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Further thoughts on the wrecking of the Doha Round

August 4, 2008

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Scoopit!

Why can they not tear down the barriers?

Why can they not tear down the barriers?

Philip Stephen has a thoughtful article in the FT on the failure, or stalling as he puts it of the Doha Round. He thinks the parties were wearing blindfolds. Adam thinks it was more a case of demonstrating the truth of the saying ‘there are none so blind as those who will not see’.

The Doha trade round has stalled. Again. In so far as anyone pays much attention, they will probably struggle to stifle a yawn. That is a pity. The deadlock will not see the international trading system crashing down about us. Yet the failure is more than a missed opportunity. It underscores a dangerous inability among rich and rising nations alike to recognise their individual in their mutual interest.

He notes for example the insecurity of the French:-

Some, of course, are celebrating. Nicolas Sarkozy casts himself as the French president who will make his country’s peace with the 21st century. The embrace of modernity, though, must not extend to anything that upsets a hugely costly agricultural policy designed for the 1950s.

Mr Sarkozy’s choice of words gives the game away. A truly confident leader would talk about meeting the challenges of globalisation: about equipping France, and indeed Europe, to draw further prosperity from an integrated world economy.

Instead the French president’s language betrays temerity. In spite of all its manifest strengths – economic, technological, cultural, political – France, it seems, cannot stand on its own feet. Europe’s leaders must “protect” the continent from the ravages of globalisation.

Mr Stephen notes the painful reality:-

the truth is that most of the big players in Geneva were happy to see the process collapse.

Among rich nations, domestic politics militate against trade liberalisation. The wealthier emerging nations meanwhile are happier to keep the privileges they have got than see them extended to those lower on the development ladder. Doha has been a story with few heroes; though, in parenthesis, Britain’s otherwise beleaguered prime minister, Gordon Brown, was among the small minority.

In the event, hopes of a deal this week were scuppered by a stand-off between India and China on one side, the US on the other. The rising powers of Asia wanted a special protection mechanism for their farmers. The US refused.

In passing he takes a swipe at the NGOs who universally blame the Americans for everything. As Stephen points out:-

The developing world scarcely speaks as one. India and China are as concerned to protect their markets from poorer nations as to keep out US multinationals. Brazil, another of the so-called Brics, was among the small group wanting a deal. Uruguay sided with Washington in demanding China and India open markets. The losers from the impasse will not be the prosperous, but some of the poorest.

Quite. he goes on to point out that taking the view that the expected benefits were small in the relative context of the entire global economy is not the right way to look at this issue.

For the past few decades the opening of markets and growing economic interdependence have been a force for geopolitical stability as well as of rising economic welfare for the world’s poorest. We learned at the beginning of the 20th century that globalisation offers no guarantee against war. But mutual economic dependence does provide a powerful incentive to settle political differences.

The present strains on the world economy, notably the imbalance between supply and demand of raw materials and a rising protectionist clamour threatens this progress. And it threatens it at a moment of huge geopolitical upheaval as the global order adjusts to the emergence of China and India as great powers.

The old order has not passed yet, but we are witnessing the changing of the guard. This factor is one that Adam believes we need to take further account of, not just the emergence of these two nations, but the fact that for very many years these two nations have been in competition with one another. It is one of the reasons that Adam thinks that NZ needs to build strong relations with India as well as with China.

The collapse of Doha, however, speaks to the failure of both sides to own up to the world as it is. On the side of the rich countries, particularly the US but no less many European nations, there is a refusal to acknowledge that globalisation no longer belongs to the west. In previous trade rounds, the rich nations set the rules and the rest could take it or leave it. No longer.

As Bob Dylan wrote ‘the times they are a’changing’ – consequently we need to recognise that fact.

We need to understand in NZ that we are now more likely to be in the zone of influence of India and China as the regional super powers and frame our trade and other policies accordingly.

Equally, the new powers now give the impression – and you see this as much in India as China – that they want to be free riders. They are happy to profit from the rules, but unwilling to support the architecture of the system. Doha, in this respect, saw both sides in blindfolds.

India and China need to recognise that if they want the status they seek then they must accept the obligations which come with such status and play their roles accordingly and not expect to get a free ride.

Finally Philip Stephen concluded:-

The implications reach well beyond trade. The parallel with the need to strike a global bargain on climate change is the obvious one. But there are a host of other areas – think of nuclear non-proliferation, energy security, state failure, terrorism – where the habit of multilateralism offers the only sensible answers. A trade deal in Geneva would have offered a glimmer of hope that world leaders understand this.

Adam agrees with those sentiments whole heartedly. The placing of individual interest before mutual self interest, coupled with the lack of vision and leadership is one of the most dismal aspects of the talks collapse.

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