Still dead as a Doha
Odds very much against trade pact now being reached
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.