Is the WTO no-deal a big deal?

29 July 2008
Massimiliano Calì
Comment
The trade talks have collapsed over the issue of Special Safeguard Measures (or SSMs) in agriculture. This measure, which allows countries to protect specific agricultural sectors from import surges, was not even among the hottest negotiating issues. And neither India and China (the two most interested parties in the negotiations) have used SSM yet. This suggests that the talks could (and probably would) have collapsed over any other (more controversial) issues, such as tariff cuts in manufacturing products (NAMA), farmers’ subsidies, market access for tropical products, geographical indications, etc.

The bottom line is that the (real) interest for a far-reaching agreement to liberalise multilateral trade regimes has quickly been vanishing in the face of faltering global economy. Countries probably fail to see any conspicuous returns from the negotiations, while fears of potential backlashes from them have become increasingly important. To be sure, given the proposals on the table it’s hard to blame negotiators for a loss of interest. Most of the proposals discussed during the Geneva talks would have hardly had any real effect. Tariff cuts in both manufacturing products and agriculture would have been negligible if anything. This is due to a combination of much higher bound than applied rates (and cuts are operated on the former), low tariffs in most sectors and countries, sensitive lists of products to be excluded from the liberalisation. Even what has been considered as the boldest proposal in these talks, ie the reduction in US farmers’ subsidies, would not have represented a real reduction in subsidies. The US proposal entailed a maximum commitment to US$ 15 billion (against the current US$ 48), which is twice as much as the current actual level of subsidies.

Importantly, the proposals discussed in Geneva would not have yielded any real benefits to most developing countries, including the group of least developed countries, which should be the real beneficiaries of the Doha (Development) Round. The poorer developing countries have been officially sidelined last Wednesday when a group of seven major negotiating countries (which included only Brazil, India and China of the developing countries) was finally left to discuss in the negotiating room.

If the real effects of a no-agreement are not likely to be important, is all this noise about the Geneva failure justified? Yes. Perhaps. To the extent that an agreement in the WTO would have strengthened (or at least would have not weakened) the multilateral trading system, the no-agreement may well be a setback. Such a system binds countries to respect a certain set of trading rules, for example preventing possible temptations towards self-sufficiency in the face of difficult domestic and international situations. This is not to deny the importance of domestic policy space. Allowing for moderate policy space is welcome to satisfy particular domestic needs, but a weak multilateral trade regime may allow for an abuse of domestic policy, which may promote protectionism. This is especially the case in a time of adverse international economic environment, as the current one.

That is the main global public good provided by the WTO. The main worry is that global public goods are often nobody’s ‘good’ in times of crisis. As yesterday’s failure demonstrates.

For a view from Sheila Page, visit her latest blog: Collapse of the WTO trade talks: A pity, and potentially a problem, but not a disaster

Authors

Massimiliano Cali
Research Associate
Massimiliano’s current research focuses on the relation between trade, development and growth on [...]