From the Bicycle Theory to a Snowball Approach to Get the WTO Moving

By Chakravarthi Raghavan Reprint | | Print |

GENEVA, Apr 4 2012 (IPS) - Trade diplomats and trade officials face several uncertainties in 2012. Many of these have their source in the continuing serious global financial crisis and its deadening hand on the real economy. This, and the reality of the major role played by corporate finance capital in the electoral process of countries, ensures nothing will be done, at least not this year, to tackle the root causes of the financial crisis, with criminal fraudulence at its heart.

In terms of the World Trade Organisation (WTO), the major developed countries entered into binding commitments at the Marrakesh conference in April 1994, for reforms to their highly protected agricultural sector that would eliminate heavy subsidies, as well as in other areas of trade. Placing their trust in the solemn treaty commitments of the major developed economies, and their good faith implementation (a basic principle of public international law), the developing countries paid a high price in advance by accepting various restrictions on their own trade in goods, in trade-related aspects of intellectual property rights (TRIPS), and trade in services too. However, the developed countries have by now repeatedly reneged on their promises and commitments.

At least in retrospect, it is clear that the big players, even when signing the Marrakesh treaty, had no intention of carrying out their own obligations.

In November 2001, taking opportunistic advantage of the terrorist attacks in New York and Washington, Pascal Lamy as EU Trade Commissioner, with the help of then-U.S. Trade Representative Robert Zoellick, had forced on the developing countries the Doha Round of Trade Negotiations –with an agenda more complex than that of the Uruguay Round (1986-1994). Soon after, Lamy appeared before the European Parliament, in a formal session followed by informal discussions, and reportedly told the MEPs that he had gained for Europe 10 years to enable them to adjust agricultural policy and shift subsidies.

As WTO Director-General, Lamy has continued on this path, though he was somewhat checkmated in Hong Kong when, at Argentina’s insistence, a kind of parallelism was established between the agricultural and non-agricultural Market Access talks. However, in the various Lamy-led efforts since 2005 to conclude the Doha Round, the mandate is presented as talks for the major emerging economies –China, India, Indonesia, South Africa, etc.– to provide market access for the U.S.

With the Doha Round at an impasse, some developed countries are promoting the view that the impasse shows that trade negotiations involving the entire membership is no longer manageable, and hence there must be negotiations among the few resulting in plurilateral agreements, such as the ITA (Information Technology Agreement) model which countries accounting for 90 percent of production and trade have participated in and joined, with others given Most-Favoured-Nation treatment. A more recent idea being floated is that if major developing countries will not participate in the plurilaterals and provide market access to the U.S.-EU service industries, the major developed countries (the U.S., the EU, Canada, Japan, Switzerland, Australia etc), will enter into a services free trade agreement.

The major developed countries claiming to account for 60 percent of global services trade, the bulk of it under financial services, have already liberalised this sector. They gain something only if the major developing economies can also be roped in and persuaded not only to liberalise the services trade but also to forget about the agricultural chapter of the Doha talks and its single undertaking. Major developing countries have however refused to fall into this trap.

Now in its eleventh year, not only have the cheerleaders of the Doha Round all walked away, some publicly and others quietly, but some of them are also advocating winding up Doha as a failure or putting it in cold storage somewhere and taking on new agendas. But there are no takers among the developing countries who are no longer amenable to being pushed around.

In this situation, in December 2011 Lamy has floated his idea of a multi-stakeholder panel.

According to Paul Rayment, former chief economist of the United Nations Economic Commission for Europe, there is a common thread running through such ideas as stakeholder groups, focus groups, plurilaterals, etc. One puts together a carefully chosen group of “the great, the wise, the virtuous” (according to one’s preferred definition of what is great, wise and virtuous). Such a group is then asked to consider a problem and to produce what it knows will be the preferred solution, and then outsiders are challenged to go along with the result or be condemned as “reactionaries, obstructionists, protectionists, or whatever the fashionable adjective might be.” This, Rayment suggests, “is the snowball approach, rather than the (Fred Bergsten-Jagdish Bhagwati) bicycle theory approach to trade policy –get the momentum going and eventually the outsiders will feel they cannot afford to stay outside the group. Group dynamics or simple dynamic economies of scale!”

After the failure at of the Cancun Conference in 2003, Ram Manohar Reddy wrote in ‘The Hindu’ newspaper: “The question now is not if the Doha round can be saved; it is instead, does the WTO have a future in its present form? It does not. The only way the WTO can contribute to ‘a rules-based multilateral trading system’, as it did until the mid-1990s, is if the all-powerful role in which it was cast in the mid-1990s is taken away from the organisation. That would mean a more narrowly defined remit for the WTO, which does not interfere in domestic policy. That may go against the dictates of globalisation, which sees no area of domestic policy as outside the influence of global economic forces. It may even seem impossible because a WTO with its powers shrunk would not be in the interests of the U.S. and the EU, both of whom in the late 1980s saw the organisation as a vehicle to further their economic interests across borders. But do the members of the WTO have any choice other than to change the direction of the organisation?”

If Lamy does set up his panel, it would do well to consider and adopt this sane advice. But if Lamy is bent upon repeating history, he might read what Karl Marx, who followed and expanded on Hegel’s dialectics, wrote in the 18th Brumaire of Louis Bonaparte: “Hegel says somewhere that all great events and personalities in world history reappear in one fashion or another. He forgot to add: the first time as tragedy, the second as farce.”

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(*) Chakravarthi Raghavan is Editor Emeritus of the SUNS (South-North Development Monitor) and an expert on the WT