The WTO Is Back -- for Now

By Jean-Pierre Lehmann

It would be churlish not to congratulate the WTO and especially Roberto Azevêdo, its dynamic director-general, for successfully passing a "Bali package" at the Indonesian resort well past the 11th hour on 7 December. The WTO Doha Round, launched in the Qatari capital in 2001, a few weeks after 9/11, had become a synonym of failure: failure of the WTO and failure to move forward an inclusive agenda of globalization. It was expected by many, including this author, that the ninth ministerial conference would follow the pattern. Instead Bali succeeded, at least in the sense that unlike previous ministerial conferences it did not collapse. The question is whether, as some exuberantly declare, the Doha Development Agenda has been brought back to life or, as others fear, the state of suspended animation has been extended by temporarily rebooting the life-support machine.

The trading system put in place after World War Two with the establishment in 1947 of the General Agreement on Tariffs and Trade, or GATT, contributed enormously to bringing peace and prosperity to the nations of the North Atlantic. This was when the world was divided in three: the first world consisting of rich market-oriented economies; a second world of state-led central-command economies; and a third world collection of basically poor countries, many of which - including Brazil, Argentina, Indonesia and India - were practicing import-substitution industrialization policies. Thus the GATT was essentially an elite club of OECD countries, with Canada, the US, the EU and Japan, what was referred to as the "quad" calling the shots. This was fine because other countries were not interested. After the last GATT Uruguay Round in 1994, the institution was reformed and recreated the following year into the World Trade Organization.

The first director-general, the late Renato Ruggiero, referred to the WTO as the first true institution of this new phase of globalization. As the Soviet empire, hence the second world, imploded and major market-oriented reforms occurred in third world countries, the world gradually unified into one global integrated market economy with only a handful like North Korea opting out. Ruggiero warned early on: "we have gone from a divided world to an integrated world; and an integrated world is much more difficult to manage." And so, that has proved to be the case.

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In 1995, the WTO counted some 90 member states; at Bali there were 160. But apart from the membership increase, all has not developed smoothly. The 1999 WTO ministerial meeting in Seattle descended into total fiasco. Then Director-General Mike Moore expressed the prophetic fear that the WTO would become the "League of Nations" of the 21st century world economy - impotent and irrelevant.

In 2001, China was admitted and the ministerial meeting was held in Doha. Developing countries from the South wanted a piece of the global trade action, but in areas where they had comparative advantage: in essence agriculture, raw materials and labor intensive goods, precisely areas where the quad had maintained high tariffs, subsidies, quotas, exclusions and other forms of trade distortions that were especially discriminatory against developing countries. The South clamoured for a level playing field, something they would not be granted because of lobbies and vested interests in the countries of the North.

Nevertheless in Doha, in great part because of the brief and ethereal moment of global solidarity in the wake of 9/11, not only was a new round launched, but it was called the Doha Development Agenda, or DDA, thus understood, by countries of the South, as development-oriented, aimed at eliminating discriminatory trade distortions. The spirit of global cooperation and development orientation disappeared before the ink was dry. At the 2003 WTO ministerial in Cancún in talks collapsed for a variety of reasons, but largely because of Washington's refusal to cut massive subsidies allocated to its powerful cotton lobby, thereby undermining more cost-efficient producers from developing countries, especially Africa's "cotton four" - Benin, Burkina Faso, Chad and Mali.

In the decade since Cancún attempts to restore the DDA have failed. While the North-South divide remains, other issues complicate the global trade picture, two of which stand out: The first is the absolutely amazing, unexpected rise of China as a global trade superpower. Another is that technology has made production of goods and services in the form of global value chains highly dispersed in a totally new paradigm.

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Jean-Pierre Lehmann is emeritus professor, IMD; visiting professor, Hong Kong University and NIIT University (Neemrana, Rajasthan, India); and founder of The Evian Group. © 2013 The Whitney and Betty MacMillan Center for International and Area Studies at Yale

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