Still dead as a Doha

Odds very much against trade pact now be­ing reached

Finweek English Edition - - Economic trends & analysis - BY HOWARD PREECE howardp@fin­

FI­NANCE MIN­IS­TER TREVOR MANUEL got some mod­est cov­er­age in South Africa’s me­dia for his de­mands last week that the world’s big in­dus­trial na­tions move ur­gently to agree­ment on the Doha trade pact. How­ever, out­side of SA, Manuel’s com­ments went vir­tu­ally un­no­ticed.

That wasn’t be­cause what Manuel said lacked ei­ther sense or rel­e­vance. On the con­trary, the views he put for­ward in Cape Town were both highly ap­po­site and sin­gu­larly ap­pro­pri­ate. Nor, cer­tainly, was Manuel largely ig­nored be­cause the is­sue he raised was only of mi­nor con­se­quence.

The global econ­omy would get a huge po­ten­tial turbo-boost if a Doha deal could still be done. The World Bank has put the po­ten­tial ag­gre­gate gains over a pe­riod of years to all na­tions at a min­i­mum US$500bn. Also, around $350bn of that would go to the emerg­ing mar­ket/de­vel­op­ing coun­tries, but there would be win­ners ev­ery­where.

So what Manuel urged was patently of great con­se­quence. But it still went mostly un­heard. Crit­i­cal rea­sons were: • That Manuel said noth­ing that hasn’t been said time and again by scores of world po­lit­i­cal, eco­nomic and busi­ness lead­ers. That ul­ti­mately SA can at most play only a back­stage mi­nor role in help­ing to se­cure a for­mal Doha Agree­ment. Most vi­tally, the odds are very much against any trade agree­ment now be­ing reached. Pas­cal Lamy, di­rec­tor-gen­eral of the World Trade Or­gan­i­sa­tion, con­tin­ues to claim that a break­through is still pos­si­ble. But he could hardly say any­thing else.

Re­al­ity is that the last chance of any mean­ing­ful Doha Treaty prob­a­bly dis­ap­peared when the Democrats in the United States won con­trol of Congress last year. Pres­i­dent Ge­orge W Bush’s Repub­li­can Party is tra­di­tion­ally more sup­port­ive of free trade than the Democrats. How­ever, there are plenty of pro­tec­tion­ist Repub­li­cans and a fair num­ber of free-trade Democrats.

The crit­i­cal fea­ture, though, is that Bush – un­like for­mer Pres­i­dent Bill Clin­ton – was able to se­cure “fast track” trade ne­go­ti­at­ing author­ity from Congress. That means Congress must ei­ther ac­cept or re­ject in en­tirely any trade lib­er­al­i­sa­tion pro­posal pre­sented by Bush – it can’t kill it by amend­ment.

But Bush’s “fast track” author­ity ex­pires on 1 July and it seems def­i­nite. Also, as­sum­ing that Hil­lary Clin­ton, Barack Obama or John Ed­wards cap­tures the White House in the 2008 pres­i­den­tial elec­tion, it’s highly un­likely that the Democrats will give tradene­go­ti­at­ing rights to their own leader.

All that means that the rest of the world knows that for prac­ti­cal pur­poses any com­pre­hen­sive trade re­form plan that re­quires US ap­proval – which nec­es­sar­ily in­volves any deal that re­ally mat­ters – is not worth pur­su­ing.

So what went wrong? The sim­ple an­swer – and it has a big el­e­ment of truth in it, but is far from the whole story – is that the US, and the French-led Euro­pean Union even more, were just not will­ing to chal­lenge their po­lit­i­cally pow­er­ful do­mes­tic farm lob­bies. Stud­ies show that one in four of out­go­ing French Pres­i­dent Jac­ques Chirac’s voter sup­port­ers has some farm con­nec­tion.

How­ever, there’s more to it than that. Their farm­ers also re­peat­edly hold other de­vel­oped economies – es­pe­cially Ja­pan and South Korea – hostage. And some de­vel­op­ing economies, most no­tably In­dia and Brazil, are also fiercely pro­tec­tion­ist con­cern­ing their own agri­cul­ture poli­cies.

In ad­di­tion, there’s a great deal of re­luc­tance in some emerg­ing mar­ket coun­tries to open up their economies to ser­vices from the de­vel­oped world (as the Doha draft spec­i­fied). Then some of those coun­tries are dis­in­clined gen­er­ally to heed pa­tent and broad “in­tel­lec­tual copy­right” claims from the rich na­tions, also cen­tral to the Doha draft.

Just to com­plete the dif­fi­cul­ties, there are ques­tions con­cern­ing the ex­tent to which Asian coun­tries (Ja­pan was al­leged to lead the way for years but China is now in cen­tral po­si­tion in the front line) seek to ma­nip­u­late their ex­change rates to se­cure for­eign trade ad­van­tages.

Few ob­servers world­wide – much more pre­oc­cu­pied as they are with Iraq and the Mid­dle East and with a wide dis­like of Bush – are aware just how an­gry most of “mid­dle Amer­ica” is about this. Here we’re talk­ing cru­cially about Demo­crat vot­ers.

I’ve noted be­fore that it was in­stinc­tively and im­me­di­ately be­lieved af­ter the 2006 US Con­gres­sional elec­tions that Iraq had been the trump card for the Demo­crat win­ners. It emerged in­stead that a great ma­jor­ity of those win­ners put their hard-line op­po­si­tion to many free trade deals – and their hos­til­ity to per­ceived Chi­nese “un­fair­ness” in par­tic­u­lar – as the cen­tral key to their suc­cess. So, mir­a­cles aside, Doha is dead. SA won’t suf­fer much di­rectly from the death of Doha: ex­ports of met­als and min­er­als are es­sen­tially mar­ket-driven.


Source: Stan­lib


Source: Stan­lib

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