Doha round and round

US must show leadership on trade talks

Completing the Doha Development Round of multilateral trade negotiations can boost global growth and new trade opportunities would constitute a stimulus package of up to $300 billion, Mr Pascal Lamy, the director general of the World Trade Organisation (WTO), claimed this week. This is incentive enough, especially for countries experiencing a slowdown in economic growth and worried about double-dip recession. Speaking at the Bahrain Global Forum, of the International Institute of Strategic Studies, Mr Lamy made a reasonable claim for the WTO and the multilateral trade regime which, he said, had ensured there was no slide into protectionism in the face of the Great Recession. International trade is today as open as it was at the beginning of the crisis, Mr Lamy claimed. After a 12 per cent fall in real terms, in 2009, world trade is expected to grow by 9.5 per cent this year. This is reassuring. Keeping the wheels of trade moving has helped. But, the global economy has to move forward. Speaking at the same forum, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia also called for an early completion of the Doha Development Round. So, what is making the trade round go around in circles?

According to Mr Lamy, there are two bumps on the road that have to be crossed. The first is to get the developed countries to agree on a reduction in fisheries subsidies. It may appear a relatively small issue but fisheries lobbies have huge clout in Europe and European leaders don’t seem to have the stomach for tough talk, even if subsidy cuts can help resolve the fiscal crisis they face. The second bump is the impasse between the White House and the Congress in the United States. President Barack Obama has to convince lobby-controlled members in the US Congress to yield ground. Mr Lamy claims Brazil, China and India can help by showing greater flexibility. India would be willing to be helpful provided the interests of India’s poor farmers are taken care of.

Perhaps this is a fit subject for some purposeful negotiation at the next G-20 summit. All the important “green room” players at the WTO are represented in the G-20. In fact, if the G-20 can find a way of concluding the Doha round, it would gain enormously in stature as a global institution. The problem, however, and one that Mr Lamy acknowledged, is that the US has to yield more space than it is willing to. Mr Lamy put it pithily when he said, “The conclusion of the Round will be one of the world’s first confirmations of a changed economic power balance.” In stating this, Mr Lamy is indicating who he thinks has to yield space and to whom. It is the US and the European Union that have to make concessions to get developing countries and emerging markets on board. Does President Obama have the political space at home to concede this? He does, given the manner in which he has pushed the health care Bill. It is not for want of political capacity but for lack of political will that President Obama may yet allow time to go by. That would be unfortunate for global growth and particularly for the recession-hit industrial economies.