Consequences of WTO talks (Doha round) falling through

This is an article written by a UN Under Secretary General. It is a must read for all of you. Take a look at it here.

The WESS 2007 (World Economic and Social Survey, an annual publication by UNESCAP) underlines two types of costs – direct and indirect – consequent to the failure of WTO talks.

Direct costs refer to the net gains from trade liberalization that would no longer materialize. Estimates put the loss of income at about $100 bn.

Indirect costs are more diverse. They include: a long-term erosion in multilateralism and its non-discriminatory rules which have provided a stable anchor and rising trade-driven prosperity to the world for more than 60 years. It could also spell the beginnings of a reversal of economic reforms back to protectionism and trade favouritism, and the mergence of new political divides which could ultimately threaten peace and security.

Failure of the Doha round would lead to a proliferation of bilateral and regional trade deals. Already in the ESACP region about 38 trade deals have been concluded since 2004. Another 25 are under formal negotiations.

What is wrong with bilateral and regional trade agreements?

The disadvantage of bilateral and regional trade deals is that they result in a trading environment wherein the developing country producers and traders will find that cheapest sources of supply are beyond their reach.

What could be achieved by the Doha round?

Hence completion of the Doha round is in the interest of developing countries. It could provide market access to developing country producers that is stable, irreversible and non-discriminatory. Because it is global, there would be scope to deliver trade concessions across more sectors than any bilateral agreements are able to do. It would help WTO members to maintain their reform momentum, giving countries external incentives to implement difficult but desirable policy changes that they would otherwise be unable politically to achieve. These benefits are all much less evident in bilateral trade agreements.