Last month, world leaders met to plot a response to the global financial crisis. As part of their package of recommendations, they called for progress in trade talks to jump-start the faltering economy. Apparently, that was just empty rhetoric. Last week, Mr. Pascal Lamy, director general of the World Trade Organization (WTO) ruled out a meeting to work out a draft text for a new trade deal. Failure to move forward on an agreement will extend the current crisis and makes protectionist measures, which would only compound problems, even more likely.
The Doha Development round of trade talks was launched in November 2001. As its name suggests, it was intended to focus on developing nation concerns, and indeed much of the negotiations have centered on those issues, particularly agricultural trade. But agreement has remained elusive. Developed nations have offered significant access to their markets and promised cuts in subsidies and other forms of support, but developing nations want more. A deal was thought to have been within reach last summer, but it collapsed over a mechanism to protect poor farmers against import surges.
Mr. Lamy hoped that the recent crisis would change the thinking of trade negotiators. After all, heads of state acknowledged the importance of trade to overcoming the current downturn at both the G20 meeting in Washington and the APEC summit that followed. But the orders must have been garbled in the time since then. The gaps in positions remained and Mr. Lamy was forced to conclude that “calling ministers to try to finalize modalities by the end of the year would be running an unacceptably high risk of failure which could damage not only the (Doha) Round but also the WTO system as a whole.”
He may be right, but delay carries risks of its own. The economic downturn makes liberalization more compelling, but it also creates political pressures that will make reform more difficult. Leaders may be tempted to emulate Mr. Rafael Correa of Ecuador and play to populist sentiment. The new year will not reset the clock for Mr. Lamy. It will make a deal more urgent.
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