Save Doha to Save the G20 Summit

Political leaders will gather for a G20 summit to address global economic governance. The summit could also be an opportunity “to exorcise the demons of protectionism,” suggests Ernesto Zedillo, director of the Yale Center for the Study of Globalization. Finding agreement on the Doha Round of trade talks, debated for seven years, would send a powerful signal for endorsing open trade. Zedillo offers the reminder that the rule-based system of the World Trade Organization does not provide foolproof prevention of protectionist tendencies: “A majority of the WTO members still have big differences between their bound and effective tariffs” and “agriculture has been brought into the system in a quite imperfect manner.” Global economic crisis demands action, and pledges by global leaders to avoid protectionism are not enough. Zedillo concludes that statesmanship – “vision, courage and diplomatic skill by national leaders” – could resolve remaining disagreements over the Doha Round, producing a tangible and significant accomplishment from the G20 summit. – YaleGlobal

Save Doha to Save the G20 Summit

A meaningful agreement that starts to reduce the world’s global economic governance deficit is simply not possible at the G20 meeting. But the G20 Summit need not be a disappointment. Plan B should be to save the summit by saving the Doha Round
Ernesto Zedillo
Wednesday, November 12, 2008

Under the threat of a brutal financial and economic collapse, G20 leaders will meet in Washington on November 15th with the aim of addressing the lack of adequate global economic governance. Despite having been an early supporter of a similar idea, I am not optimistic about the outcome of the upcoming meeting. Building a global public good, as the Bretton Woods summit did in 1944, requires both the surrender of sovereignty and immunisation to the temptation of free riding - both of which involve many thorny issues. It is simply not possible to produce a blueprint for comprehensive reform with a few weeks’ notice. Expectations that a sort of new "Bretton Woods" will be agreed are totally misplaced.

The world cannot afford to miss this opportunity

Nevertheless, I believe that it would be a shameful waste of a huge political opportunity if leaders limited themselves to creating a secretariat for planning the next meeting and instructing their bureaucrats to speculate about the future - as some have suggested is the only realistic outcome. The world cannot afford to miss the opportunity to do something meaningful to prevent the very real risk of catastrophic damage to the global economy.

Restrain protectionism and clinch the Doha talks

There is no doubt that even in the best of circumstances, a sharp global slowdown driven by painful recessions in some of the major economies of the world is at this point inevitable, and perhaps even necessary to correct the global imbalances and other excesses that are very much at the root of the crisis.

But the now unavoidable drama would become an unprecedented tragedy if countries started to fall into the protectionist temptation as a response to the crisis. Although it’s been said ad nauseam, it is worth recalling how brutally autarkic instincts emerged in the 1930s and how vast was the resulting destruction of wealth, income, employment and even human lives.

The G20 Summit is the right place to exorcise the demons of protectionism. Already, there are proposals for leaders to make on November 15th a trade pledge - to avoid protectionism as an answer to the recession. Frankly such a pledge will not suffice. Leaders will have to be bolder if they really

mean to pre-empt the threat of trade wars.

The November 15th gathering would truly become a historical and successful one if leaders were to clinch right then and there the political agreements that are needed at the highest level to conclude the Doha Round.

Three incorrect analyses

Some commentators believe that the WTO’s rules-based system - something that did not exist in the 1930s - makes the risk of a protectionist wave practically nil in this crisis. Others have even proposed to give up on the Round simply because so much has changed since it was launched.

And then there are others who think that aiming to conclude the Round soon is too ambitious (after all, they argue, rather than serious agreements, the trade talks have delivered one breakdown after another despite having been launched seven years ago). I strongly disagree with the three camps.

To those who think that the available trading system can prevent a spurt of protectionism, let’s remind them that:

 A majority of the WTO members still have big differences between their bound and effective tariffs;

 Agriculture has been brought into the system in a quite imperfect manner; and

 Countries more frequently than not have tended to abuse the WTO provisions on contingent protection (e.g. antidumping tariffs) and standards.

There is thus lots of room for additional "legal" trade barriers. To the total or partial sceptics of Doha, I would say that, although perhaps modest relative to the high aspirations at Doha’s launch, the results achieved at the talks up to now are quite substantial. The sceptics should recognise that, despite a lack of political propulsion from their leaders, negotiators have gone a long way toward narrowing

differences in crucial and contentious issues such as market access and subsidies in agriculture, and further liberalisation in non-agricultural products.

Statesmanship on November 15th

Admittedly, serious disagreements still remain; otherwise the recent July breakdown of the talks would not have happened. But let’s not forget that at the end of the day - and I can attest to this from practical experience - the last contentious aspects of good trade deals cannot be resolved by negotiators alone. Finishing the deal requires vision, courage and diplomatic skill by national leaders. That is what statesmanship is about and precisely what has been missing all along at the Doha Round until now. Statesmanship should be brought into play at last to triumph on November 15th.

Problems that can be solved with political will

There is no lack of fair ideas to solve the pending conflictive issues. There is no reason why problems such as sensitive and special products and safeguards in agriculture, and the formulas to further liberalise and address sectoral initiatives of non-agricultural products, could not be solved if there is enough political will and muscle to make prevail, not the agenda of particular interest groups, but the long term benefit of each nation. In order to close the Round, leaders would also need to send to the

WTO built-in agenda a number of issues that are certainly sensible for some countries but not as crucial for the system as a whole. And, of course, countries at the G20 should keep in mind, and reasonably accommodate, the concerns of those that will not be present at the meeting. In particular they should commit substantial resources towards the long promised but not yet accomplished "aid for trade fund" in order to support poor countries in addressing adjustment costs associated with the implementation of the Doha Round. The rich countries should also pledge to reinforce their respective social compacts to make enhanced trade integration more palatable to their own people.

Despite its timing, the G20 Summit need not be a disappointment. The Plan B to save it is none other than saving the Doha Round.

Ernesto Zedillo is director of the Yale Center for the Study of Globalization and former president of Mexico.

© Centre for Economic Policy Research 2008