Since very little was expected from the latest World Trade Organization talks in Hong Kong, they did not disappoint. After six days of wrangling among 149 countries, very little was agreed save that officials would carry on working behind the scenes, hoping to produce a more acceptable deal in four months’ time.
The good news however is that the Doha Round, which began four years ago, is still struggling on. These all-important negotiations did not end in rupture and recrimination as some pessimists feared. The reason is that the two richest participants, the US and Europe know that unless there is a deal, world trade will not continue to expand and their economies will be the poorer.
By some calculations, world trade is set to double in the next 12 to 15 years. This could have profound beneficial consequences, not simply for the emerging supereconomies like China India and Brazil. Much of the original credit for the expansion must go to the US and Europe. However, they have finally been caught out by their own liberalization agenda. Subsidies, largely on agricultural products, and terms of trade with other countries have finally become a hot issue, which Washington and Brussels can no longer duck.
For all the political posturing in Hong Kong, the nature of the problem is clear and neither the Americans nor the Europeans denied it. Their promise to end export subsidies by 2013 is hedged with conditions and is not satisfactory. However, by conceding that date, they have also conceded the principle. Now it is up to them to sell the deal to their constituencies who will, in fact, benefit from cheaper food. The real champions of subsidies are of course the producers, be it of steel or soya beans. It is time that lobbyists were shown the door because there is a greater worldwide benefit at stake. Subsidies not only cost local taxpayers, they cost the people in the countries that could compete more cheaply, if only the market were not distorted and protected by politically motivated government handouts.
Media coverage of the negotiations in Hong Kong was remarkable for the fact that it missed one crucial point. What everyone was actually talking about was business. Any businessman worth his salt knows that everything is negotiable. Commerce is in the end all about price. Politicians and bureaucrats tend to make the worst of businessmen. They are long on economic theories and short on the sort of practical knowledge you would expect to find in the humblest souq. Therefore they are perhaps not the best people to be talking about trade. But if the WTO did not exist, we would have to invent it, because the world’s businessmen have to operate within rules and regulations to ensure that deals are honest and fair. Despite the apparent failure of the meet in Hong Kong, Saudi Arabia has joined the WTO at a pivotal moment in that organization’s development, as it finally comes closer to establishing the level playing field essential for global trade to expand yet further.
