The collapse of the Doha round would also call into question the future of the WTO itself, writes Aurore Wanlin in a policy brief for the think tank the Centre for European Reform.
The organisation is still young and in need of further institutional reform. Developed countries criticise the WTO heavily for not taking into account the economic importance of its member states. NGOs and developing countries also accuse it of promoting economic liberalisation at the expense of development, social and environmental goals. Doha is the WTO’s first round of negotiations. Their success would strengthen the position of Pascal Lamy, director-general, and make internal reform easier. Doha’s failure would weaken the organisation and boost those who wish to undermine multilateral trade.
There is a fundamental difference between the Doha and previous trade rounds: that is the emergence of developing countries as key players, in particular the fast-growing economies of Brazil, China and India. Cancún showed that it was no longer enough for the EU and the US to agree a deal and expect the rest of the WTO countries to fall into line, writes research fellow Aurore Wanlin in a policy brief for the think tank the Centre for European Reform.
But developing countries do not form a homogeneous group. For example, the G20 group was formed to give major developing economies such as Brazil and India greater clout in trade talks. But while Brazil has a competitive agricultural industry and wants greater market access, the Indian government fears that agricultural liberalisation will devastate its millions of subsistence farmers. That makes it very difficult for trade negotiators to find the common ground needed to move the round forward.
Another reason for the lack of leadership is that some countries are not playing a role proportionate to their economic weight. China has a lot to gain from more trade liberalisation, but argues that it made enough concessions when it joined the WTO in 2001.
Ms Wanlin describes the lack of active support from businesses as another major handicap in the Doha talks. This is partly due to the fact that big companies have already managed to find ways to enter highly protected markets in developing countries, and thus would benefit only marginally from a successful trade round. The main beneficiaries are likely to be the small- and medium-sized enterprises which lack the resources to effectively lobby governments or international institutions. Many EU and US businesses also know that regional or bilateral trade agreements offer another effective route to gaining greater market access abroad.
She notes that the Hong Kong summit will take place around the same time as the December European Council, which will discuss the EU budget for the period from 2007 to 2013. Most EU member states are calling for the UK to give up its ‘rebate’ – a discount originally designed as compensation for the relatively high contribution of the British to the EU budget. But British public opinion is in no mood to accept a substantial reduction of the rebate, unless the EU also commits to a radical overhaul of the Common Agricultural Policy (CAP).
Read the full version of the policy brief