‘Trade talks, what trade talks?’ – you say. Well you’d be very much forgiven for not discerning this piece of news, so much have our newspapers been engrossed in banks and their ever more depressing results.
A little over a week ago, a seven year effort to forge a global trade pact fell spectacularly apart, ending fruitlessly and sounding ominous repercussions for not just the credibility of the World Trade Organisation (WTO), but also for the fight against climate change and global poverty. While it is no wonder to many that these talks have failed every Summer for the past seven years (not unlike Wimbledon Championships in producing a British winner), there are yet several wonders that have come to light in the wake of these annual talks. So here they are, the seven wonders of the Doha Round:
The wonder that the talks came this close to triumph.
In some ways, the astonishing thing about the Doha round is not that they ended in vain but they came as close as they did to success. Just before it broke down, some participating countries (of which there an incredible 153) put the chance of a deal as high as 75%. After years of talks, the major players were at the table and being constructive until the crunch came.
The wonder that the talks crumbled with so much at stake.
Some economists estimate the benefits of trade liberalisation to be around $84bn globally with developing countries enjoying 22% of these gains. At a time when the global economy is slowing and inflation is rising, a successful Doha round would have been a timely boost. Walking away at this point with so much to gain is like folding a Full House in a game of Texas hold ‘em poker. An opportunity wasted!
The wonder it stumbled on agriculture.
After years of picking the low lying fruit and having agreed on several other trading sectors and issues, it is a wonder that the hurdle of agricultural subsidies and tariffs proved too hard to overcome. Agriculture makes up only 8% of world trade and yet the fact that it provides a means of living for around 2.5 billion people makes it a heated topic at Doha. Although there was some headway made on subsidies on the part of the US and Europe, the talks essentially broke down over a relatively obscure but complicated proposal to protect farmers in developing countries by using ‘Special Safeguard Mechanisms’.
The wonder that the fat cat American farmers are not done lining their pockets.
Although the Bush administration offered to cut its allowance of trade-distorting agricultural subsidies from around $50bn seven years ago by 70% to £14.5bn, it must be remembered that US farmers’ incomes have still risen due to surging commodity prices and the falling US Dollar. At one time, this deal would have impressed their trading partners, but in an age of soaring food prices and prospering American farmers, it does strike observers as a tad grudging. And as if to have their cake and eat it too, the Americans made their deal conditional on gaining greater access to politically sensitive agricultural markets in India and China. Ironically the Americans would have gained more by pushing for greater access to their industrial goods and services, but the US farm lobby is very powerful.
The wonder of the huge political clout still possessed by farmers outside the EU.
We all know about the weight that can be thrown around by the French farmers and the American cotton farmer. But now, there is a new kid on the block and he is the small Indian subsistence farmer. The US farm lobby may be strong, with enough political muscle to overthrow presidential vetoes and push for greater corn subsidies, but it is nothing compared to the fear instilled by the Indian farmer on its government. India’s rural population numbers roughly 600 million and suicides amongst the poorest and most debt laden farmers are increasingly common, with huge political consequences, as the last BJP government found out at the last election. The current government is unwilling to make that same mistake again proving yet again that even global politics is local!
The wonder that are the BRICs.
After nearly 15 years of negotiations, China eventually joined the WTO in 2001. When it became a member, not many could have predicted the political and economic spotlight it is enjoying today. Along with India, who was one of the founding members of GATT (General Agreement on Tariffs and Trade) in 1947, China now finds itself a major player internationally and not surprisingly has taken a large part of the blame for Doha’s failure.
The wonder that markets brushed this aside.
The failure of the Doha round was nothing more than a blip on the financial markets’ radar. So busy reporting on the consequences of the sub-prime mess in the here and now, they forgot to look to the future. In the present climate of gloomy economic growth, the failure to realise that a golden opportunity for global growth was missed is depressing indeed.
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And finally………. Ken Smith, lecturer at Bucks New University says that the most common spelling mistakes should be accepted as ‘variant spellings’ and cites these examples - ‘arguement’, ‘twelth’ and ‘truely’. His academic opinion seems to state that he has been correcting the same mistakes for the last 20 years and we instead should just accept them. Wot an outragus ideya and hav his stuedents neva herd of spel chek?!
Have a good weekend,
Aparna Ram
Research Analyst
Seven Investment Management Limited