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Wednesday 23 Aug 2017 | 12:49 | SYDNEY
Wednesday 23 Aug 2017 | 12:49 | SYDNEY

Doha's demise



30 July 2008 14:09

Sadly, it’s hardly a surprise that the Doha Round of trade talks has collapsed. The immediate cause of the breakdown seems to have been failure to reach agreement on the operation of a so-called special safeguard mechanism for developing countries.  This would have allowed them to raise agricultural tariffs in response to sharp movements in prices or imports. 

In my view, three important sets of issues have been raised by this latest collapse in negotiations.

First, different sets of policymakers and politicians have drawn two mutually incompatible lessons from the current food security crisis. Thus the advocates of free trade in agriculture have pointed to the surge in global food prices as clear and pressing evidence of the need for more trade liberalisation. 'Look at these highly regulated, distorted and subsidised markets', they say. 'It’s no surprise they are vulnerable to price volatility since nobody knows what state intervention will come next. Liberalisation and deregulation is the answer. Countries around the world are already slashing their import tariffs to help bring down the price of food at home. Let’s lock those lower tariffs in. And who needs generous farm subsidies when prices are so high?'

Yet the second response has been completely different. 'Look at this spike in food prices', say opponents of free trade. 'Look at the millions now facing food insecurity, the millions pushed back into poverty, and look at the riots and food protests in more than thirty countries. And don’t forget those export bans, just when we were most reliant on imports. Of course we can’t rely on the world market now; we need to build self-sufficiency at home. Anything else is just too risky. And that means that, while we may have cut tariffs for now, we certainly want to retain the ability to put them right back up again in order to protect our own farmers in the future.'

Second, the difficulties with the Doha round remind us of a key problem facing the broader international economic architecture: the challenge of integrating economically important developing economies. Granted, the divisions at Doha did not break down into a clear-cut rich country vs. poor country split (developing economies like Brazil and Thailand also had aggressive interests in opening up world agricultural markets). Nevertheless, there was an element of this, with the US pitted against India and China.   

The challenge is that countries like India and China are now significant global players, and as such, rightly expect to play an important role in international economic policy debates. Yet they are also developing countries, with much lower incomes per head than their rich country counterparts, and hence, again not surprisingly, feel they should be accorded somewhat different treatment. This is turning into a significant problem for the developed world: Washington or Brussels can probably accept the proposition that India and China are significant players, and in the past got used to seeing them as developing countries. But accepting both simultaneously is turning out to be extremely difficult, if not impossible.

Third, the latest failure of negotiations reinforces a point I made back when the negotiations were suspended in 2006: the age of giant, set piece trade rounds like Doha and its predecessor, the Uruguay Round, is probably over. The world will now have to find a Plan B for managing world trade. In the short-term, that will mean more reliance on regional and bilateral trade agreements. In the longer term, and given the shortcomings of the regional and bilateral approach, it means structural reform of the multilateral trading system.