Tuesday, February 16, 2010

Would Doha's Demise Take the Whole WTO With It?

India's Business Standard reports on something that most of us have known for months now - the WTO's Doha Round of multilateral trade negotiations isn't getting completed in 2010:
Indian trade negotiators are of the view that the failure to close gaps in trade talks, coupled with minimal participation from the US, has killed the prospects of meeting the 2010 deadline for closing the Doha round. Analysts and trade experts said the failure to meet the deadline would put a question mark on the relevance of the World Trade Organisation (WTO) as a global trade body....

According to trade analysts and think tanks, the 2010 deadline is not achievable mainly because the US has not been engaged and there is insufficient political will on trade issues. “The main argument advanced by the US is that it needs real new effective market access for its exporters in order to win the support of the Congress for the trade deal and this could be delivered only by the sectoral agreements. Developing countries have resisted the proposal on the ground that the understanding from the outset has been that, as in the past, members would have the option to join sectoral agreements on a voluntary basis,” said Anwarul Hoda of Indian Council for Research on International Economic Relations (ICRIER).
For readers of this blog and most other people paying attention to the Doha Round, the missed 2010 deadline is hardly news.  The Business Standard article also rightly demonstrates how, without serous changes from the US and other WTO Members (but especially the US), Doha's long-term prospects are equally bleak (something that I've been saying for a while now).

On the other hand, one must really question whether, as the unnamed "analysts and trade experts" say, the collapse of the Doha Round would really mean the end of the WTO.  In fact, there are several reasons to doubt this conventional wisdom.  First, existing WTO rules are deeply ingrained in Members' domestic laws and would be difficult, if not impossible, to undo.  In the United States, for example, implementation of the WTO's Uruguay Round in 1994 required massive changes to domestic law through the Uruguay Round Agreements Act (something critics bemoan, by the way).  The US tariff schedule was changed.  Domestic trade remedies laws were overhauled.  Copyright laws were amended.  (And so on and so on and....)  Moreover, 15+ years of agency regulations and procedures, domestic court cases and international arbitration proceedings, bilateral trade agreements and investment treaties, and private commercial practices have evolved from the WTO Agreements, as well as the URAA and its counterparts.  Thus, it seems highly unlikely that the Doha Round's collapse would unravel all of that.

Second, the economic crisis of 2008-2009 has clearly demonstrated Members' commitment to the international trading system and, by extension, existing WTO rules (even as many have distanced themselves from Doha).  Sure, nations haven't been perfect (far from it), but dramatic backsliding into a tit-for-tat protectionist abyss simply hasn't occurred over the last two years.  And WTO disciplines have certainly played a part in that.  For example, even though I'm hardly a fan of the Stimulus* Bill's Buy American provisions, they were most likely enacted - at least by the letter of the law - consistently with WTO rules (after a lot of domestic and global kvetching about America's "international obligations").  And as I've noted several times, countries' resistance to (or hesitance to impose) carbon tariffs has stemmed, at least in part, from concerns that such measures would violate WTO rules.  These cases - and many, many others like them - make clear that existing WTO rules discipline nations' actions in even the darkest economic times.  Yet during the same period, the Doha Round's conclusion was never in sight.

Third, the WTO has become an indispensable adjudicating body for international trade disputes.  Since the multilateral trade body's founding in 1995, there have been over 400 disputes brought to the WTO, involving billions and billions of dollars in total trade.  A vast majority of those cases were resolved through either consultations or Members' implementation of WTO panel or Appellate Body rulings.  Admittedly, some of those rulings have been ignored, but so far, such non-compliance is rare - a particularly impressive thing when one considers that the WTO has no formal enforcement authority.  Furthermore, dispute settlement activity has remained steady over the last several years, even as the Doha Round itself has sputtered.  Since the end of 2005 (when the last serious, formal negotiating proposals were circulated by WTO Members) there have been almost 70 disputes filed at the WTO, and there have been 25 new cases since the Round's near-collapse in July 2008.  Clearly, nations' lack of confidence in Doha hasn't led them to abandon the WTO's dispute settlement body.

Finally, the Doha Round itself might be unnecessary as a necessary trade liberalization tool.  As Cato's Dan Ikenson pointed out several times, countries are liberalizing unilaterally as the benefits of doing so - particularly in today's world of multinational supply chains and globalized investment flows - have become readily apparent.  Indeed, the even the breathlessly pessimistic article quoted above notes that "In India, peak industrial tariffs have been brought down from 35 to 10 per cent ever since the beginning of the talks in Doha in 2001."  Moreover, even if unilateral liberalization (while ideal) is beyond the political pale for some countries, the huge proliferation of bilateral and regional trade agreements (while far from ideal) demonstrates that nations simply aren't waiting around for over 150 other countries to get their collective act together and conclude a final Doha Round Agreement.

All of these instances provide a clear picture of a Doha-less world with a robust WTO - one in which (i) WTO rules establish a baseline of global trade liberalization, (ii) nations pursue "WTO plus" commitments through unilateral liberalization (best route) or bilateral/regional trade agreements with other willing partners (meh route), and (iii) many large trade disputes are adjudicated through the WTO's dispute settlement body.

Indeed, it's not really a bad future when you think about it, nor is it too difficult a scenario to imagine considering that it's exactly what's happening right now - but for occasional, fruitless meetings of distraught WTO negotiators and endlessly-delayed "final" Doha deadlines, of course.

Then again, all of this talk of the "end of the WTO" does make sense from one perspective: without the Doha Round negotiations, a few hundred international bureaucrats would be out of a job.  But while it would certainly stink for these folks to have to give up their posh Geneva apartments and expansive, taxpayer-funded travel stipends, that's hardly the "end of the WTO," now is it?

Well, at least for the rest of us.

[Final note: although I don't think that the WTO's fate rests in Doha's hands, I do see a much more significant threat to the global trading system: countries' refusal to implement adverse dispute settlement rulings.  More on that here.]

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