Report from Geneva: Alice in Wonderland?

By December 3, 2009Economy, Trade

(Frank Vargo, the National Association of Manufacturers’s vice president for international economic affairs, has blogged from Geneva this week at the ministerial meeting of the WTO.  This is his final report.)

Ah well, the strangeness and wonder of the WTO negotiating process continues. Consider, for example, the Chairman’s report at the conclusion of the 7th WTO Ministerial meeting that ended yesterday. (Report available here as .doc.)

The report states, “There was wide support for building on progress made to date. There was also support for not attempting to reopen stabilized texts.” (My emphasis.) This statement refers, among other texts, to the Non-Agricultural Market Access (NAMA) text that the U.S. has not accepted. The clear implication from yesterday, though, is that many consider the text to be done, agreed, and not to be revisited.

Stabilized texts? Excuse me, but when the NAMA chairman Luzius Wasescha wrote that text at the end of last year, he stated right in his own text that, “Even though the included text is accepted as a basis for further work, we are far from a consensus among Members.” He also added “Anyhow, everything is conditional in the deepest sense.”

Whoa! By what magic elixir do we move from that December statement to the Ministerial Chairman’s statement yesterday that there is strong support for considering the text wrapped up and immutable? Is this sleight of hand? Or does the WTO have all the collective memory of a computer with a fried hard drive?

Example two: Press reports indicate at the end of the conference European officials lamented, “Doha does not seem to be fully on the agenda of the United States … there is no sign today that the Americans are ready to go forward.” (AFP report.) One said, “They want more concessions for a more acceptable package for the US Congress. Now, the problem is to find a way without damaging what has been achieved so far.”

What hypocrisy! In private, European government officials and business representatives are quite free in admitting their analysis conforms perfectly with the U.S. view – they are getting virtually no new market access out of the proposal so far. But they are willing to accept that, because they believe if they were to press for more industrial market access, the developing countries would turn right around and demand more European concessions in agriculture.

That has the Europeans terrified, for they feel they have given all they possibly can in agriculture. One more grain of wheat will break the European back and result in a revolt that will cause them to pull out of the whole deal. So they would rather build Fortress Europe around their agriculture and forgo market access gains in the rest of the world.

Example three: Indian officials still indicate a reluctance to have India participate in sectorals (but not the same degree of “shut-the-door” resistance I saw last year). But at the same time, India has free trade agreements cooking or under discussion with China, Japan, the European Union and Canada – and when India’s Prime Minister visited Washington recently, he indicated a free trade agreement could be possible with the United States as well. So my question is, who’s left? Why can’t you make cuts in the Doha Round?

The problem isn’t that the United States isn’t showing leadership, for it is. I spoke with Ambassador Ron Kirk a couple of times in Geneva this week. He knows the point to the Doha Round is getting meaningful market opening, and he knows the road to Doha goes through Beijing, New Delhi, and Brasilia. The problem isn’t U.S. leadership. The problem is getting others to get off their defensive agendas and join the United States is a commitment to open markets and grow world trade.

More people should look at the Doha analysis completed recently by the world-renowned Peterson Institute for International Economics. They estimate that a successful Doha Round could generate an increase in world exports of between $200 and $500 billion. That’s a nice number, and includes gains in agriculture, industrial trade, services, trade facilitation, and the like.

Within this, they estimate the gains for world manufactured goods trade at $50 billion. While that sounds like a large number, you have to put it in the perspective of the current size of world manufactured goods trade. The Global Trade Information Service (GTIS), which compiles the trade data of all major countries, shows that last year world manufactured goods trade was $11 trillion. Doing the math, $50 billion is 0.5 percent (half of one percent) of $11 trillion. That’s not a lot – especially when you realize most of that gain will not even materialize for nearly 10 years after the deal is concluded.

A large part of the reason why that figure is so small is the weakness of the tariff-cutting formulas that have been diluted repeatedly over the last eight years. The Peterson Institute estimates that the gain could be more than doubled by the inclusion of sectoral agreements – and they only looked at a couple of possibilities.

That’s why the United States has to keep pressing for a stronger outcome. No previous trade round since the first one, in 1946, would have succeeded without U.S. leadership, and this one wouldn’t either. The task now is to get more people on board.

We made gains at the Geneva Ministerial. While the public rhetoric hasn’t improved, their private understanding has, and that gives a bit more of a base to build on. Still a long way to go, though, on the Road to Doha.

That’s it from Geneva – until the next ministerial, the one that hopefully will wrap up a worthy trade round!

Leave a Reply