Doha Is Dead

This past weekend, the world’s central bankers and finance ministers gathered in Washington with the grandees of the International Monetary Fund and the World Bank for their annual meetings. Their attention was, quite naturally, focused on the European debt crisis. Officially, the world’s economic leaders remained committed to concluding a global trade accord, although only the leaders of the developing world reiterated that commitment over the weekend. But instead of embracing old commitments, they should all recognize that those trade talks (the so-called Doha round) are dead, the negotiating agenda is out of date, and international business has moved on. Efforts to expand trade on other tracks, however, are far from dead.

It would be difficult to repeat the string of multilateral trade successes that characterized the first 50 years after World War II. The achievements reflected a confluence of circumstances that no longer exist: U.S. economic and military dominance and unrivaled political leadership of the Western world, the weakness of the developing countries as a group, and, finally, the Cold War rivalry between the U.S. led-coalition and the Soviet bloc, which paradoxically produced stunning achievements in multilateral diplomacy.

In the field of trade diplomacy, this era reached its apogee in the 1990s with the conclusion of the Uruguay round in 1994 and the creation of the World Trade Organization (WTO). Since then, the international economic consensus has progressively disintegrated, with the Doha round as a notable casualty. The United Nations Framework Convention on Climate Change is another victim. In both cases, entrenched national interests and the rise of new powers with protectionist tendencies (Brazil, China, India, and South Africa) prevented meaningful compromise. The question is: Where do we go from here?

The answer is to set aside grand global efforts and think small until conditions are more favorable. Trade negotiators should concentrate their efforts on two things: making progress on liberalizing trade through an expansion of smaller trade accords; and encouraging businesses, financial institutions, and other nonstate groups to reach their own trade-facilitating agreements.

One path is to seek regional and bilateral agreements (often called preferential trade agreements, or PTAs). While purists decry the retrenchment from multilateralism, the good thing about PTAs is that they are built on the same rules of trade enshrined in the original General Agreement on Tariffs and Trade (1947) and repeated in the WTO (1994). The best among them go far further than the WTO in reducing border and behind-the-border barriers, both to trade and to investment. To be sure, this process creates a playing field tilted in favor of "insiders" and against disfavored "outsiders." But the tilt furnishes a strong inspiration for the "outsiders" to lower their own barriers and jump back into the world trade and investment game. All but die-hard purists call this a virtuous circle.

Closely related to PTAs are subject-specific agreements between countries. An old example is the Convention on International Trade in Endangered Species, which entered into force in 1975 with 10 members and now numbers 175. The latest example is the Anti-Counterfeiting Trade Agreement, signed just a few weeks ago by 42 countries. After the dust from the Doha round settles, the WTO might get back in the negotiating game by serving as the umbrella organization for a series of plurilateral agreements, for example on the relation between trade rules and climate change, or on good practice with respect to exchange rates or state-owned enterprises.

Another way forward is to continue to advance global rule-making at the nonstate level, led by business groups, financial institutions, and civil organizations. These morally binding understandings, even though they are not legally binding agreements, have emerged as a new source of rules, not as formal state-to-state treaties but as subordinate rules of great significance. There are many examples: the anti-corruption and corporate governance standards set by Transparency International, ethical standards for mining investments set by the Extractive Industries Transparency Initiative, various "green" certifications by NGOs involving trade in goods, the International Chamber of Commerce’s rules governing letters of credit, the capital rules for banking promulgated by the Bank for International Settlements (Basel III), the standards for national securities regulation implemented by the International Organization of Securities Commissions, and so on. Such understandings have already developed their own momentum, as leading firms work out voluntary carbon emission and labor standards and as regulatory bodies that issue patents or review drugs consult with one another. The point is that economic self-interest can and does produce compromise and understanding as the search for systemic solutions continues.

So though we may mourn the passing of the old multilateralism, exemplified by the Doha round, new modes of international cooperation are supplementing and gradually supplanting the older, higher-level efforts at treaty-making. While less dramatic, less known, and less newsworthy, these ties are binding a globalized world into bilateral, regional, and subject-specific commitments and generally accepted norms of business conduct.