TCS Daily

WTO Is Stalled; Europe Is to Blame

By Alan Oxley - April 28, 2006 12:00 AM

The Doha Round is in trouble. Many of us have known this for a long time. Look at the list of articles on WTO on the "Editor's list" on the Financial Times online:

  • Doha Round goes in circles
  • US blames EU for Doha deadlock
  • Doha talks likely to miss deadline
  • Resigned response to limited world deal

Pascal Lamy, the Director General of the WTO told Trade Ministers not to bother to come to Geneva this week. The plan was to lock in some key terms by the 30th of April so the negotiations could be wrapped up by the end of the year. This was agreed at the big WTO conference in Hong Kong last December.

Mr. Lamy says there is no agreement but there is no deadlock. Perhaps that translates differently in French, but the result is the same. If it looks like a camel, smells like a camel, and so on, it is a camel. The negotiations are stalled.

What to do now? One report from Geneva is that trade diplomats plan to negotiate continuously until the end of June. If you wonder why they wouldn't negotiate all the way through to the end of the year, it is because July is vacation time in Europe. Trade officials know talk won't change the core problem. So there is no point disrupting vacation plans.

The core problem is in Europe. EU Leaders have ruled out making serious cuts in subsidies or tariffs on agricultural products. Jacques Chirac was always obdurate that the EU budget for agricultural subsidies would not be reviewed until 2013. With public rioting against a minor change to open up employment in the youth market, he is not about to change that position and invite French farmers to join in.

Some hoped Angela Merkel, Germany's new conservative Chancellor, would loosen the EU blocker. At her first outing at the Davos global business love-in this year, she called for WTO, IMF and the World Bank to cooperate to bind environmental protection and labor rights into global trade liberalization. Ugh. There's no free-market icebreaker here. Recall she heads a coalition with the Social Democrats.

Brazil's President Lula de Silva tried to encourage Tony Blair to call a summit of world leaders. But Blair knows that meeting and talking is not the solution. He did try to tackle the core problem and force agreement among EU leaders last December to review the EU budget for farm subsidies. Chirac blocked him.

The reality is that nothing has changed in the Doha negotiations since trade officials failed to set key terms to conclude the negotiations last July. They have just continued meeting and talking around the same point, including at the Hong Kong Ministerial meeting last December. It should not have been held. Predictably, little changed.

The Bush Administration's decision to move Rob Portman to the Office of Management and Budget (OBM) shows they expect little to happen in the Doha Round this year.

It is time to stop talking and get real. The end 2006 deadline to finish Doha must be shelved. This will remove some fig leaves and reveal the real problem. Europe is in no frame of mind to liberalize. This is not just in the WTO. A comprehensive proposal to open services markets inside the EU remains shelved since the failure of French voters to endorse the EU constitution.

A new deadline should be set and that should be the end of 2009. This will give the next Administration time to settle in and adopt an aggressive strategy to secure a real result. More importantly, Jacques Chirac is likely to be out of office by then. The EU budget is to be reviewed in 2007. The new deadline will give other nations who want trade liberalization three years to mount intense global pressure on the EU to change position -- which is needed.

If that doesn't work, we will need to start to think about how to use the WTO to keep world markets open and what to do about NGOs like Oxfam who want to turn the WTO into a social welfare organization.

Alan Oxley was Ambassador to and former Chairman of the GATT, the predecessor to the WTO and is Chairman of World Growth.



WTO and free trade?
If free trade is what we really want then the most direct route to that is removal of ALL state interference. A good first step would be to abolish the WTO which is nothing but more interference.
Remember this: Nations do not trade, individuals are the only actors and it is individuals and groups of individuals(coporations etc)that trade and do business.
Nations, under command of politicians, tend to bicker, politicize and engage in violence; individuals that cooperate and engage in volutary association and contract are the real promoters of a peaceful world.

No Kidding!
You didn't have to be Nostradamus or Edgar Cayce to see this one coming. I've said since they started taking about the EU that the whole thing was a big joke and that France would be the laugh-track. I wish everything else was that obvious.

Is no loaf really better than half?
Removal of all state interference is a nice end goal but if you try for it in the here and now, what you're going to end up with is no movement at all. A 10% tariff is better than a 100% tariff. A 1% tariff is better still and no tariff at all is the best. I'll take an incremental approach that doesn't require a voting majority of economic literates in every polity on earth to make any progress whatsoever. The all or nothing approach is objectively pro-tariff.

I think that as a matter of practicality, I must agree with you. However, as a matter of principle, I find that I am compelled to always speak up for the ideal state of completely free markets which requires secure liberty and property. Ideas have substantial consequences and if we fall silent, accepting what only is the "practical" as opposed to that which is right and pricipled, then we will have missed an opportunity that may be within reach.
Thank you for the reply.

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