Global Policy Forum

Ernesto Zedillo*

The GATT/WTO Multilateral Trading System has been a powerful engine of prosperity during the last half-century, delivering a twentyfold increase in world trade. Throughout its existence, however, this system has been more an instrument of progress for developed countries than for developing countries. The trade playing field is tilted against the latter. The remaining protectionism of industrialized countries is concentrated in sectors of big export interest to developing countries, and the system has been increasingly loaded with rules that are more an impediment than an incentive to developing countries' engagement in international trade.

The Doha Round was launched in November 2001 to further trade liberalization and, very importantly, to at last address the developing countries' concerns about the system's imbalances. The Round's negotiations have so far been a story of missed deadlines, unattained agreements on any of the contentious issues and, consequently, mounting frustration.

Villains on the Stage

Agricultural liberalization has been the main stumbling block in the Doha Round negotiations, with the European Union playing the role of chief villain, albeit supported handsomely by Japan. The EU failed to make a serious negotiating proposal before the Mar. 31 deadline. Actually, the EU couldn't have made such a proposal without first reforming its infamous Common Agricultural Policy (CAP), something it finally announced in June. The CAP reform, by initiating the decoupling of subsidies from production levels, is a step in the right direction. But contrary to some premature claims, it doesn't yet put the EU on the stage of serious WTO agricultural negotiations. To get there, European officials will have to divulge how they're going to dismantle their huge export subsidies and significantly reduce their obscene restrictions on agricultural imports.

Unfortunately the EU is not the only villain in the Doha Round drama. The U.S. destroyed its strong leadership position won at the Round's launch, first by imposing steel tariffs and adopting the Farm Bill, and later by blocking a deal that would have given poor countries access to cheap essential medicines without violating WTO provisions on intellectual property rights (TRIPS). That deal had been accepted by all other WTO members last December. The U.S.' handling of this issue has made for bad economics and worse trade diplomacy. After all, the WTO's core mission is to promote free trade, not to enforce through trade sanctions the monopoly rights contained in patent protection. Conceivably there are ways to support innovation that are more efficient economically and socially than trade sanctions. In fact, a powerful case can be made for not having the WTO be the guardian of intellectual property rights or, at least, for removing medicines from the TRIPS agreement.

In practice, poor countries are willing to settle for much less than these radical options; they simply want the TRIPS agreement amended to allow producers of generic drugs to export them to poor countries that are confronting health crises and have no domestic capacity to produce medicines. This proposal contained provisions to prevent the reexportation of these medicines to rich countries. Nothing would help restore the U.S.' credibility in the trade talks more than if the U.S. dropped its unwarranted opposition before--not during--the Cancun meeting.

Convert Failure to Opportunity

Rather than muddling through the meeting at Cancun, trade ministers should use it as an opportunity to reassess the entire process of multilateral trade liberalization. If the objective is to build a system with the greatest potential to support the economic growth of both developed and developing countries, the ministers should conclude that in the long run the system must have two essential features. First: It must achieve the total removal of barriers--tariff and non-tariff--to all trade in goods by both developed and developing countries. It must also accomplish substantial, across-the-board liberalization of trade in services. Second: To be equitable to all participants, the system must provide universal enforcement of the principles of reciprocity and nondiscrimination. However, this does not preclude the implementation of special and differential provisions to help developing countries adjust more smoothly to free trade. But these provisions must be strictly temporary.

Ministers should also consider that the most useful WTO would be one focused only on trade liberalization and therefore relieved of other global governance duties that could be better performed by other multilateral, regional or national entities. Consequently, the Doha Round's agenda must be adjusted to make market access of goods and services its sole purpose. Negotiations on multilateral agreements on investment and competition must be dropped.

The Doha Round must be saved, not buried, at Cancun. But its reinvigoration will not be achieved by means of some marginal agreements on a few points in the existing agenda. Bold decisions are needed to adopt a grand vision--one that is pro growth and development. But this will not be possible unless the pivotal builders of the GATT/WTO framework, the U.S. and Europe, embrace their responsibilities as the world's largest economies, understanding that they will also be big winners from further trade reform. The U.S. and the EU must decide to be or not to be at Cancun.

About the author: Ernesto Zedillo is Director of the Yale Center for the Study of Globalization and former president of Mexico.

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