negotiation of specific andsubstantive product concessions -- trapping participants in almost a decade of negotiations about negotiations. In fact, thecombination in the framework of rigid formulas and ill-defined, largely nonnegotiable flexibilities put all the negotiators in a

defensive posture from the outset, left to assume that their own import-sensitive constituencies would face severe tariffcuts but unable to point to the kind of concrete gains in market access necessary to build domestic support for the tradetalks. Finally, the dramatic imbalance in the negotiating flexibilities available to the emerging economies as opposed to theadvanced economies has left both sides with little room to maneuver. Even if the emerging countries wanted to put more

on the table, their offers today would look like unilateral concessions, since the developed countries have nothing ofperceived value left to concede in return.

The uneven negotiating field is not the only structural roadblock that has undermined the negotiations. Multila teral tradetalks have traditionally called for the United States and fellow developed countries to take the lead in offering concessionsto jump-start flagging negotiations -- the idea being that a significant unilateral initiative by a large economy will encourageothers to reciprocate, thus paying dividends to all. Yet during the Doha Round, such efforts by the United States -- eventhose explicitly conditioned on a meaningful response -- have not been met in kind. And as time has passed, U.S. and EU

compromises have effectively been pocketed, forming the base line for the next set of demands.

The challenges posed by the negotiating structure are compounded by the fact that Doha mandates a single undertaking.This means that nothing is considered agreed until everything is agreed. This rule was designed to encourage countries to


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make tough calls in one sector knowing that they would be able to show gains in other sectors. However, in the context of

Doha, the rule has enabled individual countries to play the spoiler and seek lowest-common-denominator outcomes or tofree-ride on others concessions.

HOW TO MOVE FORWARDThe only way for world leaders to advance a healthy multilateral trading system now is to liberate themselves from thestranglehold of the Doha Round. Another series of draft proposals is not the answer.

Participants must close out the Doha Round in 2011. With leadership and goodwill, several smaller agreements could besalvaged from the existing negotiations. A top candidate for rescue is the trade facilitation package, the subject of aserious negotiation among the advanced, emerging, and developing economies. The package would reduce the costsassociated with moving goods across borders, and the Peterson Institute has estimated that it c ould contribute over $100billion to global GDP.

Other areas that might potentially be saved include the largely completed agricultural-export pillar, comprising proposedagreements on export credits, food aid, state-trading firms, and the elimination of export subsidies. Negotiators should alsoendeavor to complete two environment-related agreements, one cutting subsidies to industrial fishing fleets guilty of

overfishing the worlds oceans and the other ending tariff and nontariff barriers to green technologies in majorproducing and consuming countries.

These smaller elements of the Doha undertaking would deliver tangible near-term results. In theory, world leaders could

instruct that they be spun off and concluded this year. In practice, it is possible that in the current environment, not eventhese smaller deals can be achieved. But it is worth trying, because the Doha Round certainly has not delivered them. Andif the effort is made and then blocked, at least the media can shine a spotlight on the spoilers.

Above all, world leaders should not wait to determine whether they can conclude these before laying the groundwork tolaunch a new series of multilateral negotiations under WTO auspices. The large multilateral trade round format epitomizedby Dohas predecessors need not be obsolete, but WTO members will need a clean break from the current round toreestablish trust and regain momentum before attempting that model again. More narrowly drawn negotiations and small

deals with some commercial value may offer the best near-term approach.

One obvious avenue would be to expand the product coverage in the plurilateral Information Technology Agreement,through which every major producer and consumer in the world of information technology products, save for Brazil, has

eliminated their tariffs. Nations could initiate a similar multiparty accord for a package that includes pharmaceuticals,medical equipment, and health-care services, designed to reduce the cost of delivering health care. Such negotiations

would have to follow WTO rules, and the outcome would have to apply equally to all WTO members, regardless ofwhether they took part in the negotiations. Yet veto power over any given deal would be granted only to those members

who chose to negotiate and contribute, improving the chances of constructive engagement by most interested parties.

The international community could also draw from some of the more practical or innovative elements of existing bilateral ormultiparty agreements and seek to multilateralize them. These might include provisions governing investment,

transparency, e-commerce, services that contribute to entrepreneurial infrastructure, or even enhanced WTO intellectualproperty protections. WTO members could also commit to results-based business practice reforms, addressing suchinternational indices as the World Banks Ease of Doing Business Index and Transparency InternationalsCorruption Perceptions Index.

To reduce some of the negative effects of bilateral and regional trade deals, WTO members might consider guidelines toensure that such agreements have built-in docking provisions that allow like-minded countries to join them. Meanwhile,interested members should consider using focused WTO cases and dispute settlements to target poor-quality bilateral and

regional trade agreements that fail to meet the letter and spirit of the WTOs requirement that such agreements cover

substantially all trade. This would help reassert the fundamental principles of an open trading system, curb theproliferation of inadequate bilateral and regional trade agreements, and lay the foundation for devising better agreementsin the future.

The most significant contribution the United States could make to reestablishing WTO negotiations as a viable enterprise -- and offering a serious new deadline for action -- would be to obtain a renewal of TPA from Congress, even if limited toplurilateral and multilateral trade agreements. Along with an Obama administration push to achieve congressional

approval of pending free-trade agreements with Colombia, Panama, and South Korea, a renewed TPA would provideneeded credibility and make trading partners far more willing to listen to U.S. proposals and take risks in any future tradetalks.


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Meanwhile, the United States and other developed countries may want to review whether their trade-preference programs

for developing countries are benefiting the developing countries that need the most assistance and not creating adisincentive to swap trade concessions for access.

Once the dust has settled on the Doha Round, the United States and the other WTO members should dispassionately

study Dohas successes and failures to prepare for the next major negotiating exercise. They should explore simplerformulas that can lead to real negotiations on tariffs, nontariff barriers, subsidies, and services, with give-and-take thatbuilds momentum and ignites enthusiasm from pro-trade constituencies. Participants should also begin to address newissues, such as food security and the damaging use of export bans.

No future multilateral negotiation will succeed, however, without addressing the very real differences in economic strength,prospects, and capabilities within the so-called developing world. It is worth recalling that one of the WTOs mostimportant characteristics is the inclusion of these developing economies in governance and decision-making from its

origins as the General Agreement on Tariffs and Trade in 1948. In private, most emerging and developing countriesacknowledge that it is in their interest to bridge the increasingly artificial divide between developed and developing nationswhen it comes to global issues such as trade, international finance, and climate change. Escaping the confines of theDoha Round could hasten the emergence of new models. These might include multilateral negotiations designed to offer a

better balance between benefits and obligations, or they could include plurilateral deals that set a high bar but enable like -minded countries to participate.

Doha may be dead, but by accepting what everyone knows and no one wants to admit, the world can actually reinvigorate

and strengthen the multilateral trading system. The WTO has served the world well, but it risks losing its relevance as theDoha Round continues to drain its credibility and resources. Now is the time to liberate the would-be trade liberalizers andmove on.

the doha deal was at first a simple one

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