The WTO Doha Trade Round

by Tim Wallace, July 2008 

It has often been stressed recently that it is of great importance to the global economy that the Doha trade round comes to a successful conclusion. Peter Mandelson claims that a deal would boost confidence in the economy across the globe, helping to reduce the problems of the current slowdown. Such a boost would definitely come at a good moment - the WTO's figures show that global trade growth has been falling for the last few years, and so fewer restrictions in trade would be beneficial.

Indeed, the benefits that the WTO claims would arise with the conclusion of the Doha trade round are striking. $125bn paid in tariffs each year by firms and consumers would be saved (0.1% of global GDP), and in time this would result in the global economy being $43bn per year richer. On top of this, similar service liberalisation could lead to an extra $30bn gained per year.

There are, of course, many problems, some stemming from the EU's reluctance to cut farm tariffs. For example, whilst Mandelson has reiterated the offer to cut EU farm tariffs by 60%, Nicholas Sarkozy has been regularly undermining that stance, damaging the success of negotiations and reducing the EU's support for tariff cuts in the future. Another recent example of the failure to support trade liberalisation can be seen in the imports of electrical goods - tariffs were reduced on a range of imports such as photocopiers and fax machines under a 1996 agreement, but now that the machines are combined, they are once more being subjected to tariffs. ‘Special agricultural safeguards' have also been introduced to the negotiations - that is, if a large amount of cheap foreign goods are suddenly imported, tariffs can rise again, to protect local producers. Such obvious lack of enthusiasm for free trade does nothing but undermine confidence in European negotiating efforts, and as a result the trade talks are likely to break down.

As well as this, the US does not want to look like it is letting down farmers just before a presidential election, and there is currently a Bill passing through Congress supporting agricultural subsidies. Furthermore, the Brazilian government has accused the EU of being insincere in its offers to liberalise trade, and the Indian government and its supporters have declared that the EU and US have not lowered agricultural tariffs sufficiently for them to reciprocate with reduced tariffs on industrial goods.

In all likelihood, there will be a half-hearted compromise and the talks will be deemed a success, although insufficient progress will have been made and few will really be satisfied - other than, perhaps, the EU's protectionist lobby, which will be pleased that progress towards free trade has been delayed.