Will the Doha Round Implode in 2003?

On balance 2002 was a bad year for free trade, and 2003 could be worse. Last year there were a number of unilateral protectionist measures taken by developed countries, the most controversial being the U.S.' imposition of steel tariffs and its enactment of the farm bill. Even more worrisome was the lack of significant progress in the World Trade Organization's round of trade liberalization that had been launched in November 2001 in Doha, Qatar. Remember how difficult it was to get that round rolling. A significant group of developing countries held out until the last possible moment on the grounds that either developed countries had failed to deliver on commitments they'd made under the previous Uruguay Round or that certain WTO provisions had, in practice, proved to be counterproductive. Then there were those developed countries that opposed further trade liberalization in certain sectors. The European Union, for instance, persistently avoided negotiations on agriculture and only agreed to them after introducing a number of complex issues into the negotiating agenda--issues that developing countries remain highly skeptical of to this day.

Access to Medicines Still a Problem

Intellectual property rights is one area in which developing countries demanded a more accommodating position from industrialized countries. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) has been an integral part of the multilateral trading system since the Uruguay Round. It aims to strike a balance between providing incentives for future inventions and making existing inventions available to the masses. The effects of this agreement on the prices of pharmaceuticals hinder developing countries in their efforts to deal with public health crises, such as the AIDS epidemic. The deadlock on this was broken by a special declaration that reaffirmed the right of governments to grant compulsory licenses in cases of national emergency or other extreme urgency, allowing a third party to produce a patented product without the consent of the patent owner. This provision, however, helps only those countries that have the capacity to produce the required pharmaceuticals; it is practically worthless to those that don't--usually the poorest countries with the most severe public health problems. Members, therefore, committed themselves to finding a solution for these countries before the end of 2002. Unfortunately, after long and intense negotiations, they failed to do so. Because of concerns about the diseases to be covered, the U.S. blocked a deal allowing some developing countries to bypass patents on certain drugs so they could import cheaper generic versions. This proposal had the support of nearly all the other WTO members, including the EU, Japan and Canada. Failure to meet the deadline has now made it much harder to successfully tackle the other complex issues in the Doha Development Agenda.

Other Stumbling Blocks

The deadline on access to essential medicines was not the only one missed. The WTO has provisions that favor developing countries over other members, such as longer time periods for implementing commitments and special measures to increase trading opportunities. These are referred to as special and differential treatment (S&D) provisions. At Doha it was agreed that all S&D provisions would be reviewed and made effective, rather than existing as exercises in rhetoric. But these discussions also failed, further poisoning broader trade negotiations. The blame for this should be placed mainly on a significant group of developing countries that submitted numerous S&D requests that were inconsistent with the long-term objectives of full liberalization and whose pursuit of out-and-out protectionism is counterproductive to their own development.

The round is also threatened by the extremely slow progress in the negotiations on agriculture, correctly considered by many members to be the most important. In July, amid acrimony over its farm bill, the U.S. made an interesting two-step proposal for liberalizing agricultural trade. The first would eliminate export subsidies and significantly reduce tariffs and trade-distorting domestic support measures over a five-year period. The second would aim to fully get rid of all tariffs and trade-distorting measures, the time frame to be decided in the future. Japan, however, has yet to produce a meaningful initiative on agricultural reform. And the long-awaited EU proposal put forward in December is clearly inadequate. By leaving its Common Agricultural Policy essentially untouched, the EU's proposal delivers little in terms of additional market access and practically nothing in the phasing out of export subsidies. If the EU persists in its position, it could effectively kill the Doha Round.

Another WTO ministerial meeting is scheduled for September in Cancún, Mexico. Not only are all of the thorny issues above supposed to be resolved before this meeting, but so are many others of equal complexity, such as setting the ground rules for negotiating multilateral agreements on investment and antitrust policies. If the round is to keep moving, all players from both the developed and developing camps will have to improve their performance over 2002's. Firmer and clearer commitments to free trade by all WTO members and more enlightened leadership from the U.S. and the EU are the essential ingredients for avoiding the collapse of the Doha Round. Preventing this disaster is in everybody's best interest.