[DEBATE] : The Death of Doha; The WTO model has collapsed., What's next?

[Riaz K Tayob]

  Copyright 2006 Institute for Public Affairs
  In These Times

  September,  2006

  The Death of Doha; The WTO model has  collapsed.  What's next?

  BYLINE: BY DAVID MOBERG

  ELITE  EDITORIALISTS AND FREE-TRADE devotees gnashed their teeth in
distress
  when  the latest round of World Trade Organization (WTO) negotiations
  collapsed in  late July.  But amidst the hand-wringing, many advocates
for
  the  world's
  poor cheered.  Walden Bello, executive director of Focus on the
Global South,
  said flatly, "The collapse of the Doha Round is good for the  poor."

  How could that be?  Frustrated with what they  saw as original WTO rules
  skewed to benefit the rich, the world's poor  countries wanted to win a
  trade deal that would help them this time  around.  The rich countries had
  promised to make it easier for them to  export their agricultural goods.

  But in reality, the failed  talks were never about helping the poor or
  about development.  Even if  the rich countries had cut tariffs,
subsidies and
  other protection for their  farmers -- as everyone from free-trade
  fundamentalists
  to many developing  nations urged them to do -- the big winners still
would
  have been  corporations.  Cargill, ADM and others that trade and
process  what
  farmers produce stood to profit, not the poor, urban or rural, who
would  have
  gained on average less than a penny a day in income over a  decade.

  The Doha collapse is good for the poor mainly  because it thwarts an
  expansion of a global economy built around opening  markets for
multinational
  corporations and protecting their interests.   As a result, the
collapse also
  signals a
  turning point for regulation of the  global economy, even if it
provides no
  tangible gain for the  poor.

  Bits and pieces of an alternative that promotes a  broader vision of
  social and economic development have emerged, but there is  still no
  consensus (for
  example, over ways to protect workers' rights), let  alone enough powerful
  governments willing to push for it.  Until  governments -- especially the
  United States -- accept the need for a  alternative, perhaps developed
  outside the
  confines of the WTO, the best that  can be achieved is gridlock.

  Although the comatose WTO talks  may eventually be revived, in the
  meantime countries will accelerate  negotiation of bilateral trade
  agreements, like
  the pending agreements  between the United States and both Peru and
Colombia.
  In most cases,  developing countries and especially their poor will likely
  suffer more in  such lopsided negotiations than they would in the
  multilateral  WTO
  talks.

  "I'm cheered by the collapse because I didn't  see anything good coming
  out of this round," says Larry Weiss, executive  director of the Citizens
  Trade
  Campaign, a fair trade coalition.  "That  doesn't mean that the collapse
  presages anything better.  One of the  things it will lead to is a
patchwork
  of
  bilateral and regional deals.   The terms imposed on poorer countries
may be
  even
  worse."

  The biggest multinational corporations, which wanted a new  agreement,
  especially with expanded WTO rules over trade in services (from  financial
  services to water systems), will not be slowed significantly by  this
  failure. But they do face a rockier political road.

  There's overt rebellion against the "Washington Consensus" of free
  trade,  privatization and minimal government from leaders in countries
like
  Bolivia
  and Venezuela.  There's hard-nosed bargaining about the terms of  trade in
  countries like Brazil.  And despite lingering influence of big  business
  money and
  ideology, there is growing, if tentative, resistance to  the old model
from
  Democratic politicians in the United States, who believe  that trade deals
  have to protect labor and the environment and not give  special legal
  privileges
  to multinational corporations (See "The Prairie  Populist: Byron
Dorgan" page
  36).

  Congress approved the  Central American Free Trade Agreement (CAFTA) last
  year by just two votes  (with 15 House Democrats supporting Bush), but
Costa
  Rica
  has not yet  ratified the treaty, and the Dominican Republic has not fully
  implemented  it.  The free trade agreement with Oman also narrowly
passed in
  July,  following exposes of Oman's weak record on labor rights and of the
  widespread  abuse of migrant garment workers in Jordan, whose 2001 free
  trade agreement  had slightly improved labor rights language.  If
Democrats
  win  a
  majority in either house of Congress this fall, President Bush will
have  a
  particularly tough time next year renewing the "fast track"  trade
  negotiating authority that restricts opposition to trade  deals.

  National negotiators disagreed over many issues in  the Doha talks, but
  the biggest stumbling block was agricultural trade.   The United
States and
  the
  European Union were supposed to reduce tariffs and  subsidies to permit
  developing nations to sell their agricultural products  without unfair
  competition or obstacles.  But the developed countries  retained loopholes
  that could have preserved most  subsidies.

  At the same time, the United States insisted on  freer access to
  developing countries' markets for industrial goods and  services,
undermining
  their
  efforts to protect infant industries.  The  final straw came when the
United
  States,
  bowing to lobbies from the big  domestic agricultural producers, insisted
  that developing countries give up  nearly all powers to protect
sensitive farm
  products, including such staple  crops as rice that sustain vast
numbers of
  poor peasants.

  But even if the United States had played a completely  honest,
  well-intentioned role in the talks, the Doha round would have been  a
  failure for the poor.  That's simply because the dominant free trade
model
  does not
  promote development in poor countries (just as it fails to  promote
equity in
  developed countries).

  Over the past  year, several different economists working for the  United
  Nations   and the Carnegie Endowment for International Peace have
published
  projections  of the likely outcome of any Doha scenarios.  The results are
  striking:  The gains from trade would be extremely modest, with the rich
  countries  capturing roughly four-fifths of any benefits, and many of the
  world's  poorest countries actually losing ground.  Even if rich
countries
  eliminated all agricultural subsidies and tariffs, developing  countries
  would enjoy a
  one-time gain of less than a penny per person per  day.

  But just a few countries, such as China, Vietnam,  Argentina, Brazil and
  India, would capture most of the developing countries'  benefits.  Many
  others -- including most of sub-Saharan Africa -- would  be worse off.

  If Doha talks had succeeded, the results might  have reduced global
  poverty by only 0.3 percent, or 6 million people.   And typically that
would
  only
  involve moving incomes from a few pennies less  than $ 2 a day to a few
  pennies
  more.

  And even this  dismal picture overstates the benefits: it does not take
  into account the  losses that the Doha Agreement would have imposed --
cuts in
  vital government  revenue from tariffs, new constraints on government
economic
  policies, new  intellectual property rights requirements that would raise
  medical costs, and  accelerate displacement of poor peasants into
exploding
  slums of
  the urban  unemployed, further depressing wage levels.

  Critics from  left and right heap blame for the plight of poor peasants
  on subsidies to  rich countries' farmers, whose exports lower world
prices.
  But George Naylor,  an Iowa farmer and president of the National
Family Farm
  Coalition (NFFC),  argues that American agricultural subsidies are
designed
  primarily to  maintain production of cheap commodities for
corporations, not
  to help  farmers.

  Dumping farm products on the world market below the  cost of production
  does harm competing farmers and should be prevented.   But simply
eliminating
  subsidies in the United States would bring "very  little change in
  production and very little boost in prices," according to  Tim Wise,
deputy
  director of the
  Global Development and Environment Institute  at Tufts University.

  Agribusiness multinationals want to  expand trade and exploit low-cost
  commodities.  But advocates for small  farmers from both poor and rich
  countries, such as the NFFC, argue for "food  sovereignty," or the
right of
  each nation
  to fashion its own food strategy to  strike a balance between urban
and rural
  incomes.  Both at national and  international levels, they want to allow
  governments to manage supply to  prevent ruinous competition, to maintain
  incomes for the half of humanity  still living in rural areas and to
support
  an
  economy of independent  producers.

  In this view, development is at odds with an  unregulated market.  But
  domination of global agriculture by a few big  corporations doesn't
fit free
  market utopias either.  And the WTO's  narrow focus on trade and anarchic
  markets has a track record of  failure.  In a review of the leading
research
  on
  trade and growth,  economists Dani Rodrik of Harvard and Francisco
Rodriguez
  of the
  University  of Maryland concluded there is "little evidence that open
trade
  policies. . .  are significantly associated with economic growth."
It's not
  that trade is  bad, but in order to grow quickly and equitably
countries need
  to
  employ a  wide range of policies, including government regulation,
that are
  tailored to  their own distinctive needs.

  The WTO model has failed.   But its replacement as a framework for the
  global economy is not yet in  sight.