Doha Round’s Return into Favor Calls for Caution
Last July saw the collapse of the fourth round of the Doha negotiations. The so-called “development round” stumbled once again over agricultural issues, in particular over the special safeguard mechanism that allowed nations to protect their agriculture in the event of a global economic downturn. Following five years of unsuccessful negotiations, many observers thought that the round was again off the international agenda until further notice. Only five months later, concluding the round nevertheless returns a major topic of conversations… and a recent craze of mostly political nature that is not alien to the new global environment noted by renewed protectionism in various regions of the world. However, if the political signal given by a breakthrough of the Doha Round could represent a positive indicator for the international community, its economic and strategic consequences nonetheless remain as questionable or even dangerous as in the past. Consequently, let’s be careful to not heed to the call of short-term political sirens concerning such a strategic challenge.
The international situation has been drastically altered during the past few months. Policymakers, while fighting a financial and economic crisis unseen since 1929, are doing their best to avoid the transformation of a recession into a depression. While the International Monetary Fund (IMF) forecasts economic growth of 0.5% for 2009¬¬––that is to say a quasi standstill for global economies according to Olivier Blanchard, the IMF Chief Economist–– dire news keep coming regarding economic and social issues. According to a study published by the French consultancy Altares1, France recorded a total of 55,000 bankruptcies in 2008, a 10.3% increase over the 2007 figure. And the International Labor Organization (ILO) indicates that the global economic meltdown could translate into unemployment for 51 million additional people this year if the crisis continues2.
Challenged by such a pessimistic situation, governments rightfully attend to the most urgent tasks first, sometimes to the detriment of their international trade commitments: the lure of protectionism proliferates throughout the world, such as the “Buy American” clause for steel included in the stimulus plan adopted by the US Congress3 , higher duties on imports of foreign cars into Russia and the Indian ban against imports of Chinese toys.
In this environment of economic crisis and general trust breakdown, the Doha Round has returned to the forefront of the international scene because, for some observers, it would kill two birds with one stone.
On one hand, a potential progress of negotiations would appear as a strong political signal in terms of renewed cooperation and international trust. On the other hand, and in absence of concrete propositions in the international arena, supporters of such signal consider it as one of the only existing remedies to curb the economic and food crises currently affecting the international community.
That is the reason why all international summits (the G-20 in November 2008, the Davos World Economic Forum in January 2009 and the G-7 Finance Ministers Meeting in February 2009) do reassert the need to reach a “prompt and bold conclusion”4 of the Doha Round in their closing communications. And let’s not ignore isolated pleas made by several international decision-makers, who keep declaring their support for the re-opening of negotiations––Catherine Ashton, European Trade Commissioner5 and Luiz Inacio Lula da Silva6 , President of Brazil, among others.
If the political objective to restore trust and international cooperation that is shared by all nations is indeed praiseworthy, the economic and strategic repercussions of reaching an accord in the Doha Round could lead to a situation that could prove far worse than the one we are facing today.
First, many experts increasingly criticize the conclusion of the Doha Round because of its negative impact on the environment and global food security. This is the opinion of Olivier de Schutter, the UN Special Rapporteur on the Right to Food, who is putting the finishing touches to his report on the consequences of trade liberalization on world hunger and national policies. He shows that results of unfettered liberalization of agricultural markets will be globally destructive for global food security (especially in poor countries) because it will generate hidden costs and will submit agricultural markets to an extreme volatility, as confirmed by the first results of the momagri model 7in March 2008.
Secondly, the resumption of the Doha Cycle is only one of the measures considered to reform international governance. Other important measures are currently close to implementation in the economic, financial and banking fields and will greatly alter global trade. Such is the case, for instance, of the future evolution of currency exchange rates at a time when Chinese currency protectionism is increasingly cause for concern, or the supervision of speculation on commodity term markets that will greatly change trade conditions and thus potential gains generated by liberalization.
In this uncertain context, the international community cannot risk facing two cumulative global plights––an economic crisis and a food crisis––because of strictly political reasons. Such a situation would have drastic consequences on global strategic stability.
If there is no doubt that reviving the dynamics of international cooperation is crucial to rein in the global economic recession, it must not be achieved at any cost, and especially not to the detriment of food security. The food, financial and economic crises only illustrate a deeper crisis, that of the international governance. Most decision-makers are now aware of the need to reform global governance by regulating principles accepted by all; it is therefore advisable to not hasten the conclusion of the Doha Round¬¬––whose irreparable consequences are well known––because of political demands that are adverse to the strategic interests of most regions of the world.
by momagri Editorial Board
1 Agency specialized in company intelligence.
2 As quoted by Les Echos on February 14, 2009, “The G-7 Tries to Uncover Common Solutions to Solve the Crisis”.
3 The “Buy American” clause that was included in the $787 billion American stimulus bill approved by Congress on February 13, 2009 stipulates that steel used in infrastructure projects subject to government bids must be produced in the United States. The draft of a similar law currently being debated in the Senate would go even further by earmarking almost all supplies for publicly financed stimulus projects to American manufacturers.
4 According to the terms of the G-7 communication on February 13 and 14, 2009.
5 “Conclusions of the Doha Round Can Help Solve the Current Economic Crisis”, as stated in the report of the Plenary Meeting of February 2, 2009.
6 Please see momagri’s article “The Doha Round conclusions are still on the international agenda”http://www.momagri.org/momagri12_web/UK/PAGE_DernieresPublicationsDetail.awp?P1=430
7 Simulations obtained in March 2008 showed that, in the case of unregulated liberalization of international agricultural markets, price volatility could double.
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