Dateline Hong Kong: What Will Happen to the Doha Round?

Listener: 17 December, 2005.

Keywords: Globalisation & Trade;

The World Trade Organisation Ministerial Conference, to be held in Hong Kong December 13-18, will be a desperate attempt to get the Doha Round’s trade liberalisation back on track.

The plan was that the conference would settle the framework of the proposed settlement. The details were to be filled in over 2006, for signing in 2007 before President Bush’s congressional authority ran out. But so little progress has been made that the best we can expect is another ministerial conference early next year.

The EU and the US have made offers for eliminating their export subsidies, increasing access to their domestic markets and reducing their domestic subsidies. Each says it has gone as far as it can, but the other side has not conceded enough. Japan remains as recalcitrant.

Meanwhile, the developing economies are expected to open their borders in exchange for market access. They say they are being bullied. There is much inconsistency between the rhetoric of trade liberalisation and its reality. Advocates talk about its benefits and ignore its costs: equally vociferous critics talk of its costs and don’t mention any benefits. The brutal reality is that any trade liberalisation will make some people worse off, as well as making some better off.

The offers of the EU and the US are as daring as they are allowed by their protected domestic interests. The French, following the rejection of the proposed EU constitution, are saying no to further EU concessions, and particular farm interests in the US – beef, cotton, dairy, sugar – are as adamant. The developing world’s concerns are exacerbated by potential EU concessions to the Latin Americans that could damage Caribbean and Pacific islanders.

No article can do justification to the intricate complexities that arise from the subsidies and restrictions, even one that just focuses on agriculture, and neglects timber, fish, manufacturing, services … The Doha Round is about rationalising and reducing them. But some interests will be consequently worse off. Behind this is a disturbing story involving the North American Free Trade Agreement (NAFTA).

A 20-year trade dispute should have come to an end in August when Canada won a supposedly definitive ruling under NAFTA, which ordered the US to drop its punitive duties on Canadian softwood and refund the $US4 billion- odd already collected. But the US has refused to comply. Canada’s Industry Minister calls the US “hypocritical” and “a bully”. If the US treats its long-time best friend and neighbour so cavalierly, abrogating disputes procedures when it suits it, what is the value of any free-trade agreement with the US?

Yet, a world without progress on the Doha Round could be as frightening. Perhaps the main players would, after reflection, recommit themselves to improving international trading arrangements. More likely, a breakdown could lead to brutal trade wars reminiscent of the 1930s, which helped precipitate World War II. New Zealand has much to lose in such a scenario, which is why it is to be welcomed that our negotiating team in Hong Kong is bipartisan, with Tim Groser, new National MP and ex-WTO ambassador, teaming up with ministers Jim Sutton and Phil Goff and the officials from the Ministry of Foreign Affairs and Trade.

World trading arrangements are rigged against our efficient producers, depressing their prices, costing them and the New Zealand economy dearly.

Much of our growth in the past few years has been the result of the partial liberalisation from the Uruguay Round, which raised our export prices nearer to those of our heavily subsidised domestic competitors. One unpleasant (for us) outcome of the Doha Round may be the rich countries giving generous concessions to the developing ones and minimal offerings – sufficient to save face – to each other, but nothing of value to us, and their continuing to protect our competitors in order to conserve their domestic support.

But as gloomy as that prognosis is, a world without a successful round could be much worse. We have – correctly – emphasised multilateral over bilateral international relations. A world in which trading blocks and bilateral agreements predominate, with trade wars rather than the rule of law, would be treacherous for small countries. As Lee Kuan Yew, from just as small Singapore, pointed out, whether elephants make love or war, the grass still gets trampled on.

A related speech written about the same time.