Why the world needs a new round of trade talks

The prospect of a new round of multilateral trade talks being launched in November is brightening, though challenges remain.

The world, and in particular its poorest nations, needs a new round of multilateral trade negotiations. The World Trade Organization and the multilateral trading system will survive if we do not launch a round of talks at our Fourth Ministerial Conference in Doha, Qatar in November. But the new round is not for the WTO or for the sake of any institution. Rather, relaunching the talks will mean being able to avoid further delay in tackling the pressing problems that confront the global economy, and particularly the economies of the smallest and most vulnerable nations.

In the past year and a half, we have spent our time rebuilding confidence in a global trading system that has brought immense benefits to mankind. The confidence has grown. WTO member governments understand each other better and, just as importantly, they understand that no nation will achieve its goals inside the system unless all nations see benefits flowing to them from a new round of negotiations. Member governments understand too that progress is impossible unless all governments feel they have been part of the process.

But the age-old question about launching a round is: Do you do so in healthy or less-than-healthy economic conditions? Do you fix the roof when it is raining or when the sun is shining? Right now, the forecast is for drizzle and high winds. The economic slowdown that has gripped the United States and Japan threatens to spread to other countries that depend on those export markets for economic growth and development. The trouble is, as history tells us, economic deceleration has a nasty tendency to feed protectionist sentiment.

At such a time, it is important to send a signal that governments around the world are committed to trade liberalisation, particularly when it comes to products from the developing countries. A round would help the poor and weak countries more than anyone else. The big guys can fend for themselves. But without multilateral rules, the poor are subject to the law of the jungle. There are few economists today who would disagree with the notion that improved market access for poor country products is fundamental to efforts aimed at alleviating poverty. In rich country markets, developing country exports face much higher trade barriers than products from developed countries. If trade in manufactured products were further liberalised, three-quarters of the benefits would flow to developing countries. Indeed, the economic benefits to the developing countries of eliminating agricultural subsidies in the rich countries would, according to the World Bank, be more than 3.5 times greater than all Official Development Assistance (ODA in 1999 came to US$56.4 billion).

But such benefits would flow not just to the poor. A study by the University of Michigan found that cutting barriers to trade in agriculture, services and manufactured goods would boost the world economy by $613 billion. That is the size of the Canadian economy. Removal of such barriers would boost growth by nearly $1.9 trillion – that’s two Chinas. The European Union (EU) and European Free Trade Association (EFTA) countries would see economic growth boosted by $169 billion, Mexico would see gains of $6.5 billion, the United States $177 billion and so on.

Can the 140 member governments of the WTO launch a round in Doha? The answer is, we don’t know yet. But the odds are certainly better than they were at this time last year. We have made good progress in targeting areas of disagreement and governments have shown flexibility on their positions. In meetings we have had in the past several months, very few delegations have said they oppose a round. But, there remains wide disagreement over what the agenda of such a round should be. Differences remain over investment, competition, trade facilitation, the environment and cutting industrial tariffs. But the differences over these issues are narrowing, largely because delegations have been working together constructively and listening to the concerns of others.

There is really only one issue on which there is truly sharp disagreement – labour standards. Developing countries are more resistant than ever to including this on the WTO agenda. For them, this is not a line in the sand, it is a canyon.

While delegations debate these issues, we already have negotiations underway in agriculture, services and on the implementation of existing agreements, an issue a great many of our governments believe is of fundamental importance. We have held productive stocktaking meetings in agriculture and services, which have laid out the negotiating agenda for the next year. On implementation issues, we have made but modest progress and many developing countries would like to see us achieve more in this area. But it is quite clear to me that on all three of these issues – agriculture, services and implementation – substantial progress will be very difficult, if not impossible, outside a round.

So where does all of this leave us? It is widely accepted by governments that we must have the basic framework of an agreement in place by the end of July if we are to launch a round in Doha. The agenda has to be broad enough to have something for everyone. It must exclude issues on which we have no hope of achieving agreement. It should be detailed enough to be meaningful but not so detailed as to be a pre-negotiation. It must be 95% understood in July, and not leave 95% to do in November. Doha must not be another Seattle. Ministers from our governments will not tolerate it.

Can we do it? I think so, if governments show the necessary flexibility and willingness to compromise. We are clearly seeing evidence of that today, from many of the major players. It will not be easy, but achieving something of historical importance rarely is.

©OECD Observer 226/227, Summer 2001

Economic data


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