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The Doha deal breaker

Gulf Times | Friday, 5 September, 2008

The Doha deal breaker

By HRH Prince El Hassan bin Talal

IT is clear that the collapse of the World Trade Organisation talks in Geneva signals the end of an era. But for all the gnashing of teeth by trade ministers and hand-wringing by media pundits, it is hard to sort out what this breakdown may portend.

The Doha Round, which began in Qatar in 2001, was aimed at opening markets through reciprocal cuts in farm subsidies and trade barriers among the WTO’s 153 member nations. After seven years of contentious negotiations, the talks fell apart recently when some nations held out for a ‘special safeguard mechanism’ to protect subsistence farmers from a possible surge of low-price foreign imports that would leave their agricultural products less competitive.

All sides have expressed consternation. Many agree that the real losers will be the smaller and poor developing countries, which had hoped that Doha would offer them greater access to global food markets. Some blame India and China for free-riding on the benefits of the multilateral trade system while undermining its architecture. Others believe that the domestic policies of America and Europe in protecting their farmers are just as short-sighted, particularly now that record food prices offer them a golden opportunity to lower agricultural subsidies.

Many analysts worry that the unwinding of Doha will dramatically accelerate bilateral and preferential trade agreements and protectionism — an increasing trend since 2002. They fear that the negotiation of individual agreements outside of the WTO umbrella — especially by large entities such as the US, Europe, China, India and Brazil — will deflate confidence in the global economy and strain the credibility of the WTO as a permanent forum to set and enforce rules for trade policy.

Deep doubts about the virtues of trade liberalisation are also surfacing. Political observers fret that this first international failure to liberalise trade since World War II could lead to much fiercer competition for resources, mercantilism and autarchy. US trade representative Susan Schwab claimed that the Doha breakdown “rolled the global trading system back not by one year or by five years, but by 30 years”.

Some international activists suggest that the breakdown of the WTO talks could also weaken the prospects for other multilateral agreements, including discussions on the social effects of globalisation, climate change, nuclear non-proliferation, energy security, weapons of mass destruction, failed states, and terrorism.

There is a ring of truth to all these claims, yet they do not spell out what is really going on. Forget the trade propaganda and news headlines. The real deal breaker here is not the resistance to liberalising agriculture — that is only the tip of the iceberg. From the launch of the modern world trade system in 1947 until the start of the Doha Round, the world’s rich nations, influenced by transnational corporations, set the agenda for trade negotiations, carefully massaging global decisions in their favour. During the past several years, developing states have at last formed the economic muscle to stand up to these rich interests and neutralise their bargaining and market power.

There is no question that the demise of the Doha Round — reflecting the increasing strength of China and India, which refuse to reduce import tariffs and farm subsidies, and the decreasing strength of the US and Europe, which remain in denial over losing hegemony in the global marketplace — augurs a shift in power from the Atlantic to the Pacific during the first quarter of this century. But it is a mistake to interpret this simply as a struggle between rich and poor states, a clash of civilisations, or a battle between democratic- and autocratic-leaning states. As the trade winds grow turbulent and the tectonic plates grind, the eerie sounds we are hearing are those of the entrenched structures of national sovereignty mashing up against the emerging institutions for global co-operation.

It is not that the framework of legal negotiations and trade rules has broken down. To the contrary, the WTO’s mechanism for settling disputes — which makes the decisions and rules of the world trade body and its members legally binding and enforceable through economic sanctions — is an encouraging success. And it is not that a strong dose of liberal democracy is absent from the international machinery.

The problem is rather that the principles of tolerance and pluralism enshrined in the one country/one vote framework of the WTO is working only too well, leading to a gridlock in global decision-making. With the economic prominence of China, India, Brazil, Mexico, South Africa, Saudi Arabia, South Korea, and Australia changing the global balance of power, it has become easier for nations with strong voices to exercise their veto on collective decisions.

It seems now that our increasingly multipolar world is not rejecting multilateralism per se, but the liberal brand of multilateralism that has prevailed for more than six decades. Even the rhetoric of the liberal system — which claims that the lowering of tariffs and the reduction of other obstacles to trade automatically produces a strong incentive to settle political differences, increase the economic welfare of the poorest, and thereby prevent war — now seems like an antiquated rationalisation of Cold War power politics.

Indeed, laissez-faire has itself become the end, rather than the means to an end. It encourages nations to elevate the sovereignty of their domestic policies to the level of a sacred principle, while dismissing the genuine interests of other nations and humanity at large as a function of market competition and comparative advantage — without realising how this erodes their own sustainability and, ultimately, their own sovereignty.

The irony is that the regime of trade liberalisation is in crisis precisely because it led to greater globalisation, and this deepening global economic integration in turn has accelerated privatisation and challenged the primacy of sovereign borders — the very principles which underpin trade liberalisation.

In our free trade gone-wild world, property rights are being applied in areas where they have never before existed and may not pertain (such as intellectual products, services, biodiversity, genetics), and governments have not learned to use their sovereignty to advance multilateralism for both their individual interests and the global common good.

It is sobering to contemplate, but the present trading system is collapsing because the high echelons of commercial and political power are unwilling to bend to the common interest in creating a larger and more representative global economic framework. The collapse of Doha simply underscores the irrelevance of trade liberalisation in a digital world that is increasingly embracing open access, transparency, human rights, and sustainable development.

And the lack of commitment to undertake the necessary reforms in world trade will continue as long as property and sovereignty remain unchallengeable domains.

There must be a new starting point, based on the recognition of an added dimension in world trade — the realisation that some goods are private (commercial), some are public (governmental), and others are common (for the benefit of people everywhere). History teaches that where this commons sector is not clearly identified and organised, people are easily dispossessed of the resources they need for survival. In addition, the resources that were traditionally considered common property and managed by local people and communities are now being commodified and traded by multinational corporations without regard for their renewal.

The recent rise in food, fish, lumber, energy, and water prices should be a warning sign that neither the global trading system nor government regulation is capable of managing and regenerating cross-border resources as effectively as can local people. Since ecosystems and social and cultural groups often transcend national borders, there is a potential community of interest between producers, consumers and those with local knowledge and expertise for protecting and renewing these resources. Bringing them together is especially important in areas such as the Middle East, where cross-border agreements on water and energy can also diffuse political tensions and lead to greater trust and co-operation in the region.

The creation of supra-national bodies to help co-ordinate the provision of common resources is urgent for both rich and poor nations. The increasing integration of markets and the growing crisis of national sovereignty make it necessary to further world trade negotiations and disputes through a new generation of common trading rules and standards. If multilateral regulations and practices continue to be standardised through the WTO, these rules must now be based on globally shared values that include, yet transcend, the objectives of the commercial and political sectors — thereby creating space for the commons sector and its unique capacities for innovation, experimentation, development and sustainability. This requires a common trading system with very low (or no) barriers at state borders.

We can envision a common trade organisation — using standards set by agencies such as the International Labour Organisation in its Proposed Declaration on Social Justice for a Fair Globalization (2008) and the United Nations Environmental Program in its various policies on the environmental impact of trade — to ensure the provision of and access to common goods in a way similar to that of a national institution of government.

British Prime Minister Gordon Brown’s recent proposal for oil-producing countries to increase their supplies and investment in oil in the short term — and dedicate their new financial surpluses to exploring alternatives to oil, increasing the diversity of low-energy sources, and improving energy efficiency over the long term — is also a step in the direction of economic co-ordination and common trading.

The new commons of Trade Multilateralism 2.0 would require a rule-based system to negotiate trade collectively, involving the maintenance of global common goods in the interests of all businesses, states and people. That is an inspiring prospect to embrace in the death of Doha — the emergence of a Common Trade Organisation uniquely focused on poverty reduction, development and capacity building through the shared management of global resources.

HRH Prince El Hassan bin Talal has initiated, founded and is actively involved in a number of Jordanian and international institutes and committees with particular emphasis on humanitarian, interfaith issues and the human dimension of conflicts. He is also the author of nine books.

 source: Gulf Times