TCS Daily

World Protectionist Organization

By Alan Oxley - July 26, 2005 12:00 AM

Maybe it's time to put the Doha round of trade "liberalization" on ice.

That's a conclusion I've reached in the aftermath of a meeting of trade ministers at Dalian, China, aimed at jump starting the stalled negotiations begun at a session in 2001 at Doha, the capital of Qatar.

Then, the aim was to reduce trade barriers in four years. At Dalian, the hope was to move the thing toward a conclusion in 2006.

Only the talks didn't. No significant reduction in world trade barriers is in prospect. The choice before the World Trade Organization is to agree to do very little or to agree to nothing. Better to freeze things as they are than cover up the failure to bring down trade barriers with bureaucratic jargon, as was on display at Dalian.

The trade ministers there, for example, reported: "We have the necessary minimum structure on the export competition pillar already in place." Translation: The European Union and the United States will give up directly subsidizing exports of farm products. Sounds good, considering developing countries have said farm subsidies in the EU and US were damaging their agricultural trade, right?

Only the EU and US don't do much direct subsidization of exports any more. Instead, they spend billions of dollars on general subsidies to farmers. And there was no agreement at Dalian about doing anything serious about that.

Don't get me wrong. Trade protectionism is high, particularly so in the developing world.

The World Bank reports that tariffs on industrial goods in world trade are about three times higher in developing countries than rich countries, 15 percent compared to 5 percent. It would be good to get these barriers down.

But cutting these tariffs is not even directly discussed in the Doha Round, as if it is embarrassing like the guest who belches at the dinner table. Indeed, these trade negotiations are described by what they do not cover "NAMA" - Non Agricultural Market Access. (I have never worked out why).

And how are things going there? More jargon from Dalian: "Towards the end of the discussion, there were some indications that the possibility of a Swiss formula with a couple of coefficients that would accommodate specific concerns could be further explored." What? The meaning is this: things are going no where. The "coefficients" to "accommodate specific concerns" amount to a large number of developing countries believing they should not cut trade barriers - in short, not liberalize trade, the whole point of the trade talks - at all.

These countries, egged on by Oxfam and other anti-trade NGOs, argue a mercantilist belief that pulling down high trade barriers in rich countries is the key to poorer countries' growth.

That is simply not so. Poor countries won't increase trade unless they can compete. As the recent opening in the EU and the US garment and textile markets has shown, if they aren't as competitive as China, they will not increase trade. And their trade barriers keep them from being competitive.

A competitive services sector - efficient transport, distribution, telecommunications and banking -- is increasingly important to growth. Most developing countries just don't get it. Instead, they think barriers to efficiency make sense, taking their cue from France's recent insistence that the EU's internal program to liberalize services be frozen.

No wonder the Dalian Ministers concluded about this, in perhaps their clearest statement: "offers (to cut barriers) so far on the table still fell short of our expectations".

But what is new, really? Things have been going badly in the Doha WTO negotiations since they started. Negotiators have tried to create procedural devices to move things along for a meeting of WTO ministers scheduled in Hong Kong in December. The Dalian meeting was supposed to shape an "approximation" for an agreement that could wrap up the new trade round by the end of 2006.

Instead of doing that, it has retreated into jargon that itself signifies an erosion of the very core idea and purpose of the WTO - trade liberalization. Instead of calling for that, the Dalian statement says, "The development dimension should be substantively integrated in all area of the negotiation."

And what is "the development dimension"? To a large number of developing countries, and in particular African members of the WTO, it means "we do not cut trade barriers."

Unfortunately, rich countries pander to this protectionist, mercantile sentiment by going along with it. They give poor countries "preferential access" to their markets. But rather than helping poor countries, such preferential access harms them. It leads to economic adjustments in poor countries that lead them to become as inefficient as the industries the rich countries protect. Overall, the spread of inefficiency makes all nations poorer.

The Director General of the WTO, Supachai, should rail against this "development dimension," but he instead is reportedly in dialogue with NGOs, like Oxfam and the Third World Network, that push the idea, giving them the run of the WTO headquarters.

The basic problem in the WTO is that there is no negotiation on what matters - reducing protection. Instead, people fiddle around and give those who want to make mischief a platform to do so. Until it is clear there is true readiness to liberalize trade, not manage it, the Doha Round should be put on ice. No result would be better than the poor result "of integrating the development dimension" into agreements and encouraging protectionism rather than reducing it.

Alan Oxley is host of the Asia Pacific page of Tech Central Station and a former Ambassador to the GATT, the predecessor of the WTO.


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