The “Doha round” of WTO negotiations to increase free commerce in the world was a very difficult task from the beginning, almost impossible in some ways. To find a common denominator between developing countries with strong industry and agriculture, rich countries with even stronger industries and heavily subsidized agriculture and countries with nothing at all was expected to be, at best, a long and winding road with several bumps. Yet, for the common good, authorities of all these countries kept their optimism (at least publicly) and voiced their will to give in more than to demand in order to lay the groundwork for future tariff reductions.
But since the first meeting in Doha, in the United Arab Emirates, the picture didn’t look all that beautiful. Negotiations were tougher than expected, and the countries quickly descended into a basic game of blaming one another for a failure yet to be announced. Yesterday, June 21, this failure was announced.
Even though it’s not official, every country in the so-called G4, the group (formed by Brazil, India, US and European Union) invested by the WTO with the power to find a solution for the negotiations, didn’t hide their frustrations with the stall, and didn’t refrain to blame other countries either. Americans blamed Brazilians and Indians for not opening their industrial markets enough, while Brazil and India blamed the US for leading a US-EU proposal that wouldn’t open their agricultural markets enough. That is, the accusations remain the same. However, the current stall was new for the fact that, at least primarily, the US didn’t blame the EU for not offering a good enough deal, and refrained from the usual “I’ll give in if they give in first” excuse, that went back and forth between Americans and Europeans and ruined previous negotiations.
“While the U.S. and EU were prepared to make significant contributions, there was a lack of flexibility, indeed a rigidity, when it came to advanced developing countries who were present,” U.S. Trade Representative Susan Schwab said, in a clear reference to Brazil and India, the only developing countries which are members of the G4. Secretary of Agriculture Mike Johanns put it more bluntly: “We had two countries, India and Brazil, which I don’t think really chose to negotiate.” On the other side, Brazilian Foreign Minister Celso Amorim also didn’t measure his words, saying that “the G4 as such is dead," but he kept Doha alive by saying: "This is not the end of the story… I don’t think that the Doha round is dead." The Indian trade minister, in turn, didn’t seem much worried about keeping the appearances. He said that rich countries “want to be paid more for something they shouldn’t be doing," and that their demands are “completely unreal, are not fair, are not equitable." The blaming continues, only the patience seems to be running short. But what is wrong with Doha that drains out the patience of all the authorities who try to deal with it?
The main problem with Doha seems to be, simply put, that none of its negotiators want to give in on anything. When it seems that what the leaders of the negotiating countries would want the most is to just cut a deal and get over it, the many interests, industrial and agricultural interests especially, get in the way of the negotiations and force the talks into one more embarrassment. For starters, the interests of each country are clear: The US and EU, representing the rich countries, want to open the industrial and financial markets of the developing countries, to pave the way not only for their industries to establish themselves in these countries and invest more, but also to ensure that their profits come back to the rich countries freely, paying as little taxes as possible. There’s also the issue with the financial markets, in which the rich countries would like more openness for their investment money to land, and leave quickly at any sign of trouble with no reservations. With that done, they would be more than happy to open up their agricultural markets, eliminating subsidies that, in Europe, get to US$1 billion a day.
The developing and poor countries, in turn, would like to open up the rich countries’ agricultural markets, for the non-rich countries are embarrassingly stronger than rich countries in the majority of agricultural products, making them much cheaper and usually much better, and the only thing keeping poor countries from flooding rich markets with their products and making tons of money is the heavy load of subsidies from rich governments. However, some of these non-rich countries, the industrialized ones such as Brazil, India and China, have a great potential in their industrial and service sectors, a potential that they don’t want to give in to rich countries in exchange for agricultural openness, which turns out to be a disadvantage in the trade balance – exporting raw materials (cheap) vs. importing industrialized materials (expensive).
It’s obviously an impasse, and some countries use the complicated nature of it to instill doubts and turn countries against each other. The US, for example, never loses a chance to say that Brazil and India are holding back the development of poorer countries with no industry at all only to protect their own industries. On the other hand, Brazil, India and China align with the anti-globalization activists to say that rich countries are trying to force this deal on poor countries only to guarantee new markets for their industrialized products and create an eternal dependence based on unbalanced trade. And to make everything more complicated, both of them are right.
Americans are indeed right when they say that the interests of a country such as Brazil, the 10th richest country in the world, are dramatically different from the interests of Mozambique (120th richest), for example, and one of Mozambique’s last worries is the future of its industrial empire, which is inexistent. For a country like Mozambique, unlikely to have any industrial importance in this century, it would be better than they could ask for to open their markets for industrial goods of all kinds while boosting their economy with raw materials exports. As long as they managed their income responsibly, they would be able to form an educated workforce to work for cheap wages and sustain their economy. It wouldn’t be perfect and they would very likely become politically dependent of their largest importers, but it’s better than the best possible scenario they have today. The bottom line is: poorer countries have nothing to lose, and most of them are probably praying for any deal with the rich powers. So it’s not fair that countries with something to lose speak on their behalf.
On the other hand, developing countries are more than right to say that rich countries want nothing but to trap poor countries in their domain. The well-known argument that rich countries are trying to use globalization to ensure their political and economic dominance in the future doesn’t look like paranoia at all. It makes sense to say that rich countries know that their industrial prowess, as well as their superiority in the fourth sector won’t last much longer, as countries such as India and China can do it cheaper, and will very soon do it better (they already do in some sectors). So it makes sense to say that it wouldn’t hurt the rich countries to establish an economic and political dominance in the poor markets of today, which will be the hot markets of tomorrow, following the transformation that the hot markets of today (Chinese, Brazilian, Mexican, Indian, Russian, etc) went through decades ago. For the developing countries, it’s not only a matter of ensuring that they can fight head-to-head with rich countries in the future, but it’s also a matter of defending their industries today, when most sectors are only beginning to become internationally competitive.
In the end of the day, Doha represents a classic case of Realpolitik: Every country is out for itself and itself only. They can all talk as much as they want about representing other countries and doing the best for the all-mighty free market. But the truth is that each country is interested in the “free market” that favors itself more than others, and that is already hard to achieve, let alone favoring everyone equally, when all are suspicious of giving in on anything. The consequence of this is what we’ve been seeing: The WTO becomes an instrument of litigation, instead of the instrument of integration it was supposed to be. Globalization ends up being judged instead of being fostered, and it keeps moving forward with no rules, being molded lawsuit after lawsuit.
The G4 might not admit, but right now Doha is on its deathbed. Reviving it would be easy; it’s a matter of will. The problem is that will, in this case, involve thinking collectively instead of individually. And neither the G4 or the other WTO members seem to be ready for this mindset.