Doha Round failure due partly to lack of MNC interest

THERE is no dearth of theories on the reasons for the failure of the Doha Round of Negotiations of the World Trade Organization, despite it being launched around a decade and a half earlier, in November 2001. Such theories would include, for instance, that WTO is now a crowded club. It is now a club of heterogeneous members, ie almost all major states of the world, and operates on the consensus-based modus operandi; the consensus would naturally be tough to achieve. Again, the low hanging fruits have been plucked, the current issues on global trade rules are much more complex and they would be tougher to be agreed upon. For sure, these arguments bear truths, but they may miss two other important factors.

The two major global trade deals in the 20th century were accomplished following major political events in history. The General Agreement on Tariffs and Trade, the precursor to the WTO, was signed in the aftermath of World War II, when the war-ravaged global economy needed to be propelled by more transparent and non-discriminatory rules on world trade. The advent of the WTO in 1995 though may not be directly connected with the gradual demise of the Cold War; but it may not have been a coincidence that it came to fruition when the cold war between the capitalist and communist states was being won firmly by liberal, capitalist ideologies. Similar big events are yet to take place in the 21st century. Generally, big political events cannot be stimulated, they just happen, but there is another thing that may be stimulated for making progress in the Doha Round.

Arguably, another important factor behind the impasse in the Doha Round is the apparent lack of zeal of large multinational corporations for it. There are some analysts who argue that the WTO came into being because many large multinational pharmaceutical companies were actively pushing for a comprehensive trade agreement which would include rules on the protection of intellectual property. Many other multinational corporations felt that for them to enjoy the benefits of liberalised trade policies, the toothless enforcement regime of the GATT must be replaced by a binding dispute settlement regime. The corporate actors, of course, could not be found at the negotiating table of the Uruguay Round Negotiations but there is little doubt that the negotiators were being fed with their briefs and the former was actively aware of the negotiations.

These two factors may offer some insight into the failure of the Doha Round. The Doha Round has been touted as the development round and most of its key issues such as agriculture, aid for trade, have nothing or little in them for large multinational corporations.

Thus, there is little push from them for the conclusion of the Doha Round negotiations. We have to understand that trade agreements are there because states are protectionist by nature and they only bear the "pain" of opening their markets for the greater benefits of foreign manufacturers when they can see reciprocal benefits for their producers in foreign markets. Economists generally concur that the best course of action is unilateral liberalisation of trade policies but nonetheless states dither to do that. If economists' rationale dictated trade policymaking, there would have been no need for trade liberalisation pursuant to trade agreements.

One may ask what is the fuss if the Doha Round does not get going; after all, mega-regional trade agreements are in the offing anyway, which should propel global trade. Indeed, it is precisely the concern. It is well-known that because of their discriminatory treatment of third parties, preferential trade agreements such as the Trans-Pacific Partnership Agreement (irrespective of the number of state parties signing them), are a less preferred option to the trade liberalisation under the WTO. It is also accepted by most trade analysts that these agreements are bad for smaller economic players because the latter group tends to be discriminated because of their inability to negotiate or get a beneficial deal, even when they choose to be a part of the deal.

Hence, the reinvigoration of the Doha Round may protect the interests of all WTO members and it is particularly important for protecting the interests of the economically backward states. Again, to arrest the slide of world trade towards more discriminatory policies, big and small players alike need the WTO. How exactly large multinational companies may be made more interested in the WTO or the Doha Round Negotiations is a complex proposition, but if the diagnosis of this article is correct, then a cure can eventually be found. And economically backward member states also cannot forget that balanced trade agreements are, in essence, quid pro quo.