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The ‘usual suspects’ triumph in Geneva


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Clive Crook in his Financial Times blog comments on the failure of the WTO talks in Geneva. He takes a pessimistic view on the future for the WTO. he notes the recent proileration of FTAs, especially regional ones and suggests that in the long run this may not be a good thing.

His final paragraph :-

The FTA tendency is capable, given an enfeebled WTO, of eventually unwinding some of what has been achieved over the past half-century. (On this, see Jagdish Bhagwati’s new book.) If a growing China, India and Brazil follow the US example and use their muscle to develop their own hub-and-spoke networks of trade preference, the eventual costs in forgone trade and income could be great. The logic of trade protection never sleeps.

Given all the comments beforehand on the need for agreement, though it was noteworthy that the US Trade Representative was not as bullish or emphatic on the need for a conclusion in advance of the meetings, the outcome was a bitter disappointment to commentators such as Adam.

Thus Adam thinks we need in NZ to step up our efforts re FTAS with Japan, India and South Korea and perhaps we should look to Brazil a major emerging economy.

The FT editorialises on Doha as well, this may require registration to access,

Like Wimbledon fortnight but without the aesthetic or entertainment value, the annual breakdown of the Doha round of trade talks is becoming a summer ritual. For three successive years, dark warnings of now-or-never and one-last-chance have ended in a fruitless ministerial meeting. It is time to be brave, swallow hard and accept that the Doha round in its present form has failed.

No one can say it has not had its chances. It cycles with increasing – and increasingly risible – frequency through rising optimism and crashing despair. Doha has always struggled. Launched with a huge agenda shortly after the attacks of September 11 2001, substantially for symbolic reasons, it lacked the big push from export interests needed to overcome the fierce resistance to liberalising agriculture, its main focus.

It then notes:-

The proximate cause of failure this week was an arcane issue: a stand-off between the US, India and China over rules protecting small farmers from surges in food imports. But that merely underlines the lack of political will to complete this round and how the critical players have failed to confront their own domestic constituencies.

To harness the immortal phrase from Casablanca of –round up the usual suspects’ – it is all too clear that indeed it was they again who stood in the way.

The conclusion is that Doha is dead and that to save the WTO and enable progress to take place the WTO:-

should try two things: first, take on smaller, more manageable legislative projects among coalitions of the willing; second, try to extend consistent rules over more of the existing system.

For the first project, it could start by gathering together the few countries that dominate world trade in services and hammering out a stand­alone deal in sectors where it can find convergence. Last weekend’s fruitful services talks were an encouraging sign, especially now that developing countries such as India are powerful service exporters as well as importers. The benefits, on the model of the successful Information Technology Agreement of 1996, would then be extended to all WTO members. Several parts of the Doha deal such as export subsidies and “trade facilitation” (getting goods easily across borders) might also be agreed separately.

Second, rather than railing im­potently against the rash of PTAs, the WTO could use the powers it already has to try to enforce their compliance with existing multilateral rules.

The world’s new leaders should collectively seize the chance to take the WTO in a direction where it can regain momentum. The weight of experience over six and a half years suggests that Doha as currently constituted is not that direction. It is, regrettably, time to let it go.

This does not seem unreasonable.

Adam has major concerns though as to whether the leadership is there. The dead hand of farming lobbies in India and elsewhere, coupled with the growth of protectionism in the USA, though regrettably never far way at any time in that country – plus the protectionist and obstructionist stance of the French and Germans within the EU does not bode well.

It is important for a small country such as NZ that we do not get shut out of any emerging regional trade blocs.

In addition, we need to be very wary of Green influence both overseas and domestically as this if not watched very carefully could cause major difficulties in our ability to grow the economy.

We should ensure that we put staffing and intellectual resource into maximising our trade agreements and opportunities and not into vanity diplomatic posts.

There are some useful local comments on this in the print edition of the Dominion Post, Page C1 Business Day but not on Stuff, quoting Charles Finny of the WRCC and International Business Forum Director Steve Jacobi amongst others on the issues – here is an extract:-

Doha Failure Comments

Doha Failure Comments

A pdf of the complete article dohastalemate can be found here.

In addition the DomPost editorial today was on this topic also.

It notes:-

The finger pointing has already started. India is being identified by some as the villain for demanding that it be allowed to impose tariffs to protect sensitive agricultural products from competition if there is a surge of imports. Those critics portray the Indian Government as bowing to the political power of the peasantry, and point to support for the US position from developing countries in Latin America, anxious to export their agricultural products to Asia.

US trade representative Susan Schwab said it was “unconscionable that we could have come out with an outcome that rolled the global trading system back, not by one year or five years but by 30 years”.

Others, however, will have more sympathy with Indonesian trade minister Mari Elka Pangestu, who said that she could not understand the US position that had caused the talks to founder. Certainly, it is hard to see how the US, which still spends US$7 billion to US$9 billion a year protecting its farmers, can claim any sort of virtue in this area.

The editorial concludes:-

The key now is for New Zealand to accept that an early global agreement is unlikely, and move past the disappointment.

A contracting world economy will only foster protectionist sentiment in many countries. The emphasis should go on reaching bilateral and multilateral agreements, and creating what is known as a spaghetti bowl of interlacing trade deals.

That will not be easy, and there will inevitably be failures along the way. However, it is more likely to deliver concrete results than waiting for the WTO to deliver.

That is all very well, but it is no real substitute for a comprehensive deal, especially as inevitably some countries will get to eat more spaghetti than others and for some the strands will transmute into sheets of lasagne as the large and powerful take advantage of the weak.

One Comment


  1. Thank you to David Farrar « The Inquiring Mind

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