When the Doha round of global trade talks collapsed last Monday, suddenly
and acrimoniously, after five long years, furious trade ministers seemed to agree
about only one thing - they were throwing away the best hope in decades of helping
poor countries trade their way out of poverty.
Just a week earlier, at the G8 summit in St Petersburg, world leaders had pledged
to do whatever it took to strike a deal. But when negotiators faced each other
in Geneva it became clear the gulf between them would not be bridged by a few warm
words from George Bush or Tony Blair. Despite the stated aim of the Doha round
to redress some of the worst iniquities in the global marketplace that disadvantage
the poor, no one seemed to have the stomach for a new wave of globalisation.
The potential gains are immense. A World Bank study last year found that dismantling
global trade barriers would generate a further $300bn (£161bn) a year for
the world economy, much of it in developing countries.
Lowering trade barriers could have stimulated business between developing countries,
as well as throwing open markets in the rich north. However, it is now clear that
the US, driven by pressure from its farmers and with mid-term congressional elections
due in November, was determined to persuade Europe and developing countries to
make much deeper cuts in agricultural tariffs than they were willing to offer.
'What I'm for is trade that opens up people's markets just like we opened up ours,'
Bush said on Friday. 'I believe in good trade policy - here's my definition of
good trade policy: it's fair. That's all we ask. See, we open up our markets, you
open up yours.'
Agriculture makes up just 2 per cent of GDP in the richest countries, but farmers
have always had special political significance, in Japan and Europe as much as
in the US. At the same time, developing countries with large rural populations,
such as India, are nervous that if they lower farm trade barriers the livelihoods
of millions of subsistence farmers will be damaged by an influx of cut-price farm
goods from cheaper producers.
For the time being, despite Bush's insistence that he still wants a deal, protectionism
has won. 'Doha could be resuscitated, if there was the will there to do it, but
it could be three, four, five or six years,' said Liz Stuart, trade policy analyst
at Oxfam. John Gummer, the former Tory agriculture minister, said poor countries
were the major losers. 'The US has behaved appallingly. It talks free trade, but
is completely unable to stand up to its farm lobby.'
One immediate consequence is likely to be a rash of one-to-one deals between
developed countries and the trading partners they are keenest to cultivate. These
bilateral agreements, which many countries were already pursuing alongside Doha,
are controversial with campaigners, who warn that less powerful countries can come
under intense pressure to throw open their markets. 'Why I think it's so damaging
is that what the US will do is go into a whole lot of bilateral agreements with
poorer countries which can't stand up to them,' says Gummer.
At the WTO, a sprawling one-member-one-vote organisation, developing countries
have banded together to negotiate; bilateral deals make such solidarity impossible.
Analysts also warn that a web of complex, overlapping one-to-one deals could make
global trade inefficient and cut across more important regional agreements. Moreover,
the poorest countries, whose interests were meant to be at the heart of Doha, can
be ignored in bilaterals, as the US, EU and others cherrypick their favourite markets
for negotiations. 'No one's got any interest in doing a deal with a least-developed
country,' said Stuart. 'They're bypassed in all of this.'
A potentially more explosive prospect is an outbreak of legal hostilities against
the protectionism of Europe and the US. In a recent report, Oxfam identified $13bn
worth of farm subsidies, most of them in America, that it believes could be legitimately
challenged under existing WTO rules. Brazil, Thailand and others have won legal
cases against US cotton subsidies, and EU support for sugar, dragging them into
reluctant reforms. (The US produces $3bn worth of cotton each year and spends $4bn
subsidising it.)
This combative approach could look more attractive to developing countries if
the prospect of a broader lowering of tariff barriers disappears with the death
of Doha. Brazil, for example, with its lean agriculture sector, looked certain
to be a big winner from Doha. Populist president Luiz Inacio Lula da Silva might
decide a high-profile legal battle against the US is a vote-winner as he approaches
elections in October.
But hauling the world's trade giants through WTO arbitration would be a dangerous
gamble. American enthusiasm for multilateralism has looked wobbly for some time
and a slew of legal cases hitting farmers in electorally important states could
create a powerful backlash against the WTO. 'The US is not going to be happy about
having half a dozen legal cases go against it,' says Griffith. With the US economy
widely expected to slow in the coming months, a resurgence of protectionism could
set back the cause of a worldwide trade agreement by years.
On this side of the Atlantic, perhaps the most worrying implication of the suspension
of the talks is the question mark it throws over reforms of Europe's �40bn a year
Common Agricultural Policy (CAP). Tony Blair and German Chancellor Angela Merkel
have formed a liberalising alliance, helping to isolate French President Jacques
Chirac and drag the EU toward an agreement that would pare back the CAP to make
it palatable to developing countries. Monday's suspension undid much of that work.
Amid scant progress at the WTO summit in Hong Kong in December was a 2012 deadline
for ending export subsidies, widely agreed to be the most pernicious element of
the EU and US agriculture regimes. Britain and its liberalising partners had hoped
that ending these subsidies - which are used to hold up prices and result in cut-price
goods being dumped in developing countries - would begin the unravelling of the
CAP. With the talks on hold, the offer to end export subsidies is now off the table,
and CAP reformists have lost one of their most powerful weapons.
Number 10 sources insist Blair is still set on radical reform of the CAP at
a review next year. But without a trade deal the task is much harder. Lowering
trade barriers to help the developing world is a very different proposition to
reducing support for farmers to save money or redirect resources away from agriculture:
the latter looks like the trade equivalent of unilateral disarmament.
Not everyone has given up on Doha: trade ministers continue to eye each other
warily, while insisting they are ready to come back to the table at any time. And
the 'no deal is better than a bad deal' camp, which includes development campaigners
such as ActionAid, say the end result could be a radical rethink a bout the WTO
and its raison d'etre. But with staff in Geneva quietly rebooking the summer holidays
they had cancelled to see through the talks, it could be months - more likely years
- before anyone dares to repeat high-flown promises of a 'development round'.
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