The Debacle of Geneva

By July 29, 2008General

The headline was so grim, we had to read the whole article. The Handelsblatt is a German daily newspaper that often partners with the Wall Street Journal. Today’s column from Helmut Hauschild, European correspondent, is headlined,  Das Debakel von Genf, “The Debacle of Geneva.”

Excerpt:

In the long term, however, the Geneva debacle represents a divide of far-reaching consequence. It begins with the reality that the rules of trade will become less transparent. The new norm will be now trade agreements between individual countries, rather than the previously accepted global standard. 

The World Trade Organization will lose its ability to influence and referee disputes. The negative impact on the export economy will manifest itself only gradually, but it will be high. The climate for trade will be markedly more rough than before.

The failure of the WTO talks is at the same time an expression of new complexities. Long gone is the time of a bipolar world economy, in which the United States and Europe set the tone and world trade agreements were then developed accordingly. China and India have taken the stage, powerfully. They represent their own interests, hard as stone, and will support free trade only as far as it benefits them. The former industrial powers will come to rue the day, bitterly. Geneva was just a taste of what’s to come.

 

And that assumes that countries are willing to negotiate bilateral trade agreements. That’s no so clear here in the United States these days.

Full translation follows in the extended section… 

The collapse of the WTO negotiations

The Debacle of Geneva

 You have to look some distance back into history to encounter another fiasco like the WTO talks in Geneva. Seventy-five years ago in London President Franklin D. Roosevelt failed in this effort to persuade the trade powers of the day to radically lower their trade barriers. The result was a multiyear trade war that had immensely negative consequences for the global standard of living.

This time the world will get off a little lighter, at least in the short term. The failure of the seven-year-long global trade negotiations will not unleash a competition to higher duties, as the world economy is today far too tightly interwoven that one of the great trading powers could pull out.

In the long term, however, the Geneva debacle represents a divide of far-reaching consequence. It begins with the reality that the rules of trade will become less transparent. The new norm will be now trade agreements between individual countries, rather than the previously accepted global standard. 

The World Trade Organization will lose its ability to influence and referee disputes. The negative impact on the export economy will manifest itself only gradually, but it will be high. The climate for trade will be markedly more difficult (rough) than before.

The failure of the WTO talks is at the same time an expression of new complexities. Long gone is the time of a bipolar world economy, in which the United States and Europe set the ton and world trade agreements were then developed accordingly. China and India have taken the stage, powerfully. They represent their own interests, hard as stone, and will support free trade only as far as it benefits them. The former industrial powers will come to rue the day, bitterly. Geneva was just a taste of what’s to come.

 

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