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How to save the Doha Round






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World Bank Chief Economist and Vice-President for Economic Development, François Bourguignon, was joined by His Excellency Mr Elbio Rosselli, Head of the Mission of Uruguay to the European Union (EU), to address the thorny question of ‘How to save the Doha round’ of trade talks, at a Policy Briefing jointly hosted by the EPC and the World Bank and kindly supported by the King Baudouin Foundation (KBF). The briefing was chaired and introduced by EPC Political Director, John Palmer. A question and answer session followed. This is not an official record of the proceedings, and specific remarks are not necessarily attributable.

François Bourguignon observed that the future for the Doha round is far from clear. Commenting on the current positions reached by the different WTO Members, he noted “infidelity is not divorce.  I believe this is what we are going through today – a lot of attempts at infidelity. But at the same time we all hope we are very far from divorce.”

He stressed that the importance of the Doha round was that it focused on development. This distinguished Doha from previous rounds.  “Globalisation is good for development,” he emphasised, “but it may exclude parts of the world and the development problem is to integrate all countries into the process.”  Doha started positively, he said, but the failure of Cancún was a cause of considerable disillusionment.

Cancún – reasons for failure

Mr Bourguignon revisited the main reasons for the failure at Cancún.  First among these was agriculture.  In this area, he said that the US and the EU were pushing for a deal that would more or less leave intact the most obvious forms of protection in their economies. At the same time, the least developed countries opposed the Singapore issues of investment, competition, transparency in government procurement, and trade facilitation, feeling that liberalisation in these areas would unduly compromise them and their institutions.

However, Mr Bourguignon also observed that some positive elements could be drawn from Cancún. He praised the emergence of the G20 group of developing countries and its role as a powerful negotiating actor, against the preconceptions that it would not hold up for long.

Overall, Mr Bourguignon saw grounds for optimism. “The negotiations might resume.  2004 might end much better than it started.  But we cannot say all traffic lights are green – far from it.”

Back to basics

Mr Bourguignon suggested it was important to go back to basics and consider the principles underpinning global trade negotiations. He offered four of these, saying they had much to say about the “good and bad things to be expected from trade and the difficulty of making sure the overall balance is positive.” These principles are fundamental to reactivating Doha:

  • “Free trade potentially increases economic efficiency and growth capacity.”  However, there are some important conditions attached to this, primarily that markets must work properly, and for that some kind of regulation is needed.
  • Partial liberalisation, regional agreements, bilateral preferences cannot replace the benefits of multilateral liberalisation. “There is no equivalence between a world of multilateral trade and a world of mainly regional or bilateral agreements.”  World Bank research had found that the developing world did not benefit strongly from bilateral preferences; in fact in many cases such agreements simply placed awkward limitations and proved to be discriminatory for many developing countries.
  • Multilateral trade is beneficial overall, but the overall gain is not necessarily evenly shared. This was the main reason for the difficulty in implementing trade agreements, he said: “There will be losers.” EU farmers are a prime example of a group that stands to lose. “It is absolutely possible that the gain [from liberalised trade] will be concentrated in a few sectors or social groups,” said Mr Bourguignon, but the answer to this was not to step back from liberalisation, but rather to ensure effective redistribution, through changes in the tax and social welfare systems.
  • Not all countries have the same capability when it comes to organising redistributive systems. Administrative, fiscal and monitoring capacity varies greatly from country to country and becomes a vital issue when confronted with the capacity to reap the benefits from trade liberalization. In this sense, it is difficult to impose the same rule on everybody.

Mr Bourguignon concluded by outlining a number of basic points that need to be addressed in order to move negotiations forward:

  • Agricultural protectionism must be dealt with: subsidies must be properly decoupled from production levels. “Market access [for agriculture] is limited both in the US and the EU simply because there are tariffs, some of which are extremely high.”
  • Losers from the process must be compensated, with effective redistribution systems. This is particularly important to bear in mind in relation to those countries yet to make their first steps in terms of trade liberalisation.
  • The world must realise “there is no alternative to Doha.” The only other possibility would be regional and bilateral preferences, but this would be much less efficient and beneficial.
  • Negotiators should recognise that there are differences between partners, who have different capacities and capabilities.  These should be reflected in trade agreements.  The objective should be “a globalised world, but globalised in the right way.”

A difficult road ahead

In response to the points made by Mr Bourguignon, HE Mr Elbio Rosselli, who was formerly Head of the Delegation of Uruguay to the WTO, concurred that rescuing Doha was essential, but expressed concern that there might be a “long line of casualties” before the target is reached.

Mr Rosselli agreed with Mr Bourguignon on the problem of regional or bilateral trade agreements.  He argued that FTAs, PTAs, RTAs – free, preferential and regional trade agreements, “are in fact all DTAs: discriminatory trade agreements.” There was a fear of eroding preferences, he commented, noting the paradox in this: “You have a round to liberalise trade, but how much can you liberalise trade if one of the conditions for trade liberalisation is that you do not erode preferences?”
 
On the subject of the difficulty some countries have in implementing the measures agreed at the global level, Mr Rosselli said that the Uruguay round agreements imposed an enormous logistical and administrative burden.  In fact, this contrasted with World Bank and IMF plans for reducing the role of the state. “Capacity building is a fundamental issue,” he said.

Mr Rosselli gave a view of the current process from the perspective of a negotiator: “Most of trade negotiators are optimists. Things are not as bad as they were. We’re still in the intensive care unit but there has been some progress, though more procedural than substantive. But often getting the procedure right allows you to deal with the substance correctly.”

Four areas required commitment and political will in order to move forward, said Mr Rosselli:

  • Agriculture is the heart of these negotiations.  It is the area of trade where the most pernicious trade practices survive.
  • Market access is ‘fundamental’.  High tariffs need to be dealt with and the phasing out of export subsidies is also essential.
  • Cotton requires delicate political balancing, but it’s possible to advance in this area.
  • The Singapore issues: the way forward here is to unbundle the four issues, said Mr Rosselli. “We believe the questions of trade facilitation and transparency of government procurement could be workable.  Questions concerning investment and competition are a little bit more difficult.”

Mr Rosselli also spoke about the negotiations in view of the current political climate, with forthcoming US Presidential elections and enlargement and elections in the EU.  “The limited progress can be built upon.  Unfortunately this is not a great year in the domestic politics of a very large international player.  I think 2004 is the year of the bureaucrat.  We can work hard to find the road and present items for consideration by politicians in 2005.” 

Discussion

Responding to a question on whether the strong parties in the negotiations – the EU and the US – should lead by example, as proposed by Oxfam, taking a decisive step in terms of agriculture or textiles, Mr Bourguignon commented, “We all hope that one day this is what will happen.” He continued: “A bold step must be taken.  Perhaps the recent initiative by the Chief US Trade Negotiator, Mr Robert Zoellick, [the letter concerning cotton] is a sign.  Maybe it is an invitation for the European Union to take the same kind of step.”

Questioned on the redistribution mechanisms and the export of jobs, Mr Bourguignon compared the global position to the situation in the EU where there has been trade liberalisation. “We know that liberalisation means there will be a change in the sectoral structure of production,” he said.  “When we talk about the export of jobs we should talk about the export of some jobs and the creation of others.”  The main issue in this respect is that those losing their jobs because of liberalisation may not necessarily find new jobs in expanding sectors replacing contracting ones.  This underlined the need for redistribution mechanisms and policies to help with ‘reconversion’, he said.  In Europe, “we all know regions that were very badly hurt by restructuring of global production.”  But given time, adjustment can be managed.  It is a question of “convincing the actors that at the end we may find a win-win solution.”

Another participant asked for a comment on the existing feeling that the ‘big players’ were pursuing their own interests. Mr Bourguignon countered this view by saying that the big players are convinced by the need for the development agenda, and increasing development assistance has a major part to play in this.  However it is a process that takes time. “We need advocates” for the policies, he concluded.

Reflecting further on the Zoellick cotton initiative and its possible connection to the US elections, Mr Rosselli commented “Everybody needs to reposition themselves in these games.”  However, there was a need to show willing in order to advance the position.  He concluded by saying, “Things are very difficult.  There’s been no substantial movement so far,” and reinforced his earlier point about politicians having other concerns in 2004.  “Work can be done by bureaucrats in the quiet halls of Geneva,” he said. Mr Bourguignon was less concerned with the motives behind the Zoellick letter.  He was just happy it was there.  “It is simply some light at the end of the tunnel,” he said. 

On the issue of the G90 and G20 groupings, he commented that the distinction between middle and low income countries could be useful, as this may provide a framework whereby the former can open their markets to the latter systematically, creating a gradualised liberalisation effect.

He concluded with some reflection on the issue of migration. “What kind of world are we preparing for?” he asked. “There is a theory that migration reinforces development of growth poles” or concentration of population in certain areas.  “If we want this, migration may be part of the story.”  He also postulated a mechanism in which migration and trade could be brought together. With service contracts, he said, “Temporary migration could be considered a trade operation.”


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