Stalled Doha Round Opens Trade Opportunities

In November 2001, the world’s trade negotiators undertook an ambitious round of multilateral negotiations under the auspices of the World Trade Organization (WTO). A decade later, those efforts have stalled.

With medicine too sour for developing and developed countries alike to accept, the Doha Development Round of negotiations cannot succeed as the international trade community envisioned. Trade negotiators have tried to make Doha work since 2001, but demands from developing countries for special treatment, among other issues, have brought progress to a standstill.

A change of course for the world’s trade governing body will not destroy the institution, as some fear. New avenues for trade liberalization, consistent with the WTO’s rules, should be considered, including a services trade plurilateral agreement.

Three broad courses of action are under consideration. The first is to continue to negotiate for a large package of trade liberalization, essentially to “stay the course” and hope that additional negotiations will lead to a breakthrough. It is unlikely that such an approach will yield results. A decade’s worth of negotiations failed to overcome barriers to success, including a renewed push for a conclusion to last spring’s round. Additionally, the Doha Round has been in progress for so long, the topics on the table fail to reflect the rapidly evolving trade issues that are blocking liberalized trade, particularly the services sector.

The second option is to develop a smaller Doha package for the December Ministerial. This package might include customs reforms, agricultural subsidy issues, and duty-free, quota-free access for less developed countries. This strategy reflects the “harvest” idea: Removing portions of the larger Doha Round that are practical and agreeing to them as a separate package. Proponents of this approach see it as more feasible than continuing to negotiate the larger package. Additionally, some trade officials and observers, particularly in Europe, believe agreeing to a smaller package would create momentum for negotiations on the larger Doha package, which they view as essential for the WTO to maintain its integrity.

However, this strategy faces significant pitfalls. It is unclear how momentum from a smaller package would create the political will to overcome the roadblocks that have kept the larger package from being agreed upon for a decade. Moreover, officials disagree on what would be acceptable in a smaller package. Based on what has been proposed, developed countries such as the U.S. would have little to gain from the smaller package, but would bear most of its costs. It would be very difficult to convince the U.S. to accept a one-sided deal. The U.S. is notoriously skittish about trade liberalization, and has failed to ratify even the advantageous bilateral agreements with Colombia, Panama, and South Korea.

The third option is controversial, but has growing support in the business community: A plurilateral agreement on trade in services. This agreement would include only those countries willing to participate. Unlike agreements concerning agricultural products or manufactured goods, services agreements can be plurilateral under Article V of the General Agreement on Trade in Services (GATS). The agreement would allow for greater trade liberalization in services, the most significant sector for growth in most developed economies. Though governments have not endorsed the idea, momentum has been growing in the private services sector. On June 6, the Global Services Coalition, made up of service sector associations from several developed economies, issued a statement calling for a services plurilateral. It is still unclear how much the private sector will push for a services plurilateral and whether or not governments will endorse the idea; however, the proposal will likely be discussed on the sidelines of the upcoming Global Services Summit in Washington, D.C. on July 20.

No government wants to be blamed for “giving up” on the Doha Round. However, in the face of obstacles that many countries are unwilling or unable to overcome, the future of trade liberalization must be considered. To continue a stalled Doha Round only harms the global trading system. If the Doha Round cannot be concluded successfully, alternative vehicles for liberalization should be pursued.

Photo CreditWorld Trade Organization