The Doha round of WTO trade talks is dead. On Monday, negotiators for the main trading blocs declared the talks “indefinitely suspended” and went home. In truth, the Doha talks have been on life support for a long time—revived now and then only by the happy talk of promoters and politicians. But the underlying political and structural obstacles to a new WTO treaty were insurmountable.
The Doha round was launched in 2001—in Doha, Qatar—as a “development round”—that is, it was intended to benefit developing economies. Unlike previous WTO rounds that had focused on trade liberalization in goods—Doha focused primarily on agriculture.
At issue were proposals to liberalize the global trade in agricultural products. The stumbling blocks to an agreement proved insurmountable: ending US farm subsidies; eliminating EU tariffs on agricultural products; and the continued need of countries like India for market protections against competition from exports from the rich nations.
Most farm groups, most global justice organizations and NGOs, and much of the developing world opposed the direction of the Doha talks almost from the outset. In 2003, for instance, developing countries walked out of the ministerial meeting in Cancun to protest rich country proposals. But some emerging countries with strong farm export sectors, like Brazil, remained committed to a deal and sided with the US in an effort to force the EU to cut tariffs and open up European agricultural markets. A few NGOs like Oxfam also pushed for a deal claiming it would help emerging economies and their rural populations. Meanwhile, the Bush administration made some noises about cutting farm subsidies to get a deal, although Congress probably would have had other ideas.
In any event, Bush’s comments were largely for show: the neo-cons in his administration never liked the multi-lateral rule-based neo-liberalism represented by the WTO. They prefer the brute force of direct trade negotiations with individual nations and regions. The power imbalance between the US and Central America, for instance, insured that CAFTA would be more to the US’s liking than almost global deal.
In the end countries like Brazil and NGOs like Oxfam dropped their support when it became clear that the US would not take the steps needed to make a deal that was acceptable to the developing world.
The collapse of the Doha round was fitting and inevitable—in today’s world it is far-fetched to imagine anything that would benefit the world’s poor could emerging from WTO negotiations. But the defeat of the Doha round ushers in a very different set of challenges. We may be entering a post-WTO period in the global economy. Not that the WTO will disappear entirely, that is unlikely, but rather it may become much less central to global trade.
The collapse of the Doha talks brings to a boil a crisis in the world trading regime that has been simmering for years: the decline of the post-war multi-lateral trading system and the rise of bi-lateral and bi-regional agreements know as “preferential trade agreements” or PTAs.
The post-war trading system was based on the so-called “most favored nation” (MFN) principle. Each nation would extend to all nations the terms that it offered its most favored trade partner. In principle, no discriminatory tariffs were allowed. The MFN principle was enshrined first in the General Agreement on Trade and Tariffs (GATT) established in 1948 and later in the WTO which was founded in 1994.
In reality, both the GATT and the WTO had many loopholes which allowed for exemptions. Over time, the Most Favored Nation Principle upon which both the GATT and the WTO were based was severely undermined. In its place a host of “preferential trade agreements” (PTAs) have evolved. As the name suggests, these PTAs allow preferential treatment to signatories to the agreements rather than “most favored nation” status to all trading partners. A 2005 WTO report described the situation this way:
[N]early five decades after the founding of GATT, MFN is no longer the rule; it is almost the exception. Certainly, much trade between major economies is still conducted on an MFN basis. However, what has been termed the “spaghetti bowl” of customs unions, common markets, regional and bilateral free trade areas, preferences and an endless assortment of miscellaneous trade deals had almost reach the point where MFN treatment is exceptional treatment. Certainly the term might now be better defined as LFN, Least-Favored-Nation treatment.
Out of a total of 300 PTAs notified to the GATT and the WTO up to October 2004, 176 were notified after January 1995. Of these, 150 PTAs are currently in force, and an additional 70 are estimated to be operational, although not yet ratified. By the end of 2007, if PTAs reportedly planned or already under negotiation are concluded, the total number of PTAs enforced might well approach 300.”
[As a result] , “[t]he reality today is that the WTO presides over a world trading system that is far from the vision of the architects of the GATT. This is best illustrated by reference to the EU which now has its MFN tariffs fully applicable to only nine trading partners.”
In practice, of course, the rich countries and the global corporations have always used all types of agreements—bi-lateral, regional, or multilateral—to advance their interests as the times and circumstances required. They continue to do so. Indeed, regardless of the trade regime, the process of globalization proceeds at full tilt affecting more aspects of social and economic life.
The crisis in the world trading system that is exemplified by the collapse of the Doha round, by the increased assertiveness of the developing world, by the proliferation of PTAs like NAFTA, CAFTA, and the scores of other bi-lateral and regional treaties pushed by the US and the EU must be understood in the context of today’s highly volatile political and economic environment. Global economic stagnation; US unilateralism; increased capital mobility; corporate outsourcing; an unstable world financial system; a sharp drop in the US dollar; the increased rivalry between the US and the EU; and the emergence of China as an economic powerhouse are all part of a new and much more complex period in world affairs than that which existed when the WTO was implemented in the 1995.
The developing world and their labor, political and civil society allies in the global justice movement succeeded in killing the Doha round. Now they need to take the essential next step and develop an alternative global economic program that benefits all of the people of the world and not just wealthy elites.
The rich countries will seize on the failure of Doha to pursue “competitive liberalization” policies—to use their economic might to negotiate PTAs favorable to corporate interests—as the price of market access. Global labor movements and civil society organizations need to mobilize to resist this race to the bottom.
It won’t be easy. The temptation of governments to seek short term gains through bi-lateral and bi-regional agreements is compelling. But if the developing world sticks together they may be able to force better terms. Unions and civil society organizations should work to develop a set of minimum standards for any trade treaties that are signed. They may find willing partners in the new progressive governments of Latin America. And they can take heart in the fact that the developing world did stand together to reject the Doha round. Still, if they don’t continue to stand together, stopping the Doha round will be a pyrrhic victory.