When it comes to trade negotiations, what is preferable: failure or compromise? In the eyes of the negotiators of the major economic players, no deal is better than an aborted one.
The Doha world trade talks finally collapsed on 24 July after five years of discussions and minimal progress. In the end, it simply proved impossible to bridge the differences between the parties: the emerging and poorer countries pressing for dramatic cuts in agricultural tariffs without willingness to address their own; the US keen to cut the highest tariffs; thus putting the onus on the European Union (EU) with the higher tariffs, and the EU unprepared to move unilaterally by more than it had offered – clearly an insufficient offer in the eyes of the other countries.
The last round of the trade talks that was scheduled to take four years was completed in eight, and it was only concluded as the result of a compromise. Now, with more World Trade Organisation (WTO) member countries than ever before, and a more sophisticated set of players (the developing countries have had far greater input this time round).
Officially, the talks are not dead, merely ‘resting’. The WTO’s director general Pascal Lamy suspended further negotiations indefinitely, with no timetable planned for the talks to restart. It could be years rather than months before the political will is mustered to try again. In fact, it looks unlikely that anything will happen until after the next US president takes office in January 2009 and tries to secure a new Trade Promotion Authority from Congress (the present deal expires in June 2007).
The future remains unclear. Global trade is at its post-war peak, so does it really matter that the negotiations failed? The number of bilateral agreements between two countries/ trading regions has been steadily increasing and this could accelerate that trend further. However, weaker-negotiating countries will lose out from this trend, and stronger ones will benefit in certain aspects of trade.
With the talks suspended, the EU retains the bulk of its agricultural subsidy and blankets itself from international trade. Moreover, the opportunities for global trade are somewhat diminished and the net effect will be less choice for the consumer, higher prices, and potentially less productivity in the sector through a lack of competition. Although the US has already instigated discussion on how to rekindle the talks, any decisions are most probably many years away.
Furthermore, global trade is presently powered by the enormous spending capacity, and inclination, that the US consumer has had in recent years, coupled with the massive growth in production capacity of developing countries (particularly China) over the same time span. However, signs of weakness are starting to show on both sides of this double act, indicating that it lacks longterm sustainability and that one of these countries will sooner or later fall off the economic balance, sending the other tumbling too.
The implications of this will be widespread and, at that point, we might all decide that a trade agreement compromise would have been better than a failure.
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