The WTO and the Failure of the Doha Rounds

1 The WTO and the Failure of the Doha Rounds Paper Outline I.

The Doha Development Agenda

II.

Failure of Doha Negotiations

III.

Role of the World Trade Organization in the Future for World Trade

IV.

Challenges of the Preferential Trade Agreements

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2 The WTO and the Failure of the Doha Rounds The Doha Development Agenda The Doha Development Agenda is the current round of trade negotiations involving members of the World Trade Organization. The negotiations started in November 2001 in Doha, Qatar. The major objectives of Doha are reforming international trade by establishing reduced trade barriers and enhanced trade policies.

The negotiations were sanctioned by the Doha ministerial declaration and negations centered on, “agriculture, services, trade and development, non-agricultural market access, and intellectual property topic” (WTO 2012, par. 2).

Failure of Doha negotiations The negotiators had set January 1, 2005 to be the final date for finalizing the Doha rounds. In the course of the negotiations, the rounds’ initial goals fell short of the exact nature of business in everyday life. The developed nations showed reluctance in providing political capital to implement the developing countries’ interests. Some differences also arose among the developed nations themselves. Such differences touched on the European Union and the United States retaining agricultural subsidies.

The subsidies were perceived to perpetuate trade barriers (Cho 2010, 573).

In September 2003, the World Trade Organization ministerial meeting in Mexico was marred by accusations and counteraccusations as the developed countries were not ready to deal with the meeting’s agenda of liberating the markets in order to achieve the Doha Development Agenda by the close of 2004. Instead, the developed countries wanted to maintain their protection policies. The negotiations, thus, stalled until July 2004. This was after countries managed to lay a basic foundation for introducing a

3 framework for future discussions. The framework, however, did not encourage the world trade states to reduce their differences in their various stands, like eliminating farm subsidies while establishing the framework for Hong Kong discussions in late 2005. The objective was to ensure that the rounds came to a completion by December 2006.

However, owing to unripe political climate, the July 2004 package was not realized (Cho 2010, 573).

In the Hong Kong deliberations, the Doha rounds revived some momentum with the setting of targets such as elimination of, “agricultural export subsidies by 2013 and cotton subsidies by 2006” (Cho 2010, 574). This was in addition to the efforts to promote the development of poor countries by allowing the countries make exports free of duty and quota by the end of 2008. The Hong Kong pact, however, did not address the anticipated framework for, “agricultural and non-agricultural market access (NAMA) sector” (Cho 2010, 574). The negotiations were put on hold in July 2006 because of misunderstandings concerning farm subsidies and tariffs and industrial tariffs. The rounds were also seen as promoting a system of trade policies that were not favorable for development, and greatly compromising the internal regulations of member states.

However, as of 2008, the Doha talks stalled due to differences in the issues of discussion between the developed nations and the developing nations.

Role of the World Trade Organization in the future for world trade The World Trade Organization is a body with great significance in the world of trade. The WTO has rules and policies that have great impacts on the development plans of developing member states. However, the failure of Doha negotiations reflects the failure in the negotiating arm of the World Trade Organization, both in market

4 access and decision making. It portrays the World Trade Organization as lacking the ability to be flexible. Instead, the failure to agree shows WTO as adapting to rising world trade issues which cannot be solved through bilateral compromises. To strengthen its role in world trade, the World Trade Organization must deal with key issues and challenges that are central to its framework (Capling & Higgott 2009, 313).

To start with, the World Trade Organization must deal with issues that are raised by developing countries. This transcends the decisions made previously and those made during the 2003 ministerial conference. The major decision was to ensure that the member states are putting appropriate measures to correct the issues of imbalances in the rules and systems. This is in addition to formulating new policies which do not disturb the trading system imbalances further. Though the World Trade Organization has previously enhanced the global trade system by establishing a basis for member countries to do trade among themselves, there have been problems with the framework in the recent past. This is mainly due to the unavailability of beneficial prospects to the developing world, challenges in the enforcement of their own mandates, and lack of openness and minimal participation in formulating policies (Capling & Higgott 2009, 314).

Another challenge the World Trade Organization must tackle is working towards realizing the expected benefits in agriculture and textiles sectors. These sectors have been strongly protected by the developed countries due to the continued increase in domestic subsidies. The World Trade Organization must also ensure that the developed countries deliver on their liberalization commitments (Looney 2004, 2). The developed countries increasingly call for the developing countries to open up their markets rapidly.

5 Conversely, the developed countries are always in need of more time to adjust. Thus, the World Trade Organization has the role of ensuring that future obligations are implemented by all parties. As a result of difficulties in implementing their own obligations, developing countries have challenges in pursuing development goals such as industrialization, addressing health needs and promoting agriculture. These problems emanate from, “structural imbalances and weaknesses of several of World Trade Organization agreements” (Capling & Higgott 2009, 401).

The World Trade Organization must, therefore, develop strategies to deal with the ironical liberalization and globalization of some of the countries in the Organization for Economic Co-operation and Development, OECD, while addressing the reduced popularity of liberalization in some quarters in these countries. The loss of popularity is mainly as a result of job losses and income inequality (Looney 2004, 2). The world trade body must also be responsive to the multidimensional nature of the world trade mechanisms, as opposed to past perceptions of the WTO as being an exclusive body for developed countries. As member countries seek to have a greater role in advancing their commercial policies, the World Trade Organization has to deal with the challenges of defining agendas and negotiations. The World Trade Organization must, therefore, encompass all the member states in all the body’s activities. The challenge for the World Trade Organization leadership is to empower the emerging economies to take leadership responsibilities, at the same time encouraging the initial players to continue participating (Low, 2009, 328).

To be able to continue with an active role in world trade, the World Trade Organization needs to refine its framework for negotiations and modalities of

6 agreements. The formulation of policies must also consider the often competing goals of the World Trade Organization so as to unify the goals. For instance, the World Trade Organization has to reconcile member states over the introduction of new agendas. This is despite the fact that there are previous member countries that have stagnated (Low 2009, 329). The World Trade Organization also has a huge role of ensuring that more just world trade mechanisms are in place. This can be achieved by promoting equity in terms of efficiency, transparency and legitimacy in the trade system in order to reflect inclusiveness for all members. It is the responsibility of the WTO to introduce, “a balance of rights and regulations among its members that will be perceived as legitimate, sufficiently flexible, and also capable of addressing the trade-related development needs and priorities of individual members” (Capling & Higgott 2009, 319).

Many states across the globe have turned to different trade systems based on bilateral and regional agreements that encourage preferential modes of trade among the members. These preferential trade agreements are against the World Trade Organization’s world trade since they are discriminative. The preferential trade agreements are catalyzed by the World Trade Organization’s perceived bureaucracy in decision making. The World Trade Organization, therefore, has a role of introducing trade reforms in order to promote world trade and discourage discriminatory trade systems. It is no wonder that the World Trade Organization finds itself in a multilateral trade environment whereby states rapidly adopt liberalization, “unilaterally and/or preferentially through bilateral and regional trade agreements” (Capling & Higgott 2009, 319). As a result, the World Trade Organizations must take extra roles that cannot be achieved by the preferential trade systems; for instance, policy formulation and non-

7 litigious discussions that may be essential in advancing knowledge and encouraging more comprehension, besides expanding avenues for collective action.

Challenges of the Preferential Trade Agreements Preferential Trade Agreements (PTAs) are trade pacts among states. PTAs minimize trade tariffs for the member states. Preferential Trade Agreements, also called Free Trade Agreements, are preferential trade pacts not limited to geographical location of the member countries. There has been a drastic rise in Preferential Trade Agreements over time, with estimates that each member of the World Trade Organization is a signatory to about thirteen preferential trade agreements. Each agreement is developed to minimize trade restrictions and increase subsidies among the member states. Most of the Preferential Trade Agreements came into being as a result of stagnation of Doha negotiation; hence PTAs were formed as building blocks for opening multilateral markets (Mikic & Ramjoue 2009, 312). They were also formed to promote production networks through the facilitation of free trade agreements-driven trade and investment liberalization. Another motive for the proliferation of preferential trade agreements was to expand market niches and utilization of economies of scale.

Other free trade agreements were formed in, “response to European and North American regionalism to improve competitiveness and raise voice on global trade issues” (Mikic & Ramjoue 2009, 312).

Despite the role of preferential trade agreements in advancing technology, skill transfer, domestic reforms, and enhanced development prospect, they pose a formidable challenge to the basic nondiscrimination policy of the World Trade Organization. The wide proliferation of preferential trade organizations has eroded the

8 nondiscrimination principle by, “reducing the most-favored-nation clause to the exception rather than the rule” (Dieter 2009, 397). The preferential trade agreements also tend to emphasize on the origin of the product, in spite of the liberal world trade where there are no limitations on trade. Only products originating from member states are eligible for duty-free trade; hence there are challenges pertaining to the methodology of distinguishing goods from member states and those from nonmembers. Governance procedures such as issuance of certificates of compliance are huge challenges to these organizations, particularly in countries with scarce resources (Mikic & Ramjoue 2009, 313).

Since many countries are members of various preferential trade agreements, the rules of origin greatly compound the challenges. In complying with different rules and procedures of the various pacts, organizations incur extra costs in developing certificates of origin. This, in the end, increases the operational costs. These challenges make the World Trade Organization be preferred because of the uniform standards across all member countries (Mikic & Ramjoue 2009, 314).

Preferential trade agreements are also faced by the challenge of opening up the markets. This is despite opening up markets being the major reason for the establishment of PTAs. It has been suggested that products that are hard to liberalize in the World Trade Organization also prove to be difficult for the preferential trade agreements. Most preferential trade agreements are established on regulatory mechanisms and not on tariff basis (Dieter 2009, 394). This is mainly as a result of changes in the manner in which production is done globally because of the increased global production networks. These networks demand favorable settings that can offer

9 better investor protection and infrastructural support. This is a challenge that some preferential trade agreements have difficulties in addressing due to scarce resources.

10 Reference List Capling, Ann and Higgott Richard. 2009. “Introduction: The Future of the Multilateral Trade System-What Role for the World Trade Organization?” Global Governance, 15: 313-325.

Cho, Sungjoon.2010. “The Demise of Development in the Doha Round Negotiations.”

Texas International Law Journal 45: 573 Dieter, Heribert. 2009. “The Multilateral Trading System and Preferential Trade Agreements: Can The Negative Effects be Minimized?” Global Governance 15: 393-408.

Looney, Robert. 2004. “The Cancun Conundrum: What Future for the World Trade Organization (WTO)?” Journal of Third World Studies, XXI, 2, 2004 Low, Patrick. 2009. “Potential Future Functions of the World Trade Organization.”

Global governance 15: 327-334.

Mikic, Mia and Ramjoue Melanie. 2009. Preferential Trade Agreements: An Insurance against Protectionism? ASCAP 2.

WTO. 2012. Understanding the WTO: The Doha Agenda. WTO. http://www.wto.org/ and the Failure of the Doha rounds (accessed on 08 th October 2012)