A deep feeling of frustration understandably pervades Roderick Abbott’s article. The history of the Doha Round has been one of frustration, disappointment and failure. Negotiations have been going on for years and still no agreement seems to be at hand’s reach. His conclusion is that the whole process will probably end in failure and will endanger the World Trade Organisation (WTO) itself.
Abbott sets out some convincing reasons for the round’s failure. The multilateral trade negotiations have been too protracted, and so the changing economic environment has meant the rewriting of priorities for most participants. The global situation has changed so dramatically since Doha’s 2001 launch that China is no longer an emerging economic power, while the profound crisis gripping the western economies has accelerated the power shift from the Atlantic to Asia and the Pacific. He rightly acknowledges the WTO’s inability to come to terms with this. It is in any case a major problem with large international organisations that are themselves bureaucracies that they are incapable of updating their agenda in line with fast moving developments. So it isn’t just WTO negotiations whose priorities have changed but the growing gap that has developed between the WTO’s own vision and reality.
This may look like damning evidence of the WTO’s short-sightedness, but unfortunately it isn’t its only failing. The WTO was established as the successor to the GATT on the premise that free trade is beneficial for the vast majority of people on earth. But that has not turned out to be the case.
Free trade could be beneficial, provided the liberalisations are on a fair basis. But the exclusion from the WTO’s agenda of exchange rates, of sector-by-sector real labour costs and productivity comparisons, and the exclusion of the differential size effects of member countries’ populations, radically undermined the whole exercise. Free trade has instead been more beneficial to multinational corporations than to populations. The pressure on real wages in developed countries has to a large extent been the cause of the over-development of credit we have seen in these countries. Without crediting a larger and larger share of the population, consumption levels would have fallen well before 2007. So now that globalised development model has hit a wall.
Added to this there are the world’s environmental problems and the increasing scarcity of natural resources. Here again, the WTO has been unable to address the issue because its intellectual horizon was blocked by the free trade paradigm.
The likely failure of the Doha Round is casting doubts on the WTO’s future, and on that I share Roderick Abbott’s view. But the whole process of re-writing the Organisation’s basic principles needs to go much farther than Abbott envisions. What’s at stake is not just the current Doha negotiations but the WTO’s future priorities: should it be free trade or employment, wages and development? If the WTO proves unable to amend its principles it could well decay and die, with regional trade organisations taking its place. That would certainly be a messy process but probably the only outcome should the WTO prove unable to come to terms with change.