Calls to restart global trade talks are intensifying, but yet another meeting aimed at reviving the Doha Round looks set to fail.
WTO chief Pascal Lamy believes the Round fell apart because “too many negotiators focused on the small picture, forgetting the bigger one”. He said that countries must shift their focus away from domestic politics and broaden their vision.
However, supporters and opponents of the WTO find it difficult to agree on exactly what the broader picture is.
Numerous studies have attempted to assess the economic impact of the Doha Round, but their results vary enormously.
According to the Carnegie Institute: “Any of the plausible trade scenarios will produce only modest gains, on the order of a one-time increase in world income of $40 to $60 billion. This represents an increase of less than 0.2% of current global gross domestic product.”
The World Bank, on the other hand, foresees that liberalising trade in a manner consistent with the Hong Kong Ministerial Declaration would lead to “global gains of the order of $95-120 billion per year”.
Nevertheless, NGOs opposed to the WTO point out that even this staunch supporter of the Doha Round has downsized its original projections; in 2003, the World Bank had forecast an $832 billion-per-year boost to the global economy from the total elimination of trade barriers; the majority – $539 billion – going to the developing world. In 2006, new projections estimated potential overall welfare gains at only $287 billion – just one-third the original forecast. Furthermore, developing country gains dropped to $90 billion, a “loss” of more than 80%.
Despite contradictions between the figures, even most opponents of the WTO agree that a deal would increase overall economic welfare. However, they underline that these benefits will not fall to those who most need them. They say poorer countries would lose out, whether from the erosion of preferences they enjoy in third markets or from the direct impact on their own agricultural, industrial and services sectors.
Despite this, there is a general consensus that renouncing to a global deal now would result in losses all around.
- The recent agreement that would ensure that all developed countries grant duty- and quota-free market access to all Least Developed Countries would be lost.
- Agricultural exporters will miss out on the deepest farm-tariff cuts ever offered by the EU.
- Europe and the US would lose new access to the markets of emerging economies such China and Brazil for their exported industrial goods and services.
The US and the EU will be able to continue subsidising their agricultural production, thereby artificially enhancing their competitiveness, leading to over-production and dumping, which hurts poor farmers in developing countries.
Failure could inflict a serious blow to the credibility of the international trading system and the WTO as an institution. The Dispute Settlement Body, which is currently the only supranational body capable of rendering compulsory judgements on disputes between countries, could be undermined.
Return of bilateralism:
The lack of a global trade deal will accelerate a return to a system of bilateral agreements and FTAs in which the large would be able to strong arm the small and where the multiplication of trade rules and tariffs would generate higher transaction costs and damage the trading and investment environment.