It is time to close the Doha Round: with or without a deal

30 November 2009
Comment
As trade ministers move to Geneva for the three day WTO Ministerial meeting, some of them may start wondering what exactly they are going to discuss there. This is no trivial question, given that this is the first ministerial meeting that will not deal with the negotiations during the current Round. After over eight years of fruitless negotiations, this continuous lingering of the negotiating circus is disappointing to say the least. However many observers, including within ODI, suggest that waiting for major WTO member countries to get their acts together and strike a deal is worth the hassle. There are three main arguments in favour of waiting:

  1. The potential cost of not reaching a deal is high as stricter trade rules – particularly lower tariff bound rates – are necessary to prevent the assault of the protectionist bandwagon, even more so in a time of crisis as this.
  2. Although not as large as those who launched the round had hoped for, the actual benefits of concluding a deal are still non negligible.
  3. WTO members need to conclude the current round in order to be able to move on to more important trade negotiations.

Let me scrutinise each of these arguments in turn.

As I have argued elsewhere there is no real evidence of a ‘protectionist juggernaut’ during this crisis, and in recent months the recourse to protectionist measures has decreased steadily. This confirms that governments these day do not tend to use the ‘water’ in their tariffs (the difference between WTO bound and applied rates) to protect their markets.

If the costs of a failed round do not appear to be impressive, nor do the potential benefits of a deal. Starting with the ambitions of deepening the multilateral trade liberalisation process much further (especially to benefit developing countries), the round has lost a great deal of its ambition along the way and what is currently left on the table to discuss does not seem to stimulate countries, or their businesses’ appetites. As reported by the World Bank the major benefits of a deal in absolute terms would be related to the reduction in tariffs, but even these would be fairly low. The average applied rates in agriculture would decrease from 14.5% to 11.8% in the most realistic scenario, while cuts in non agricultural goods would be much lower. The only relevant potential benefits of a deal may accrue to some developing countries, such as some of the LDCs if their request for 100% duty free quota free market access in non agricultural products is accepted.

It is, therefore, not surprising that other trade-related themes, not currently included in the negotiations, have become more relevant than those being discussed. The world looks now remarkably different to the way it looked at the start of the round in 2001 and a number of new trade-related issues have made their way up to the top of the trade agenda, such as the relation between trade and environment, from trade in environmental goods to carbon-based border tax adjustment, trade in energy, aid for trade and the temporary movement of persons to provide services (mode 4). All of those issues would benefit from the development of specific sets of rules and commitments at the multilateral level. Given the importance of these issues, if the third argument of those in favour of waiting for a positive conclusion of the round is right, then this alone would probably justify waiting patiently. However, if one does not believe that a failed round may necessarily jeopardise the credibility of the WTO, then concluding the Doha Round speedily is probably more important than reaching an agreement. This would imply that ending the current round without a deal (i.e. scrapping the negotiations) or at least with a ‘Doha-lite’ deal (i.e. agreeing only in some areas relevant for developing countries) is more desirable than keeping it alive for much longer. As ministers make their way to the WTO building for yet another meeting without any agreement in sight, they would do well bear that in mind.

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Authors

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