November marks the eighth anniversary of the Doha Development Agenda– the first multilateral trade negotiation under the auspices of the World Trade Organization. But what started as a real opportunity to help poor countries prosper through trade, for some it has now become a lost cause. But Doha doesn’t have to be a metaphor for failure. We can still save it and make it work. After all, if we can’t fix Doha, how can we hope to address much greater challenges that confront us, such as climate change?
For many, lowering subsidies and tariffs appears to be a tough sell for their domestic constituencies. They say a Doha deal is not worth the costs because it will not generate enough market access opportunities. But as we gear up for the upcoming World Trade Organization’s (WTO) ministerial meeting in Geneva on Nov. 30, we have to stress an unequivocal fact: the conclusion of the Doha round is worth fighting for. It will give the world economy a boost when it is most needed, reduce the scope for governments to resort to protectionism, and bolster the prospects for cooperation in other critical areas like the environment.
In terms of improved market access, the modalities under consideration – even taking into account likely exceptions for sensitive products – will generate increased trade that in turn could produce an additional US$160 billion in real global income, as new World Bank research shows. Are we really in such good economic shape that we can do without the extra stimulus?
For some, the proposals now on the table do too little to reduce average levels of protection. The average farm tariffs that exporters face would fall to 12 per cent (from 14.5 percent), and the tariffs on exports of manufactures to less than 2.5 per cent (from about 3 percent). But this is misleading because the small average cuts hide large reductions in peak tariffs. For millions of workers and farmers in poor countries, tariff and subsidy cuts will make a big difference. A Doha deal would mean tariff declines from 32 to 6 percent for the tennis shoes manufactured in Bangladesh and exported to the U.S. And removing all cotton subsidies and tariffs would increase real incomes in Sub-Saharan Africa by US$150 million per year.
Beyond the additional market access gains, Doha will restrain governments from resorting to protectionism. President Barack Obama in the U.S. and his counterparts in the EU all face pressure to protect their domestic interests. But in a world with new emerging powers like China or Brazil, it’s no longer possible for the industrial nations to have the only and last word. Especially, when the interests of very poor countries not represented in the G8 or G20 are at stake.
On the environmental front, a conclusion of Doha will also help. Agricultural support programs have produced a lot of pollution and devastation. Over 75 percent of global fish stocks are over-exploited, with a resulting annual loss for the world economy of US$50 billion. A Doha deal could phase out fishery subsidies, benefiting many small island states and poor coastal regions in developing countries that rely on fisheries for livelihood and food security. Similarly, removing policies that restrain trade in efficient environmental goods and services could foster a greener quality of growth.
Last but not least, there will be greater economic opportunities for very poor countries as a result of enhanced market access, the implementation of the “duty free and quota free” proposal, and an agreement to take concrete actions to facilitate trade, such as lowering red tape type border crossing costs, and significant reductions in tariff escalation (tariff peaks).
Standing in the way of success are differences over the design of certain agricultural safeguards, and whether there should be a movement to free or freer trade in specific sectors, among other things. These issues should not hold up a Doha agreement. There is already a significant deal on the table. At a time that the global economy struggles to leave the recession behind, we cannot afford to say no to this opportunity to boost growth, jobs and incomes.
First appeared at World Bank Growth and Crisis blog