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Should We Revel in Doha’s Failure?
momagri’s Executive Vice President
momagri’s Economic Adviser
The recent collapse of the WTO ministerial talks on agriculture is not an isolated event: it follows a five-year series of what WTO director general called “botches” that should have never happened since the global beneficial effects of an agreement appeared undeniable and the hope of every member State to reach a solution seemed genuine. However, the facts speak for themselves: the Doha Round is in a coma and attempts for revival seem to be ineffective and less and less encouraged as well.
Must we infer from all this that the driving force for global growth and development is bound to wither? It has now become crucial and urgent to answer the question. We must, however, first ask ourselves four questions, which may seem a priori naïve but are in fact many-sided because of their strong ideological principles.
Is the Doha Round a necessary condition to international trade development?
Contrary to what has been said, the Doha Round breakdown in no way constitutes a threat to international trade development. This is supported by the fact that international trade increased by seven percent since 2003… On the other hand, encouraging flexibility in international markets is a must, provided that it is not detrimental to food security.
Consequently, we can either let markets freely fluctuate when they operate successfully –which is hardly ever the case– or liberalize trade by establishing regulatory mechanisms to tackle market “hitches”, such as global over-speculation or under-stockpiling.
Can the Doha Round lead to general and balanced expansion in the world?
According to WTO figures, which reproduce World Bank statistics published in 2007, global yearly profits generated by full market liberalization are very small and would, in fact, represent only 0.08 percent of the world’s GNP, the equivalent of sixteen dollars per person and per year!
As we have shown, this model is in reality totally unsuited to agriculture and it is more than probable that unregulated liberalization will increase poverty in developing countries and will breed turmoil for many nations. That is the reason why we are currently measuring the impact of liberalization on poverty in the framework of the momagri model.
Moreover and regarding our story, it is interesting to note that those sixteen dollars would be very unfairly spread around, with the largest share monopolized by China and Brazil and not by the poorer nations of Africa. Does the Doha Round allow curbing hyper-volatility of agricultural commodities prices?
Does the Doha Round allow curbing hyper-volatility of agricultural commodities prices?
If agricultural prices volatility was only caused by exogenous factors, such as climate, then globalization and ongoing trade liberalization could play a role in smoothing them over. This is not what we are witnessing. Other and different factors are linked to the very performance of agricultural markets. They are endogenous factors, such as farmers’ expectations and speculation, that have an even greater influence when markets are liberalized.
This explains why liberalization is not only inefficient but dangerous if not regulated, because the market cannot cover these risks. Doha could therefore have an impact in total contradiction with expected results.
Does the Doha Round guarantee food security and sovereignty in a dangerous world?
The fact that talks collapsed on the special safeguard mechanism proves that the Doha Round’s proposed guarantees do not meet the expectations of the world’s various nations concerning food security and supply… It also demonstrates that non-regulated trade can lead to disparities that can violate a country’s national security.
Contrary to claims made by prophets of doom, Doha’s collapse will not implicate a sudden end to global development. In fact, it presents international decision-makers with a formidable opportunity to reassess the discussions’ contents and the strategy to be implemented to set up a fair trade system that will be better prepared to meet the challenges of the 21st century. We have a second chance to reach a good solution. Let’s not waste it in the name of some ideological principles, whose damaging results are all too obvious. It goes without saying that there rests our responsibility for the future.