Should we care that world trade talks have collapsed?

Opinion piece (The Daily Telegraph)
Katinka Barysch
31 July 2008

After nine days of fierce haggling, trade ministers from the 153 countries that are in the World Trade Organisation gave up this week. It is not clear whether the Doha round of multilateral trade talks - seven years in the making - is now dead. Should we care?

Economists say that the direct economic benefits from finishing the round would be well below one per cent of global output. But the costs of failure could be huge.

First, a Doha agreement would force the EU to further reform its Common Agricultural Policy (CAP). The EU had offered to abolish all export subsidies, and to cut domestic farm support and import tariffs.

That would have been a good start for the review of the CAP that starts this year. And it could have freed up billions of euros from the EU budget that would be better spent on innovation, climate protection or development.

Second, business in the UK and elsewhere is wrong to say that the Doha round doesn't matter for them. Most countries around the world now apply manufacturing tariffs that are much lower than the ceilings fixed in the last trade round in 1993. They could push them up to these ceiling without penalty at any time. Legally fixing manufacturing tariffs nearer their currently applied levels would give companies the certainty that they need to trade and invest abroad.

Third, if Doha fails, the WTO could lose much of its credibility, and the trend towards (less desirable and discriminatory) bilateral and regional trade agreements would accelerate further.

With only half of all Americans now believing that international trade is good for them, protectionist sentiment rising in Europe, and emerging countries becoming more assertive, the world needs stronger global trade rules and dispute settlement mechanism, not weaker ones.

Finally, as Charles Grant and I have argued in our recent report Can Europe and China shape a new world order?, this is a critical time for persuading emerging powers that multilateralism actually works for them.

They should work through international rules and organisations, not follow narrow-minding power politics. The WTO (and its predecessor, the GATT) is one of the cornerstones of the post-war multilateral order and the one that arguably matters most for China, India, Brazil and other rising economies.

If the WTO does not deliver, how can we convince these countries that they should take the UN, the World Bank or the Kyoto regime on climate change seriously?