Monday, July 03, 2006

Doha round as dead thing walking

BY the looks of it, the Doha round of trade negotiations dubbed as the “development round” is dead. By end of this month, US President George Bush’s presidential trade-promoting authority expires, making it difficult for America to take the lead in negotiating for a global reduction in barriers to trade. It’s called the “development round” because, according to a World Bank study, a reduction in agricultural tariffs and subsidies could raise global exports by $300 billion, thereby lifting lots of countries in the developing world out of poverty.

Certainly, it’s so easy to blame members of the European Union, particularly France, for their reluctance to reduce agricultural trade barriers and subsidies that are hurting lots of farm exports from the developing world. They actually offered to cut farm tariffs by 40 percent, but with the caveat that they be allowed to put at least 160 products into the sensitive list, thereby making these products beyond reform. The Americans also share the blame for not showing leadership in the trade negotiations at a crucial time when the rest of the developed world is having problems with the recent successes of China and India in the exports of manufactured products.

But certainly, the blame really should be equally shared also by the major players like India, China and Brazil as they have been reluctant to open their markets for industrial goods, something that could promote South-South trade deemed beneficial to other developing countries as well.

One should note that China, Brazil and India are the leaders of the Group of 20 that have largely benefited from rising agricultural exports in the last decade since the formation of the World Trade Organization. China has also been the major beneficiary in the global liberalization of manufactures, its success causing worsening trade deficits in the US and many parts of the world. And yet, China has not been willing to liberalize its services, particularly telecommunications and banking, where the West has keen interest and competitive advantage. Negotiations are a give-and-take but if one would only want to take, the talks are sure to bog down the way it is unraveling right now.

Where does that leave the Philippines? The Philippines is part of the G20 but one wonders what sorts of benefits Filipinos get from its membership. Beside mangoes, asparagus, pineapples, and bananas, the Philippines really does not have significant volumes of agricultural exports to the EU and US. On the other hand, the failure of the Doha Round means that high tariffs for the Philippines’ sensitive agricultural products like rice, corn, livestock and poultry, sugar are going to stay. That probably explains the Philippines’ ambivalent attitude about the entire process. Our negotiators, mindful of the pressures from local vested interests and the anti-globalization activists probably don’t give a heck whether or not the Doha Round pushes through.

That’s a pity because the collapse of the Doha round would surely threaten the raison d’etre of the entire multilateral trading system. A worst-case scenario could be the unraveling of the most-favored nation approach to trade negotiations (i.e agreements agreed by two parties automatically applies to all members of the World Trade Organization), replacing it with bilateral talks that would certainly favor countries with greater political clout and economic influence. Without an effective global framework for addressing trade liberalization issues, countries are likely to settle trade disputes through litigation, a costly process that works in favor of the rich countries.

One might ask that if indeed “free trade” is a win-win situation, as its advocates would say, why are these countries that are supposed to benefit most, the ones that won’t budge to make way for the successful conclusion of the Doha round?

Simple: it’s politics. All countries joined the WTO with a clear understanding of the economic benefits of trade liberalization and globalization but they do come to the negotiating table behaving like 18th century beggar-thy-neighbor mercantilists. Negotiations are like theaters where negotiators play to a gallery of lobbyists and interest groups at home. Their performances are judged by the concessions they gain and not the compromises they made to make the entire process succeed.

But ultimately, those talks are likely to revive again once the new crop of political leaders with fresher mandates and less political trauma rises in a year or two after new rounds of elections. The $300-billion rise in global exports is just too huge an economic benefit for global trade to miss. That means the Philippines should look at the lull as a period to strengthen the country’s competitiveness by building economic infrastructure like irrigation, road, bridges; introducing more competition in inter-island shipping to reduce cost and enhance efficiency in the economy; and reviving the education system. Yes, the failure of the Doha round is an even stronger reason for the Philippines to do its much-delayed homework.

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