Global Policy Forum

By Larry Elliott

Doha is make or break time for the World Trade Organization. After the fiasco in Seattle, another failure to launch trade liberalisation talks would be fatal for the WTO's credibility, ushering in an era where countries would strike bilateral trade deals or group themselves into regional blocs.

In the atmosphere of recessionary gloom that has descended on the west following the attacks on September 11, such an eventuality fills the west with horror. The fear among ministers is that deadlock in Doha will lead to a retreat into protectionism that will turn recession into depression, just as the Smoot-Hawley tariff did in the 1930s.

As Paul Krugman has illustrated, there was no conceivable way - given the size of trade as a proportion of American GDP in 1930 - that Smoot-Hawley could have caused the great slump, but in the febrile atmosphere of November 2001 there is certainly a risk that a WTO stalemate would have seriously adverse effects on financial markets and business confidence. The stakes are higher than they were in Seattle in 1999, when America's boom meant it was acting as the global consumer of last resort.

The talks did not break down because of the protests that brought the city to a standstill. They broke down because the developing countries were presented with a lousy deal by the west and were sick of being ignored and patronised. Countries like Bangladesh and India walked away from the negotiating table rather than accept Bill Clinton's idea that core labour standards should be written into trade deals, seeing the move as a form of backdoor protectionism.

The rich and powerful countries say they have learned lessons from Seattle. So, the cliche of the moment is that Doha must see the launch of a development round that will see the fruits of economic growth and globalisation spread around to Africa, Latin America, the Caribbean and Asia. Promises a-plenty have been made about the need to make free trade work for the poor.

Well now it is time for the west to put up or shut up. The altered state of the world since September 11 provides not just a golden opportunity but a prime motivation for the US, the European Union and the rest of the developed world to end their nauseating hypocrisy and take the concrete steps that are needed to make good their solemn promises. If the multilateral trading system is now facing a crisis of legitimacy it is not because of anti-globalisation protests but because the developed nations have said one thing and done another. History suggests that trade can be an effective mechanism for increasing economic growth in poor countries, but that requires rich countries to face down their protectionist lobbies and take decisions that might cause short-term pain to their electorates to secure long-term gains. After the events of September 11, the notion that poverty and economic insecurity in one part of the world can have ramifications in another might seem to be a no-brainer. If so, the message does not appear to have been picked up by trade negotiators in the west.

Developing countries don't want competition policy and investment to form part of a new round, but the EU has insisted that they be on the table because it needs some bargaining chips to compensate for the concessions it will have to make on agriculture. The Americans are playing hardball over intellectual property rights, even though the case made by Brazil, India and South Africa about the need for cheap generic drugs in times of national health emergencies has been borne out by the Bush administration's response to the anthrax scare in the US. Intimidation of the most blatant kind has been going on behind the scenes, with warnings to poor countries that they will have preferential trade terms rescinded unless they drop their objections to a text that is being cooked up without their input and will be presented on a take-it-or-leave-it basis.

This blatant bullying gives the lie to the idea that the west intends Doha to be the launch of a development round. Instead, it is the same old recipe in which the rich and powerful seek to ex tract the maximum amount of concessions from the weak and powerless for the minimum cost. The west's rhetoric is all about the virtues of free trade; its actions are mercantilist.

The developing world does not have much in common with the anti-globalisation movement in the west. It wants to see a new round of talks launched because it sees trade as a key ingredient in boosting growth and per capita incomes. But, rightly, it is not prepared to accept a deal at any price and sees Doha as a litmus test of the west's ability to deliver.

As Kevin Watkins of Oxfam put it: "The record of industrialised countries in the area of trade policy is one of heroic under-achievement. They have collectively reneged on every commitment made." He says tariff barriers in rich countries are four times higher for poor countries than for industrialised countries, agricultural subsidies have been increased, pledges to free up trade in textiles have been ignored, intellectual property rights and investment rules are applied in a fashion that undermines social and economic welfare in poor countries and further marginalises them.

So what should happen? Firstly, the west should recognise that it has an interest in poor countries becoming richer. Rich countries do not tend to be finishing schools for terrorists; instead they buy your exports. Secondly, a blanket trade liberalisation by poor countries while the rich countries leave their protective barriers in place would be counter-productive. In the current environment, that means that the developing world is stuck with offering commodities that are falling in price for the high-valued added manufactured goods made in the west. It was to avoid remaining an agrarian economy that Alexander Hamilton told Adam Smith to sling his hook when the great economist said America should concentrate on its comparative advantage in agriculture and leave the industrial stuff to Britain. The US, Germany and Japan all used trade barriers as a protective shield in their periods of rapid industrialisation.

Thirdly, the west should take specific steps to help the developing world. It should ensure that tariffs on goods from poor countries are no higher than those from rich countries and it should scale down the particularly punitive tariffs on those goods that are especially vital to developing countries. The creditable attempt by the EU's trade commissioner Pascal Lamy to introduce tariff-free access to Europe for "everything but arms" from the world's 49 least developed countries was frustrated by powerful lobbies that have postponed the implementation of the deal for sugar, bananas and rice - the three areas of particular interest to the LDCs. If a "development round" is to mean anything, everything but arms should be applied across the developed world, and applied now.

There's more that the west could do but this would be a start. If it continues to push for a deal that would merely replicate the one-sided failings of the Uruguay round, the poor countries should do now what they should have done then and walk away. The US, the EU, Japan and the other developed nations would be made to recognise that selfishness and stupidity normally go hand in hand, and that the unacceptable deal on offer not only harms the prospects of the poor but could put the multilateral trading system at risk. This may sound like a dangerous game for developing nations which, as the World Bank has pointed out, stand to suffer most from a global downturn. But it may be the only way to wring meaningful concessions out of the west. The way to deal with bullies is to stand up to them.

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