Much has been made of the failure of the talks because of disagreements between developed and developing countries on a host of agricultural and non-agricultural issues. That is a fundamental misreading of the talks. The sticking points were the same as in every other trade negotiation; the interests of consumers were sacrificed for the benefit of existing high cost producers. While the talks were scuttled partially by demands of India and China to have special high tariff safeguards for domestic producers of some agricultural products, the group of ten developed countries including Japan and Switzerland had plenty of high agricultural tariffs they also were defending. Food exporting developing countries like Uruguay were pushing for more market access to other developing country markets. It bears repeating that 70 percent of the import taxes collected by developing countries come from other developing countries. Each country, including the U.S., shares part of the blame for the failure by protecting industries at the expense of consumers and lower cost producers.
The ending of the talks in Geneva will have zero impact on trade-promoting economic forces like specialization of labor and comparative advantage. Resources and people continue to be unevenly distributed around the world. The Middle East has petroleum, but is short of productive land that can produce food at low costs. Japan is an economic giant, but needs petroleum, other raw materials and food from around the world. Even India and China themselves have growing populations and incomes and will become more dependent on international trade for raw materials, markets for products and food for their growing middle classes. They have already lowered barriers to imports of vegetables oils to lower costs for consumers.
There certainly is a risk for the breakdown of the WTO talks to lead to a further weakening of the WTO and the spread of trade protectionism. The creation of the General Agreement on Tariffs and Trade 60 years ago was due to what are now called the developed countries recognizing the role that protectionism played in creating and deepening the worldwide depression of the 1930s. The U.S. changed policies in 1933 to shift the center of power on trade away from protecting the narrow interests of producers in certain regions of the country to the broader interests of consumers. As the couple dozen original members of GATT negotiated round after round of multilateral agreements in the 1950s, 1960s and 1970s they all recognized that going back to the failed policies of the past were not an option. Those rounds were a way to do collectively what they could not politically afford to do individually.
Countries that were too quick to write off the Doha Round of talks need to read some history books or risk reliving the past to the determent of all countries. As WTO Director-General Pascal Lamy urged after the talks went on for a few days, each country needs to reconsider the “red lines” of where they believe that cannot negotiate. Broad bilateral negotiations cannot survive if each country comes with a whole bag full of red-lined tariff.
The early rounds under the GATT had an advantage in that agriculture was not a part of those talks. While agriculture is important to developed and developing countries and should be part of a single undertaking, including it accomplishes nothing if it causes the talks to fail. This will surely increase call for negotiations in non-agricultural goods and services without agriculture. As Director-General Lamy has pointed out, progress was made on many items. Even in agriculture great progress was made on export subsidies, export credits and food aid. That progress should be salvaged in some type of follow-up effort.
Despite the fact that a few countries have developed enough wealth that they have lost their taste for the messy efforts of trade negotiations and the market disturbances that come with freer trade, 90 percent of the world’s population can achieve a sharp improvement in their standard of living through trade agreements that lower costs and increase choices.
Director-General Lamy has suggested that WTO members should wait for “the dust to settle” before deciding how to move ahead. That is sound advice. If the WTO with 153 members has become too big for a single undertaking, there was plenty of progress under the Doha talks to draw on for further negotiations with a narrower agenda. The existing structure under the Uruguay agreement that created the WTO can serve to facilitate trade.
The greatest threat to freer trade is the failure to continue to negotiate. Problems in trade abound as shown in the contentious nature of the Doha talks. That should not be surprising with the growth of trade since the WTO became operational in 1995. The U.S. and other countries have rightly argued that the dispute settlement process through the WTO is a second order solution. If the WTO simply becomes a place for complainers to argue over splitting hairs, then its life will be short and painful.
Increased trade is vital for the world. Free trade is the ideal to increase incomes and consumer choice, but few countries have chosen to go that route. The next best solution is back to the negotiating table in whatever breadth and depth willing partners can agree to achieve freer trade.