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The real cost to the global economy of the lack of progress in concluding the Doha Development round is not yet apparent.  We have just concluded the most successful, sustained period of global growth in history.  Hundreds of millions have been lifted out of extreme poverty.  All of this has been underwritten by agreed rules of international trade.  This predictability of a rules-based system, based on agreed arrangements, arbitrated by a binding disputes system, has been the World Trade Organisation’s gift to progress and peaceful development.

The excuses for the present failure to progress further at the Doha Development round are heroic misreadings of history.  Some have claimed the Doha round was only successful because of 9/11 which is not true.  Others have said there was no demand for the launch and even suggested we should have waited until China had bedded in as a WTO member.  The opposite is the truth.  The injustices and inefficiencies of the status quo were not going to be addressed without a wide new round.  We had been negotiating for 15 years China ’s membership, and for 50 years development issues such as agriculture had been sidelined to the cost of most developing countries.

Rich countries subsidise their farmers at the expense of their consumers by a billion dollars a day.  The UK exports almost $60 billion to the US and faces an average tariff of less than 1%, and this raises $400 million in revenue.  The US gets about the same revenue from Cambodian exports of $2 billion because Cambodians face a 17% tariff, such is their product mix.

As the wind goes out of the sails at the WTO regional and bilateral deals expand. From a few dozen a couple of decades ago to over 200 done, or being done, now.  This is understandable.  Politicians want to sign things, achieve something.   But most are not free trade agreements, they are preferential trade deals.  Thus, American beef can have an advantage in South Korea at the cost of Argentine beef.  NZ wine into China at the cost of South African wine.  Economists suggest many of these deals are counter-productive as they create trade diversions, unsettle the global supply chain, create new privileges, new friction, and with different rules of origin, new complications and costs.  They most certainly give new powerful levers to politicians who will use them.  When the Baltic States and Sweden joined the European Union, they had to put up tariffs in agriculture.  The Baltic States had a successful confectionary industry based on inexpensive sugar from developing countries.  Upon joining the EU, they had to buy subsidised European sugar.  The business collapsed; goodbye local jobs and jobs in Africa .  When the US cuts bilateral deals with Africa and other countries in textiles, part of the deal is that fabrics must be sourced from the US .

All roads lead to China and the big economies, nobody is knocking on doors in Papua-New Guinea, Bolivia or Africa .  Lobbyists love regional and bilateral deals, it’s easier to motivate domestic interests, it’s more real, immediate and quantifiable, thus more lobbyists’ money was directed at the US/Colombia deal that was the deal to conclude the Doha round.  The poor, as usual, will be left behind, the powerful strengthened.  Whatever happened to the APEC (Asian Pacific Economic community) goals of free trade among developed countries by 2010, and developing countries by 2020?

In deals with China, China has managed to get inserted vague language to protect local markets against ‘export surges’, something denied them at the recent WTO Ministerial, which was a key reason for the collapse of those talks.  No rules of proof or material damage, no binding disputes mechanism in any of these deals, agricultural interests are always diluted. 

NZ has recently, to heroic fanfare, announced we will be doing a deal with the US , something already agreed by Australia and the US .  Denied NZ because of foreign policy differences.  Actually, we will be doing a deal in concert with Singapore , Chile and Brunei .

The gift of multilateralism is not just the economic logic, but the distance it puts between immediate foreign policy ambitions, as well as putting smaller players into the mix.  In the WTO, unlike the UN, politics seldom intrude.  Each member is entitled to the gains made by another member on the basis of ‘most favoured nation’ status.  Thus, Cuba sits at meetings with the US , even in the most difficult times, India and Pakistan shared speaking notes.

If I were a Minister, I too would do the deals, and I do them aggressively because of the costs of being left out.  So, I’m opposed to all of this in principle, but principles in politics are not the most important thing, national interest is the most enduring factor, however short-term.

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