Global Liberalization: Trade-Offs across Borders

I: To start off, we would like to discuss the Doha Round trade talks and their failure to date to produce consensus on major issues, including tariff and agricultural policies. Do you think that this failure indicates a significant shift in momentum behind trade liberalization and globalization? B: Doha is indeed at risk. But it has not failed--and, in fact, many leaders are trying to rescue it from collapse. At die 2011 World Economic Forum Annual Meeting in Davos, where Peter Sutherland and I, co-chairs of a High-Level Independent Expert Group on Trade appointed by the British, German, Indonesian, and Turkish governments, were at a Panel discussing an Interim Report focused solely on Doha, though our mandate goes beyond trade liberalization to address issues such as preventing protectionism and analyzing needed changes in the World Trade Organization (WTO) to improve its efficiency in overseeing world trade. Aside from the two co-chairs, the Panel had among its members British Prime Minister David Cameron, German Chancellor Angela Merkel, Indonesian President Susilo Yudhoyono, and WTO Director-General Pascal Lamy. The Bhagwati-Sutherland Report noted that the Doha Round was now in its tenth year. True, the Rounds have successively increased in the years taken to complete them; the previous Uruguay Round lasted nearly eight years. But Doha was now taking so long that a growing desperation had set in. It was dying of continued inability' to reach a settlement of differences among the negotiating countries. Many political leaders were shifting to preferential trade agreements, particularly Free Trade Agreements, which were proliferating at an unprecedented pace, with the oft-cited excuse that multilateral trade negotiations were blocked. It was as if the turnpike was closed and one had to take the dirt road--and that the dirt road was the one that seemed now to be the way many would rather travel. Thus, one had to conclude the Doha Round. We had therefore set a deadline: finish Doha by 2011 or bury it. Remember: the prospect of a hanging clears the mind dramatically. We also argued at great length why the failure of Doha would lose us the gains from liberalizing trade. Its demise would also undermine the credibility of the WTO, and that, in turn, meant further costs, since the WTO was an important trade institution that provided the rule of law in trade--rules which, while still in need of further improvement, had already proven their worth by helping to prevent the rush to the 1930s-style protectionism of having no rules at all. Besides, I would emphasize that the WTO is a unique international institution that should appeal especially to the weaker nations. I tell my students, who often think the WTO is worse than the Bretton Woods institutions, that the WTO is genuinely democratic. It works by consensus, just like the United Nations, but without its paralysis on most issues: even little Georgia can withhold its consent to Russia's entry into the WTO. No country can appoint the WTO Director-General the way the United States virtually appoints the head of the World Bank (currently Robert Zoellick), or Europe chooses the head of the IMF: Pascal Lamy had to fight a tough contest with the Brazilian nominee to get his job. Again, the WTO has a binding Dispute Settlement Mechanism where compliance is adjudicated and penalties follow. Contrast that with the Climate Change commitments, which have no bite as there is no penalty for failing to fulfill the pledges made. What we did was a gamble. If Doha continued to be stalled in the next few months, then we were practically recommending that it be abandoned. In fact, that is what some observers have taken to arguing after our Report: that Doha cannot be negotiated, and that it therefore be abandoned at the end of the year. That would be the wrong outcome of our deadline idea! But we will have to wait and see. I must say that Doha is negotiable with politically practical and marginal adjustments by the United States, India, Brazil, China, and the European Union, in particular. …