Beyond Doha – Part IV

The head of the WTO is trying to lay out an alternative to the total collapse of the Doha Round in an op-ed in the International Herald Tribune – Pascal Lamy: What now, trade ministers?

Even the least ambitious proposals would have cut trade distorting farm subsidies by two to three times the previous round of talks. Export subsidies would have been eliminated. For the first time members would have limited fishery subsidies, which contribute to the depletion of our oceans.
The vast majority of exports from the very poorest countries would have faced no barriers to trade, and practices that had crippled African cotton farmers would have been substantially reformed.
Powerful tariff-cutting formulas that were on the verge of agreement would have opened global markets as never before. And the services negotiations held the promise of new business opportunities in sectors like express delivery, banking, insurance, computer services and communications.
Can this considerable foundation be retained?

This may constitute the so-called Doha-lite agenda that the US has already rejected – partly at the urging of business groups such as the Business Roundtable. But the breakdown of the talks may have shocked negotiators enough to force them to re-think the scope of the agenda. Already the US and Brazil are talking about how to restart the talks, according to the Financial Times.
As Bruce Stokes pointed out last January in “Salvaging the Doha Round”:

A limited agreement would have undeniable benefits. U.S. multinational corporations would, at a minimum, lock in their current level of access to developing-country markets. Congress would not have to make deep, politically painful cuts in farm spending. And the WTO—with the rules and dispute-settlement mechanism that are invaluable to day-today commerce—would not be called into question, a potential casualty of a failed Doha Round.

Locking in the services parts of the agreement, as agreed to last December at the Hong Kong ministerial meeting, would be seen by many as a major step forward. As an OECD study puts it:

On some counts, the gains from services liberalisation could exceed gains in the area of goods by a factor of five. Developing countries stand to be amongst the major beneficiaries, not least because of their growing role as exporters of services. Developing countries are particularly successful in sectors such as port and shipping services, audiovisual, construction, and health services. And while developing countries have a clear comparative advantage in labour-intensive services, such as construction, technological advances in the telecommunications and computer industries has enabled them to become highly successful in skill-intensive computer-related activities.
But it may be through the opening up of imports that the greatest welfare gains will be realised –or forgone – from services liberalisation. This is because of the critical effects of services barriers on downstream users. Ongoing OECD analysis finds that if account is taken of services barriers, the effective rate of protection for some agricultural and manufacturing sectors actually turns negative, meaning that services barriers contribute to effective taxation of these industries, further compounding the overall distortions to the economy. Examples of manufacturing industry in developing countries that are effectively taxed by services barriers include motor vehicles in Brazil, chemical products in Romania and mineral products in Thailand.

Of course, opening up services will run into the buzz saw of controversy over offshoring. But, since the US economy is already open to offshore services, opening of other nations to our services may be a win for the US. It is certainly a discussion that needs to be undertaken.

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