According to a story in today’s Wall Street Journal, it looks like we might finally have closure to the Doha Round of trade negotiations. But, it won’t be the large deal that was envisioned a decade ago. But it might be a scaled down version the “Doha-lite” mentioned a few years ago. WTO Director-General Pascal Lamy is now using the term “early-harvest. “As the story relates:
Mr. Lamy on Tuesday outlined the new, more restrained approach in a speech to ambassadors. “Even though the Ministerial is in December, we cannot afford a Christmas tree,” he said, comparing the overburdened holiday decoration to a trade agenda with too many items.
That remark suggests the era of big, multilateral trade deals is over, say WTO officials. In the future, trade deals will either not involve every WTO member, a so-called plurilateral deal, or will be limited in scope. The Government Agreement, a 1994 pact on the fair awarding of government contracts, signed by 39 countries, is seen as a model.
I’ve been saying that for years. It became clear to me after the Uruguay Round that we may have seen the end of large multilateral deals. Here is what I wrote 5 years ago:
During my Senate staff career, I was involved in the beginning and the end of the Uruguay Round. When we finally passed the implementing legislation, I mused out loud that I thought this would be the last global round of trade negotiations. None of my colleagues agreed – and some of the old hands seemed taken aback at such heresy. They argued that you can only get an agreement by linking everything in a big package. (In diplomacy – this is known as “linkage.”)
Over a decade later, I still thing I am right. It is not just an issue of a backlash against globalization and a rise of protectionism. That is certainly a factor — and a point that will be hyped over and over again should the Doha Round fail.
But there is much more going on – especially in the internal dynamics. Global trade talks have become to complex and overarching to succeed in one mega-negotiation. The dynamics that made these trade rounds work is no longer present. Trade talks aren’t about just trade any more. They are talks about the harmonization of economic rules. As such, the old trade-offs no longer apply.
In previous negotiations, the focus was on tariff reduction. I’ll reduce my tariffs on steel if you reduce your tariffs on autos. This allowed for a win-win (from economists point of view) situation that pushed for lower and lower tariffs. Everyone agreed that the end point was lower tariffs. The question was how to get there.
In the new talks, it is unclear how the trade-offs work, and in what direction the dynamics points. I’ll lower my tariffs on steel if you increase your patent protection to 100 years? I’ll allow you to subsidize your aircraft industry if you don’t ban my genetically-modified beef? I’ll decrease my agricultural subsidies if you reduce regulations on investment banking?
We don’t have any agreement on what the end point should be. We have a general idea – “open economies” – but we differ dramatically on what that means and on the specifics.
In addition, I’m not sure that the Doha Round is even looking at the right set of issues. As I’ve said before (After Doha: What The WTO Is Not Talking About), it may be the last trade negotiations of the industrial era – not the first of the information age.
My gut reaction to the trade talks is that we will have to approach each of these economic regulatory issues separately – possibly in separate forums. Yes, this being a negotiation, there will be linkage. But the complex web of links will not become so great as to bring the entire structure down.
I, for one would welcome, such as shift. As the I-Cubed Economy matures, these economic harmonization discussions need to be ongoing. We are still feeling our regulatory way – and the economy keeps shifting. It is not as simply a matter as hitting a zero tariff number or eliminating a trade barrier. It is an evolutionary process that we need to engage with other countries real-time and continuously.
That is much more difficult that negotiating a trade agreement – but also much more important.
So, if the Doha Round collapses, let us not take it as a sign of failure. Rather, it is an opportunity to build the new international framework for regulating the new global I-Cubed Economy.
So, let’s finish off Doha — and then we can get on with the real work of building that new framework.