Political will necessary for trade talks’ success

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: The Doha round and the recent WTO talks in Geneva would be a tough act to follow for future negotiators. Political and economic commentaries writing off the Doha Round for the present abound citing the unfavourable global scenario—the oil and food-price shock, spiraling inflation and banking crisis as well as the spectre of looming elections for key WTO players. Implicit in such arguments is the assumption that the world economy would rebound by around 2010 when the Doha round could possibly be successfully closed.

This argument, however, is beset with a number of ifs and buts. The possibility of a Democratic presidential candidate winning the US election may signal the return of issues like labour to the trade agenda with possible disastrous consequences as witnessed at Seattle apart from a boost to protectionist policies to step up domestic employment and growth.

The French Presidency of the EU and the US Farm Bill, 2008 could slow down agricultural reforms and allow larger domestic subsidies in the interregnum, thereby inflating the base for calculations in future. The key trade negotiators of the new QUAD in WTO—the US, EU, Brazil and India may no longer be around and it has been historically the case that personal relationships and trust are an integral part of the closing stages of a round of negotiations. The circumstances currently may be less than propitious but they could be much worse in 2010 and beyond.

A second argument advocated for intrinsic failure of this round is the perceived lack of substantial benefits to most members, particularly the key developed countries in sharp contrast to previous rounds where the gains were quite big. Given the massive global food price increases, benefits from reduction of agricultural subsidies could sharpen the increase adversely affecting poor consumers from developing countries whose food consumption constitutes a much larger portion of the consumption basket.

Similarly, the welfare gains from tariff reductions for industrial goods in WTO is likely to be minimal given the autonomous liberalisation in all key emerging markets leading to actual reduction in import prices. This is accentuated by the faster liberalisation through the free or preferential trade agreement route being taken by all key players, both in magnitude as well as time frame of such cuts.