Opinion Addressing the disenchantment with Doha
If the Doha Round fails,existing trade distortions will worsen and harm the interests of developing countries
If the Doha Round fails,existing trade distortions will worsen and harm the interests of developing countries
Last month,a WTO panel convened by Pascal Lamy,the director-general,submitted the report The Future of Trade: The Challenges of Convergence. While part of the report delves into the contribution of trade to economic growth,development and prosperity,there are two significant factors. First,its timing. Second,the relevance of some of its recommendations to the future of the multilateral trading system,as well as to emerging and developing economies. These have reignited some interest in the fate of the Doha Round,as the world trade body goes to the ninth ministerial conference in Bali in December.
The timing is interesting because many countries have just about given up on any tangible outcome from the Doha Round. Twelve years down the line and with many missed deadlines,there is no consensus in sight on most issues. Moreover,Lamy is on his way out. It is unlikely that the deliberations will see any traction till the new DG is in the saddle. In this sense,the report attempts to sustain interest in the multilateral trading system. Its analysis of some of the transformational factors that have shaped trade in recent years,such as proliferation of preferential trade agreements (PTAs),growing influence of non-tariff measures (NTMs),rise of international value chains,and geographical shifts in patterns of trade and investment,could not have come at a better time for emerging economies like India.
So far as progress of the Doha Round is concerned,among the most contentious issues remains market access,where reconciling the interests of developed and developing countries is a big challenge. Second,there remains a wide gap between the bound and applied tariffs of some large developing countries (India,Brazil,etc). Because of this,even if negotiations succeed on tariff reduction,there would be little impact on trade liberalisation in these markets. Third,the WTO needs to adopt some criteria to differentiate among developing countries. The present arrangement allows some advanced developing countries to avoid making significant concessions while imposing burdensome obligations on poor countries. Fourth,heterogeneity among developing countries presents a problem.
The panels report signals a paradigm shift for the future of global trade. It has recognised many new trends and provided a reality check before the ministerial conference: first,it acknowledges that PTAs are here to stay. The report warns that PTAs add to trade costs,can be exclusionary,and may also lead to segmentation of the world economy. It mentions that since the 1980s,there has been a rapid proliferation of PTAs and BITs (bilateral investment treaties). However,perhaps recognising this as a consequence of the disenchantment with the Doha Round,the panel recommends members explore ways in which PTAs could converge within the multilateral system. Since India has negotiated many bilateral and regional agreements,this will give it leverage.
The panel points out that with gradual fall in most tariffs,NTMs are increasingly influencing trade outcomes and,in many cases,restricting trade. However,NTMs can no longer be ignored since domestic policy compulsions could be based on health,safety or environmental grounds. Thus,the effort should be to ensure NTMs do not disproportionately mitigate trade benefits.
The panel has highlighted the organic relationship between imports and exports for a national economy. Pointing out that the share of intermediate goods in trade has risen to 50-60 per cent of total merchandise trade,and the share of import content of exports has risen from about 20 per cent in the 1970s to about 40 per cent today,the report states that if a country is restricting imports,it might also be frustrating its own exports. This is important for countries like India,which use tariff measures for a variety of domestic policy considerations.
Finally,the report shows that the economies of developing countries now constitute about half of the world GDP,and that while the share of North-North trade has shrunk from 56 per cent in 1990 to 36 per cent in 2011,the share of North-South and South-South trade expanded from 33 per cent to 38 per cent and from 8 per cent to 24 per cent respectively. If this continues,by 2020 the share of South-South trade will increase to 34 per cent. This should give the South more power in Bali.
The panels recommendations could lend impetus to the Doha Round agenda. The WTOs strength is its principles and processes. Through its emphasis on principles of national treatment and non-discrimination,it provides a strong forum for negotiating. By providing recourse in cases of violations,it underlines a rules-based system that enables international trade to work as a prime mover of growth and development. If the Doha Round fails,the existing distortions in trade will be exacerbated,and developing countries will find it difficult to have a level-playing field. There is a risk that the WTO processes will be marred by litigation instead of legislation,and dispute settlement will substitute rule-making. If the multilateral system is not allowed to succeed,countries would resort to bilateral and regional trade deals,which would introduce strains and inefficiencies by diverting trade and investment,and through increased transaction costs. Thus,the panels recommendations are useful.
The writer is chairperson,Central Board of Excise & Customs,and ex-officio special secretary with the Union government. Views are personal
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