Why 2010 could mark the death of the global trade system as we know it.
- By Paul BlusteinPaul Blustein is a journalist in the global economy and development program at the Brookings Institution. His latest book, published Sept. 22, is Misadventures of the Most Favored Nations: Clashing Egos, Inflated Ambitions, and the Great Shambles of the Global Trade System.
Someday historians may look back on 2010 as the year the global trade system died — or contracted a terminal illness. A pledge by world leaders to complete the Doha round of global trade negotiations this year looks increasingly likely to end in yet another flop, and that would deal a crushing blow to the trade system as we know it.
Of course, commerce will continue across national borders, and one-off deals between countries will still happen. But the slow-but-steady, across-the-board opening of markets that has fueled growth for decades is grinding to a halt. After eight painful years of standstill and failure, with each meeting just a shoveling of intractable problems forward to the next, the Doha talks might collapse once and for all in 2010, possibly taking the World Trade Organization (WTO) down in the process.
Yes, negotiators could once again defer the day of reckoning by setting a new deadline and resolving to try again later — just as they’ve already done in Cancún, Geneva (three times), Hong Kong, and Potsdam. But they’re running out of chances. No less an authority than Stuart Harbinson, the former WTO General Council chairman who played a key role in the round’s launch in 2001, wrote recently: "This time … the crisis is real. Too many deadlines have come and gone and the WTO simply cannot afford a repeat. The fundamental credibility of the institution is now at stake … 2010 is a real deadline."
That’s dangerous, because for all its failings, the WTO is a rare international organization that works as intended. The Geneva-based trade group is the current embodiment of the system established after World War II to prevent a reversion to 1930s-style protectionism and trade wars. Its rules keep a lid on its member countries’ import barriers, and members take their trade disputes to WTO tribunals rather than imposing tit-for-tat sanctions on each other’s goods. In addition, the WTO is the guardian of the most-favored-nation principle, which requires members to treat each other’s products in a nondiscriminatory fashion — a valuable bulwark against the sorts of trade blocs that can lead to friction or even military conflict.
If Doha falls apart, the WTO’s ability to continue performing its vital functions would be imperiled. If it can’t forge new agreements, how long before it loses its authority to arbitrate disputes? The trade body won’t disintegrate overnight, but the danger is that its tribunals will be weakened to the point where member countries start ignoring WTO rulings and flouting their commitments.
Without negotiated settlements of contentious issues, litigation will almost surely spread like wildfire — a potentially explosive situation. On climate change, for example, some in the United States and Europe want to impose "green tariffs" on goods from countries that aren’t reducing their carbon emissions fast enough (read: China and India). In the absence of clear rules, China and India would have plenty of leeway to challenge such tariffs, putting WTO tribunals in the terribly awkward position of having to decide: Are such tariffs illegal, meaning that free trade trumps saving the planet? Or, if the tariffs are legal, should the Chinese and Indians have the right to slap duties on goods from Western countries, which they blame for creating the global warming problem in the first place?
Sadly, even in a best-case scenario for 2010, with Doha ending in a deal, the global trading regime might still be doomed. The round’s initial goals — making globalization work for the billions left behind by eliminating the farm subsidies and tariffs that adversely affect the world’s poor — have become so laughably implausible that completing what’s left of an agreement will prompt a painful reckoning. The deal on the table has been so watered down by negotiations that it cannot be credibly said to work wonders for the poor, or even effect much change in how global trade takes place. The gap between the result and the initial aspirations will prompt legitimate questions about why so much time was required and whether the WTO has any future as a negotiating forum.
What an irony that would be for President Barack Obama. Despite making multilateralism a keystone of his foreign policy, he may preside over the marginalization of the most successful multilateral institution of all.