The future of the WTO and the Doha trade round
July 29, 2008 witnessed the collapse of the World Trade Organization’s Doha Round, high-level negotiations aimed at lowering trade barriers between countries. Immediate reactions were varied, reflecting international ambivalence about globalization. Free traders viewed the collapse as a disaster, poverty activists as a moral failure, and globalization’s malcontents as a triumph. In fact, the implications of the Doha round were so murky that the Dow Jones rose 250 points even as pundits administered last rites to the multilateral trade system.
If Doha’s collapse last summer left the future of global trade unclear, the greatest financial crisis in decades has since made that future even more uncertain. What was once an unlikely dream now seems impossible; the world is not prepared to make trade more free. Instead, the WTO’s role in the coming years will be to halt any retreat from recent free trade gains. As N. Gregory Mankiw, professor of economics at Harvard and former Chairman of President Bush’s Council of Economic Advisors, told the HPR, “Perhaps making progress is too much to ask for in this economic climate, but I’m hopeful that with the WTO we won’t backslide.” Indeed, if the WTO can parlay the looming threat of protectionism into a rallying call, it can regain relevance by seeking a renewed international commitment to its rulings and a more contemporary trade agenda.
Let’s Make a Deal
Since its founding in 1995, the WTO has made great strides in trade liberalization, operating on the principle that open markets tend to maximize economic welfare and development. Yet trade barriers in Western nations, such as subsidies for domestic farmers and tariffs on foreign goods, still prevent developing countries from selling their agricultural products abroad to spur growth. Scheduled to end in 2005, the Doha trade round was designed to address such issues, but its negotiations too often broke down into stalemates between the developing and developed worlds.
Ultimately, however, Doha’s proponents inflated its importance as a potential economic miracle. As Dani Rodrik, professor at the Harvard Kennedy School, informed the HPR, “Doha never promised big gains and resulted in negotiators tying up huge amounts of political capital in return for very meager rewards.” The Doha round’s failures even brought the WTO’s relevance itself into question. To compensate for the lack of multilateral progress at Doha, nations pursued bilateral trade agreements, resulting in over 400 active treaties that fragmented the trade consensus and marginalized poor countries. Thus, because of the disproportionate attention given to Doha, the WTO remained stuck in 2001 while the world of trade moved on without it.
WTO, Now or Never
Most negotiators realize that reaching a deal on Doha is now nearly impossible, as falling crop prices have made farmers more resistant than ever to giving up their subsidies. Paradoxically, however, the failure of Doha has given the WTO a chance to symbolically reassert itself as the premier defender of economic freedom. As Paul Blustein, journalist for the Global Economy at the Brookings Institution, told the HPR, “The best thing the international community can do, with Obama’s lead, is to concentrate efforts on shoring up the WTO, making sure that its rules are completely up-to-date with the circumstances of the modern economy.” A break from Doha provides an opportunity to focus on improving these rules.
In addition, the WTO can reassert its relevance by expanding the Doha agenda to address bigger issues like food crises, currency manipulation, and economic climate change sanctions. By establishing a more contemporary and relevant Doha agenda, even as Doha’s original aims falter, the WTO can take a clear leadership role in this crisis. The WTO must also demonstrate that it is willing to impose sanctions and uphold its rulings against member states that implement illegal protectionist barriers. Moreover, the WTO has a vital role to play in monitoring trade trends, ensuring that countries remain transparent in reporting any new trade measures. As the global economy suffers, an international watchdog on this front becomes ever more crucial. If the WTO can rededicate itself to enforcement and revitalize the Doha trade talks by focusing on new challenges, the free trade agenda could emerge from this period not weakened by growing protectionism, but stronger than any time in the last decade.