Germans would be interested to know that Chancellor Angela Merkel teamed up in 2010 with British Prime Minister David Cameron (and, in turn, both brought on board the President of Indonesia and the Prime Minister of Turkey) to appoint an Independent Expert Group, co-chaired by me and former WTO Director General and EU Trade Commissioner Peter Sutherland, to help bring the Doha Round of Multilateral Trade Negotiations (MTN) to a close after nearly ten years of negotiations. She even turned up at Davos where we presented our Report and spoke emphatically in support of Doha, as did Mr. Cameron.
The joker in the pack, who was the kill joy rather than a source of merriment and support, was the United States. When I said that it was disappointing that President Obama had even omitted mentioning Doha in the State of the Union address, and that one could only hope that this was because he did not wish to mention a four-letter word to bring civility into American political discourse, many in the audience laughed, but not Senator John Kerry! In fact, the United States under the Obama Administration, already under siege from the labour unions who were hostile to trade, was resolutely opposed to closing the Doha Round unless numerous concessions were made to appease its business lobbies.
Thus, Obama administration wanted Doha Heavy: several demands for more concessions by others, especially the major developing countries, including new concessions in services, were to be negotiated. This meant, of course, that the conclusion of Doha would be put off by some years: Doha would then be dead for all practical purposes. So, many preferred to opt for Doha Lite: add a few concessions by the US and India on agriculture (which had earlier been a sticking point: the US concessions were inadequate and the Indian demands for special Safeguards were excessive), some minor concessions in manufactures that would appease difficult Congressmen in the US, and close the Round. The long laundry list of concessions demanded but not negotiated would then be handled by declaring a new Round of “unfinished agenda” just as the Doha Round could be seen as one, tantalizingly an Obama Round, addressing the “unfinished agenda” of the Uruguay Round. But this was roundly rejected by the US.
In the end, Pascal Lamy, the Director General of WTO and a Frenchman who is a freak phenomenon in being a socialist and a free trader, made a pitch to settle for just a few concessions for the 49 Least Developed Countries (LDCs). I called this Doha Lite and Decaffeinated, meaning just coloured water! A principal item here was the extension of one-way duty-free access to the LDCs. But the Europeans had already made this concession through the Everything But Arms initiative: and this was before the Doha Round was announced, so could not be counted as one of Doha concessions! So, the real concession was to be made by the US as part of the Doha Round. But the US insisted that even that concession would not be made except as part of Doha Heavy.
In short, the US killed Doha. Or at least put into Intensive Care. The WTO Ministerial in November 2011 ended without concluding Doha, in defiance of all the efforts that leading scholars and statesmen worldwide had been making in its behalf. The astonishing thing is that Doha was a multilateral-liberalization initiative; and ironically, it was killed by President Obama who had ironically been awarded the Nobel Peace Prize by Norway in the expectation that he would promote multilateralism and turn his back on US unilateralism!
There has been an attempt at preventing the finger being pointed at the US for this enormous setback. When Doha failed to be settled at the Cancun meeting of the WTO in 1993, Robert Zoellick, the US Trade Representative at the time, and even Lamy as the EU Trade Commissioner, did not hesitate to blame the developing countries who had refused to go along with inadequate concessions on agriculture. But who will point a finger at the US? One does not bark at a Rottweiler!
Yet, failure to do so means that the turning of what my great teacher Charles Kindleberger called an “altruistic hegemon” who provided a public good to the world, into what I have called a “selfish hegemon” which uses its pre-eminence to undermine a public good like the multilateral world trading system, will have passed without the public condemnation that alone can force it into better behavior.
Where does that leave us, however? There is great complacency that the fall of Doha is no cause for lament and that the WTO as the apex institution for trade will survive intact. It is as if loss of faith in Catholicism will not affect the Vatican. Doha has three legs: multilateral liberalization; framing of trading rules; and the Dispute Settlement Mechanism. The first is now broken. In turn, it cannot but break the other two.
With multilateral trade liberalization now almost abandoned, the world is now left exclusively to bilateral and “regional” Preferential Trade Agreements (PTAs). These were proliferating even earlier, creating a hugely chaotic pattern of preferences that I have called a “spaghetti bowl”. These were deplorable and the discrimination that they were founded on would have turned in their grave the grand multilateralists from the time of US Secretary Cordell Hull, who won the Nobel Peace Prize (among other things) for promoting multilateral free trade.
And now, the US, not content with killing Doha, is even promoting the regional PTA called the Trans-Pacific Partnership, compounding its folly twice over.
In the absence of MTNs like Doha, these PTAs will also become the arrangements where rules such as anti-dumping and subsidies codes will be set and will then be muscled into WTO at Geneva. Similarly, the Dispute Settlement Mechanism at the WTO, a proud achievement in 1995, will also be in danger of falling into disuse as bilateral and regional dispute settlement arrangements will take over: and where the hegemons will expect that this asymmetric power will get them more favourable adjudication. None of this is cause for celebration; rather it calls for lamentation.
But I cannot conclude without commenting on the different but related issue of Protectionism which relates, not to moving forward with liberalization but with preventing a falling back. When the crisis broke out almost four years ago, all trade scholars noted that the WTO had played a role in containing protectionism: it provided institutional obstacles to raising trade barriers freely unlike in the post-1929-Crash 1930s when no such institutional constraints were present. So had the role of ideas: few believed now that macroeconomic crises could be resolved by raising trade barriers. Structural changes also meant that retaliation was now easier and more likely.
The continuing crisis, and the destructive US undermining of Doha and hence of the WTO, have combined to make Protectionism now a more potent threat. The recent G20 meeting hardly focused on these threats, unlike in earlier meetings like the one in London with Prime Minister Gordon Brown presiding. Whether this is from indifference or complacency, it bodes ill for the world trading system.
The original article appeared in Handelsblatt.