The global trade talks, the so-called Doha Round, have collapsed and all parties are now accusing the other for the failure and inability to make trade concessions. Where does this leave Saudi Arabia, which joined the WTO after many years of negotiations? Was it worth it after all? Why did the talks breakdown and can an equitable deal still be reached? Some argue that the WTO has shown itself unfit to promote the interest of the world’s poorest developing nations and that both the European Union and the United States have unfairly insisted on significant business opportunities for their multinationals as condition for these talks. At the same time, the EU and the US are accused of having refused to take meaningful action needed to prevent dumping and their commitments to cutting farming subsidies were restricted to symbolic gestures.
Others accuse the “richer” of the developing countries in putting their self-interest first at the expense of their “poorer” cousins, and accuse these countries of bargaining for greater market access. Specifically, the last Doha Round talks seemed to have degenerated into such a scenario with Brazil seeking greater agricultural market access, India seeking greater service provider entry, while China greater access for its manufacturing industries. The poorer developing countries found themselves largely excluded from such bargaining.
But it is not the developing countries alone that seemed to have adopted “a go it alone” policy, as the split between the EU and the US that caught most attention. EU Trade Commissioner Peter Mandelson criticized the US strongly that it was inflexible on further farm subsidy concessions, while Washington made it clear that there would be no more such concessions, and the US went on to attack the EU, India and Japan for not doing enough.
Those who behave in the WTO multilateral trading system and its goals to spread economic development, market efficiency and individual welfare to the world, lamented the potential cost of failure in terms of economic and political fall out. They argued that in times of current political and economic tensions, there was an urgent need to top up international confidence, not further damage it. Again, it depends whether one sees the glass half empty or half full and whether one believes that multilateral trade agreements are better than multilateral agreements to achieve economic growth and prosperity.
The truth of the matter is that the latest Doha Round of trade talks was going nowhere because the US and the EU, for similar domestic political and economic pressures, refused to stop dumping by cutting “real money” from their agricultural support, while demanding that developing countries continue to open up their markets for services , finance and manufacturing products. Protectionist trading tendencies are increasingly emerging around the world, and some counties are now arguing that no deals are better than bad deals, and, according to the US, the Doha Round deal would be a bad deal.
The other lament about the collapse of the Doha Round talks is that this will usher in an even more damaging era of bilateral trade negotiations in which poorer trading countries will be picked off one by one into more extreme concessions than would be the case under a WTO multilateral trading umbrella. However , as happened with the GCC countries free trade agreements, the US and the EU were proceeding happily with their own bilateral deals with the GCC whether Doha Round succeeded or not.
The good news is that the collapse of the Doha Round trade talks will open up a new opportunity for debating what sort of rules we wish to put in place to govern the global economy in the new century. Are there any other approaches that protect nations interest besides the WTO approach? Will Saudi Arabia now pursue a more bilateral approach or hope to benefit from the WTO accession though a more invigorated multilateral emphasis? This depends on the nature of Saudi Arabia’s export comparative advantages, which centers on its petrochemical industry. In this case, unlike agricultural based developing economies, Saudi Arabia sees itself as effectively competing with the advanced economies in the more advanced petrochemical sector and all its derivatives. As such, the WTO accession opened up for the Kingdom a more level playing field in terms of market access, which has been denied prior to entry.
(Dr. Mohamed A. Ramady is visiting associate professor, Finance and Economics, King Fahd University of Petroleum and Minerals.)