How vested interests scuppered the Doha trade talks

published 7 August 2006

Are the Doha negotiations truly over?

Yes. The Doha round of world trade negotiations was abandoned last week. Last-ditch talks in Geneva between six major players the US, EU, India, Brazil, Japan and Australia, who account for three-quarters of world trade collapsed in failure and recrimination. It was a sorry end to five years of bargaining that aimed to "lift millions out of poverty, curb rich countries' ruinous farm support and open markets for countless goods and services", says The Economist. The Doha round, launched soon after September 11th, aimed to demonstrate that "a prosperous and united world" could rise above Islamist terrorism. Instead, the common good was defeated by special interest politics. If the wreck is terminal, as seems likely, everyone will be the poorer.

What caused negotiations to break down?

The talks were already in trouble before Geneva, having stalled badly in Cancun three years ago. The final breakdown centred on irreconcilable differences over farm liberalisation. The US demanded sharp cuts in farm import tariffs; the EU, Japan and India baulked, insisting that the US first slash its agricultural subsidies. But underlying this, says Alan Beattie of the FT, Doha lacked the three ingredients vital for a successful global trade deal: agreement between the EU and US, overwhelming belief in a multilateral system and exporters pushing hard enough for a deal to overcome domestic protectionism.

Who's the culprit?

EU trade commissioner Peter Mandelson and former Tory agriculture minister John Gummer normally unlikely bedfellows both point their fingers at the US. Mandelson says America tried to extract a "disproportionate" price from the developing countries and expected every concession it made to be matched "dollar for dollar". While the US talks free trade, it is "completely unable to stand up to its farm lobby", says Gummer. But not according to Irwin Stelzer in The Sunday Times: "rich French farmers" shot down the deal, he says, helped by politically potent farm blocs in Japan and India. However, it was more than a stalemate between the US and the EU, says Liam Halligan in The Sunday Telegraph. Today's world is more complicated and "emerging giants" such as China and India also need to be squared off. The West can no longer carve up a deal and ram it through, so achieving a compromise is far harder.

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Can the talks be salvaged?

Previous trade negotiations have stumbled only to rise again, points out The Economist. Take the Uruguay round, which was suspended in 1990, but was followed by a deal three years later. But the fault lines in the Doha round are deep and reviving the talks could take years. President Bush loses his "fast track" negotiating authority granted by Congress next summer, meaning the window of opportunity to translate an international agreement into US law without the deal being torn apart by competing special interests is now almost certainly closed, says the FT. And nobody has the slightest idea how to revive the talks, so the hiatus may be prolonged, agrees Larry Elliott of The Guardian. They could remain in cold storage until a new president arrives at the White House in 2009.

What's the cost of the failure?

According to a World Bank study, dismantling global trade barriers would generate an extra $300bn annually for the world economy, with developing countries the main beneficiaries. Longer-term, says William Keegan in The Observer, the setback could reverse the progressive dismantling of trade barriers, which, since the Marshall Plan to reconstruct war-ravaged Europe, has been a key driver of the post-1945 economic success story. Multilateralism has underpinned free trade, boosted commerce and done much to limit global conflict. But, says Halligan, protectionist sentiments are rising and protectionist interest groups are exerting more leverage than potential beneficiaries of free trade.

What will happen now?

Expect a rash of one-to-one deals between developed countries and the trading partners they are keenest to cultivate, says Heather Stewart in The Observer. The poorest countries, which Doha was intended to help, can be ignored as the US, EU and others cherry-pick their favourites for signing bilateral agreements. Nearer to home, work to reform Europe's e40bn a year Common Agricultural Policy (CAP) has been set back just as the EU was inching nearer an agreement to pare back the CAP and make it palatable to developing countries. Meanwhile, the WTO's director-general, Pascal Lamy, plans for next month's IMF meeting in Singapore to agree an aid-for-trade package to help the poorest countries do business with the rest of the world more effectively. But it's "small beer" set against the lost prize of Doha.

What does it mean for China and India?

Big developing economies such as China and India won't be too affected, says Jonathan Fenby in The Business. They might not say so openly, but their main concern is to maintain growth, rather than help poor nations. China's huge potential domestic market means Western governments will be keen on bilateral deals to open it up for their firms but they will have to offer greater market access for Chinese products in return. India is likely to pursue talks with developing nations, but there are protectionist lobbies in its industrial and agricultural sectors that want to keep foreign competitors out.