End of multilateralism and WTO?
Pascal Lamy's term as director-general of the World Trade Organization is likely to end without further progress on the implementation of the Doha Development Agenda. This means he will complete eight years as the head of the world's most powerful trade body without achieving its most ambitious objective.
Lamy has blamed the geopolitical repercussions of the rise of emerging economies such as China, India and Brazil for the deadlock in international trade and climate change talks. He argues that the lack of consensus on balancing benefits and contributions between the emerging economies on one hand and the advanced economies such as the United States, Europe and Japan on the other, is leading to continuation of the deadlocks.
The almost unbridgeable gap between the two groups is much more than a stumbling block in trade talks. It signals the inability of multilateralism to produce global trade solutions. It also casts a grave shadow over the effectiveness and future of the WTO.
Trade negotiations, whether multilateral or regional, eventually boil down to giving up some degree of existing market access in exchange for fresh access. The negotiations leading to the formation of the WTO provide enough examples of such accesses being traded off. Emerging economies do not have identical views on all trade-offs. This is because of their different comparative advantages in world trade. China's views, for example, would differ from those of Brazil, India, or Thailand in market access for specific agricultural commodities, depending on which country wants more access in what commodities and how much access they want to give up in particular products.
Notwithstanding these differences, at the WTO, emerging economies have often come together to oppose the advanced economies. The opposition has been inspired by the common political desire to prevent advanced countries from implementing their agenda. In other negotiations, such as those on regional trade agreements, emerging economies often lock horns with each other over specific market access issues. While the political goal of blocking the agendas of the advanced economies do not apply to these negotiations, country-specific political considerations, such as the interests of particular producers and business lobbies, do influence talks.
For several years, global trade matters have been settled in line with the views of advanced economies, as they were the major players in world trade. However, the growth of emerging economies, particularly China, as major trade players has changed that. World trade decisions can no longer be taken without consulting China and other major emerging economies. Despite differences on various market access issues, the latter have the common grievance of not having been given enough importance in global trade talks and decisions in the past. This political angst makes them intrinsically defensive. While economic rationality might urge emerging economies to adopt constructive postures in world trade talks, mutual differences on specific market access issues prohibits them from fine-tuning a commonly acceptable alternative agenda. As a result they mostly end up blocking talks without proposing feasible alternatives.
The differences among emerging economies are less on non-traditional trade issues like services, intellectual property, labor and environment standards. But the divergence between them and the advanced economies is much more on these matters. Multilateral discussions covering both traditional market issues and non-traditional subjects are unlikely to yield common solutions even if emerging economies are not politically defensive. The enormous gap between them and the advanced economies on non-traditional trade issues precludes possibilities of even remote convergence.
Multilateral efforts to reorient global trade are unlikely to be successful given the political angst of emerging economies and the lack of convergence on non-traditional trade issues. Future world trade is likely to be split into distinct regional blocs. Some of these like the Trans-Pacific Partnership will try to pull in the more powerful economies in world trade for increasing the size of intra-bloc trade and its strategic economic influence. The success of such efforts will depend on the balance between advanced and emerging economies in the framework. The US has tried to keep internal political opposition to a minimum within the TPP by confining it to "like-minded" partners. But even then, the considerable economic distance between the US and an emerging economy like Vietnam is proving to be difficult to bridge in the TPP negotiations.
Lamy's tenure ends with not only no hope of resurrecting the Doha Development Agenda. It also ends on the worst possible note for multilateralism and the WTO.
The author is head of partnerships and programme and visiting senior research fellow at the Institute of South Asian Studies in the National University of Singapore.
