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Friday, June 22, 2007

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Peter Gallagher

The problem with brinksmanship is that the more you do it, the less it means. And then there's the 'zombie problem'.

It must be very difficult in current trading conditions for Brazil and India to imagine that they are on the edge of a 'brink'. The USA may feel closer to the brink; but the trade deficit is either a cliff of it's own making (consumers! why would you let them run an economy?) or a banal confirmation of the continuing, only-slightly-weakening, attraction of its economy for investors. In any case it's hard to connect the prospective outcome of the Doha round with that "brink". As Nath said, the US has less hope than China that a NAMA coefficient of 20 will have commercial value.

The EC and USA accuse the Brazilians (and India) of making an offer on the NAMA tariff cutting formula (a coefficient of 30) that would offer no new market access. Appalling! Yet the EC, too, offers a market access proposal on agriculture that has zero impact (nominal 65% cuts in the 'upper tier' of tariffs higher than 75% will offer no new access in dairy, sugar or most meat, for example). It's ironic repayment for the EC's 'solidarity' in leading the charge at Doha for 'less than full reciprocity' for developing countries.

After thirty years of these stand-offs (Tokyo Round through Doha) it is past time to acknowledge that the multilateral trade round format doesn't work. We cannot coordinate real changes in trade and investment policies by negotiation. Over and over again it appears that real changes arise only from autonomous measures such as those in Brazil and China in the late 80s and first half of the 90s; the EC ('McSharry reforms') in the first half of the 1990s; Vietnam's and India's first steps to liberalization in the mid-to-late 90s, and also reluctantly; ASEAN, Korea and Mexico in the late 90s. Attempts to wrench such changes from WTO Members in a round of negotiations has a very poor record of success and what changes are won come at a cost to the system.

When multilateral negotiations (Tokyo, Uruguay, Doha) return with bare confirmations (bindings) of these autonomous changes they do so as a near corpse, a 'zombie'. The liberalization objectives of the Round's initial mandate have been strangled by a decade of tortuous haggling. Pinned to the shroud are compromise texts that entrench protection of special interests ('ceiling bindings', 'special treatment (annex 5)', 'minimum access quotas', 'blue box', exceptions and deceptions in services schedules). These 'undead' lie around for a decade or so waiting for ressurection in the next round of negotiations and rise up, at the end, re-embalmed and even multiplied ('sensitive' or 'special' prodcut categories, more 'special' safeguards).

If Doha 'survives' with the current framework, you can be pretty sure it will not be 'alive'; only 'undead'.

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