Geneva - The 153 members of the World Trade Organisation
(WTO) agree on two things: we're in a hole. And we must keep digging.
The hole is the Doha Development Round, a decade-old
negotiation that was billed as the next stage of trade liberalisation after the
creation of the WTO itself.
After repeated failures to clinch a deal, Doha is on life
support. But nobody is prepared to kill it off.
"There is a Russian proverb that says 'Don't chop off
the branch you are sitting on'," WTO director general Pascal Lamy told
trade ministers, defending the body at its biennial conference in Geneva last
Saturday.
The ministers had collectively acknowledged that the Doha
round was unlikely to be concluded in the near future, but promised to keep
working towards it, despite a gulf in opinions - especially between United
States and China - that makes it almost unthinkable that the WTO could reach
consensus.
Trade diplomats like to point out that the WTO is more than
Doha alone, and failure to complete Doha does not mean the end of the WTO,
since the body also monitors world trade and arbitrates disputes brought to it
by member states.
But with so much negotiating capital already tied up in
Doha, every new proposal to modernise WTO rules is seen part of a wider wrangle
over the trade round, paralysing discussion.
And if the WTO does not keep the world's trade rulebook up
to date, it risks losing its position as the global arbiter. Recent allegations
of protectionism, such as currency manipulation and environmental taxes, are
outside the WTO rules, or at best a grey area.
Lamy has blamed the paralysis on a "crisis of
multilateralism": a failure of diplomacy that has also hobbled
negotiations on the eurozone crisis and global climate talks.
"The international system can't be in good shape
because the members of the international system are in bad shape," he said
at a briefing a fortnight before the conference. "They've got very little
energy left for international compromise."
Doha was originally meant to help developing economies, but
that idea looks out of date now that India, Brazil and most of all China have
grown into trading superpowers. For that reason some officials say Doha,
launched at the same time that China was accepted into the WTO, was doomed from
the start.
And equally, that helps explain why China, India and Brazil
are its most vocal champions, determined not to let any new ideas gain traction
unless there's a payoff.
"There's no question of redefining Doha,"
Brazilian Foreign Minister Antonio Patriota said on the eve of the WTO
conference. "We agreed on its mandate 10 years ago."
In short, Doha and arguments about Doha are using up all
WTO's oxygen and it has been largely unable to evolve for a decade as a result.
Wrong kind of success
That is not to say global trade governance is not changing
at all, and the WTO's ministerial conference notched up two big successes. But
both, in their own way, compound the problem.
One was the decision to grant Russia membership after 18
years of talks, so that at last all the big economies will be inside the club.
The other was a long-awaited reform of the Government
Procurement Agreement (GPA), which will open $100bn of government contracts to
foreign competition every year.
Russia has promised to play a positive role once it joins
midway through 2012 and it may not even get into Doha negotiations, but having
another big and opinionated player at the table will not make it any easier to
reach consensus.
The procurement agreement is even more pernicious for Doha,
since it is a side agreement, a voluntary pact that only 42 of the WTO's 153
members have signed up to.
For many, the fact that 42 countries could agree is proof
that success lies in smaller, "plurilateral" agreements that forge
coalitions of the willing rather than those like Doha which include everyone.
Many WTO members, including the EU and the United States,
are already discussing setting up an agreement on trade in services, which
could liberalise rules on accounting firms, doctors or insurance companies
working across borders.
Many countries are also interested in the idea of cutting
tariffs on parts used in renewable energy. Others want to move quickly to
capture some of the "easy" wins from Doha, such as reducing cost and
red tape around customs.
But unlike the trade in services, which has an exemption
under WTO rules, such side agreements will only be WTO deals if every WTO
member signs up. That is unlikely.
"We do not think that there should be peeling off,"
said Indian Trade Minister Anand Sharma.
Without the WTO agreeing, what hope for side deals?
The simple answer is every WTO member has already signed
separate deals affecting trade, often in a drive for regional integration, or
to establish global rules in areas such as the trade in endangered species.
The WTO said it is unfazed by regional agreements, saying
they will not distort world trade as long as there are enough of them. If
everybody has preferences, nobody has preferences, Lamy said.
Building blocs
But the flowering of regional trade deals has moved up a
gear as the big powers - the United States, the European Union and Russia -
race to build blocs to compete with each other and with China.
The United States is pushing the TransPacific Partnership
(TPP), whose members include Australia, Vietnam, Malaysia, Singapore and Chile.
"Part of our belief... is saying: 'Let's not handicap
ourselves by saying we can only do this one way," US trade representative
Ron Kirk told Reuters in an interview.
"It may be that they can become the fuel that ignites a
broader discussion about how you merge those into a multilateral stream like
Doha."
Lamy played down the suggestion that breakaway groups would
damage the WTO and said they were nothing new. Fear of "plurilateral"
agreements was generated by paranoia and mistrust between governments, he said.
But some of Lamy's staff are worried and privately blame him
for leading the WTO into a dead end by allowing Doha to stifle agreement. Lamy,
who is due to step down in September 2013, argues that it is not up to him, but
WTO members, and they have consistently chosen the Doha road.
After the latest push to clinch a deal came unstuck earlier
this year, Lamy told Reuters that he had no plans to go early.
"You never say never. But it's not my temper (style).
So if that happens, it would be a surprise, even to me."