The Doha round collapse: end of globalisation?

Dr. D.B.Nihalsingha

DOHA: There is much finger pointing in the wake of the collapse on the 24th July, of the Doha round of free-trade negotiations hosted by the World Trade Organization. The three blocks that were the primary protagonist in the Doha drama- the United States, European Union, Brazil-India block, went home nursing mutual accusations for failure. Ironically, this was called the 'development round,' aimed at helping the poorest of the poor to raise themselves out of poverty.

Inasmuch as the term development was a misnomer, (the talks were not about development but expanding markets and reducing tariffs), the contradictions and deception, which led to the collapse, forms an essential backdrop to the events.

Whether in trade, war or politics, inconsistency between precept and practice abound: the US advocates human rights, while abusing them in Iraq, Afghanistan, Guantanomo Bay and in secret prisons around the world; the G8 commits itself to a "democratic, prosperous and peaceful Africa," but the funds for such an effort are not forthcoming; the Washington Consensus demands that developing country subsidies for the poor be cut while some of the heaviest subsidy (for agriculture) exists on their own door steps; a world court is rejected, while multilateral measures are espoused for trade.

The failure of the Doha round, plodding on for the five years, was a foregone conclusion: the Economist, (29th July, 2006) called it "the confidence trick on which the system is founded." That newspaper called the failure "a reckless disregard for...the smooth working of world trade" noting that all wanted access to world markets while being unwilling to open their own to imports. It called the drive for concessions in tariffs for one country, which are then granted to all and the dressing up the Doha talks as 'development' when it was not, as a double "trick" which had "backfired."

In the past, as in the Uruguay round (which took eight years), the developed countries, managed to get more from the developing world than they gave. Philip Bowring (N.Y. Herald Tribune) referred to the fact that thus far the poorest countries have been "largely excluded from the benefits of open trade," with dismal benefits of free trade to the developing world. The poor of the world has thus far been short-changed. It is that realization which led to the camouflage of 'development' to be applied to the Doha round.

Ha-Joon Chanag, of the Cambridge University Economics Faculty Assistant Director of Development Studies holds that the world's per capita income grew by 3.1% between 1960 and 1980 era of state control but grew only by 1% during the free-trade period after 1980 (to 2000).

Chanag says, "Even this paltry 1% masks the reality of growth collapse in many developing countries. Per capita income in Latin America has virtually stood still in the 1980-2000 period, that [of] Sub-Saharan Africa has been shrinking and those in many former Communist economies are still half or less of what they were before the fall of Communism."

He went on to say that this is "a truly embarrassing record for a [free-trade] doctrine that has prided itself on hard-nosed focus on efficiency and growth and has thus justified its policies on the ground that greater wealth needs to be generated before it can be distributed."

WTO regards that 50 countries are in the least developed category (LDC). With the world trade quantum at $19 trillion, the LDC share is a mere 1% of the pie. At the same time, the ability of free-trade alias globalization to "lift all boats" has been a misnomer. Bigger boats have been lifted, some boats have not been lifted at all: there are some 4 billon poor, living on less than $2 a day. Despite all the hype about prosperity, free-trade has opened a yawning and ever widening gap between the rich and the poor, between countries and within countries.

The developed nations at Doha demanded that less developed nations cut their tariffs before the developed nations cut theirs. This was again a replay of the earlier attempts which short changed the developing world. This time, however, Brazil-India led developing countries stood firm, requiring the developed nations to cut massive farm subsidies and conceding only limited cuts in tariffs in agriculture. India's trade minister stated, "We can't negotiate subsistence and livelihoods."

In this Catch 22 situation, who is mostly responsible for the Doha debacle? For all the lecturing to the developing world about subsidies, the developed worlds own subsidies are massive. The US subsidy is $43 billion.

Even though its tariffs on agriculture are low, it offered a 60% cut in five years. That pales before the European Union (EU) agriculture subsidy of $143 billion and high tariffs. EU, while offering a token 39% cut, has sidestepped the issue altogether, arguing cutting tariffs would not help the poor. It would not, because the highest tariffs and the largest subsidies are not in the US but in Europe. To that extent EU has been responsible for contributing to torpedoing the Doha round.

Adam Smith Institute's Madsen Pirie commented "The problem is that old Europe does not want a deal...The losers are poor countries. Their farmers cannot sell their goods in [developed world] markets and in some cases cannot sell in any other markets thanks to EU dumping of subsidized surpluses." The Economist summed up that "Doha's failure makes rich-country promises to help the poor sound hollow."

The World Bank has estimated the gains of a multilateral agreement to be $300 billion; a gain, which will lift some 'small boats'- the worlds poor, out of poverty. Unfortunately that prospect is out of the script for now. Talks have broken down before: the Uruguay round was scheduled for four years and took eight. There will be a time of stock staking and attempts will be made to bring all parties back to the table. After licking their wounds, they most probably will be at it again.

In the meantime, the developing world would see a proliferation of regional trade deals- short cuts to by-pass multilateral agreements. These have been growing, with US leading the charge with some 14 deals already done and 11 more in the making. The ASEAN have bi-lateral deals with each other; all have deals with China. Some 70 free-trade deals are estimated by end of 2006.

The noodle bowl of deals thus created- the sheer numbers will turn the world in to spaghetti-bowl- some 200 regional trade deals in all the world, will make life more complex and more complicated.

Is this the end of free-trade? Will all the kings' horses and all the kings' men ever put humpty dumpty together again? Time alone will tell.