Doha: dead and not liking it

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Creeping behind the headlines of the Cybercrime Law, the RH Bill, of Cabinet appointments, controversies involving anti-narcotic officials, and all those emotional commentaries about the dark and absolutely anti-progressive days of martial law, news of Doha’s seemingly inevitable demise is relatively untold. That Doha is passing unmourned is ironic, particularly when one remembers what it was all about. 

The Economist seems to have made the call already (“Goodbye Doha, hello Bali”; Sept. 8, 2012): “Instead of allowing the Doha round to be replaced with a patchwork of regional deals, the WTO’s boss, Pascal Lamy, should close it and resurrect the best bits in a ‘Global Recovery Round.’ He should drop the all-or-nothing ‘single undertaking’ rule that helped kill Doha. Instead, talks would be broken up into small chunks and allowed to progress independently of one another. Negotiations would be open, so that any member could leave or join. Some deals, therefore, would not include everyone.”

This, at first glance, seems like a good thing. But as readers of this column know, your Trade Tripper has never been a big supporter of FTAs for the Philippines. They are too trade distorting, skewed against the poorer countries, very complex arrangements that, with the expected and is happening “noodle bowl” effect, simply makes it impossible for developing countries’ bureaucracies to protect themselves from technical smuggling (let alone find ways to take advantage of FTA provisions). That is why it should be no surprise that, after 30 years of the AFTA’s effectivity, a relatively recent working ADBI paper (FTAs and Philippine Business: Evidence from Transport, Food, and Electronics Firms) found that only around 20% of the companies surveyed here in the Philippines have taken advantage of its preferential rates.

To let Doha go in favor of FTA’s is clearly a non-choice. As Columbia University’s Jagdish Bhagwati said in a New Delhi interview: “If we let Doha collapse, we will be overtaken by regional trade agreements and other bilateral arrangements, which will be discriminatory, where the weaker sections would not prosper and hegemonic powers like the Americans and Europeans would establish trade deals with smaller powers and would dominate trade in their own way, which is not possible in a multilateral system.”

Writing for Handelsblatt, Bhagwati goes on to name Doha’s killer: the United States. Or, more specifically, the Obama Administration. As he put it: “the US killed Doha. Or at least put into Intensive Care... it was killed by President Obama who had ironically been awarded the Nobel Peace Prize by Norway in the expectation that he would promote multilateralism and turn his back on US unilateralism!” Unfortunately, “the US, not content with killing Doha, is even promoting the regional PTA called the Trans-Pacific Partnership, compounding its folly twice over. In the absence of MTNs like Doha, these PTAs will also become the arrangements where rules such as anti-dumping and subsidies codes will be set and will then be muscled into WTO at Geneva.”

But neither is a “Global Recovery Round” a welcome alternative. It merely shifts emphasis on developing country needs to assisting the world’s leading economies get back on their feet. It seems to be working on the quite convenient theory that the rich countries continued economic dominance is necessary for developing countries to prosper, which is fallacious.

Doha’s death thus presents two hits against developing countries. It comes at a time of, as reported by the WTO last September, “slowing global output growth [that] has led WTO economists to downgrade their 2012 forecast for world trade expansion to 2.5% from 3.7% and to scale back their 2013 estimate to 4.5% from 5.6%.” Furthermore, it must be remembered that the entire point of Doha was to ensure equality of opportunity for them after the lopsided Uruguay Round of agreements. Doha -- which is actually the Doha Development Round -- was launched with hopes of putting more poor country friendly provisions, particularly in relation to tariffs for industrial goods and the lowering of subsidies for agricultural products.

Unfortunately, the richer, developed countries have proven themselves to be not practicing as they preached. They repeatedly made demands that would ensure the Doha Round is not concluded successfully, which was in full display at the Cancun Ministerial when they attempted to include the Singapore issues over the huge objections of the developing countries.

Sadly, even WTO DG Pascal Lamy seems to have thrown in the towel as well: although there remains the clear need to help developing countries, “the nature of trade is changing. We are increasingly trading in tasks and in value-added and through value chains which are increasing in both breadth and in depth.”

No doubt the world’s events have overtaken Doha. But as things change, some remained the same. For purposes of giving confidence to developing countries and for developed countries to show their good faith moving forward, a successful conclusion to Doha would have still been a very good thing nevertheless.