Doha deadlock may dethrone WTO as global arbiter

The 153 members of the World Trade Organisation agree on two things: We’re in a hole. And we must keep digging.

The hole is the Doha Development Round, a decade-old negotiation that was billed as the next stage of trade liberalisation after the creation of the WTO itself.

After repeated failures to clinch a deal, Doha is on life-support. But nobody is prepared to kill it off.

“There is a Russian proverb that says ‘Don’t chop off the branch you are sitting on’,” WTO Director General Pascal Lamy told trade ministers, defending the body at its biennial conference in Geneva last Saturday.

Trade diplomats like to point out that the WTO is more than Doha alone, and failure to complete Doha does not mean the end of WTO, since the body also monitors world trade and arbitrates disputes brought to it by member states.

But with so much negotiating capital already tied up in Doha, every new proposal to modernise WTO rules is seen part of a wider wrangle over the trade round, paralysing discussion.

And if WTO does not keep the world’s trade rulebook up to date, it risks losing its position as the global arbiter. Lamy has blamed the paralysis on “crisis of multilateralism”: a failure of diplomacy that has also hobbled negotiations on the euro zone crisis and global climate talks.

“The international system can’t be in good shape because the members of the international system are in bad shape,” he said. “They’ve got very little energy left for international compromise.”

Doha was originally meant to help developing economies, but that idea looks out of date now that India, Brazil and most of all China have grown into trading superpowers. For that reason some officials say Doha, launched at the same time that China was accepted into the WTO, was doomed from the start.

And equally, that helps explain why China, India and Brazil are its most vocal champions, determined not to let any new ideas gain traction unless there’s a payoff.

“There's no question of redefining Doha,” Brazilian Foreign Minister Antonio Patriota said on the eve of the WTO conference. “We agreed on its mandate 10 years ago.”

In short, Doha and arguments about Doha are using up all WTO’s oxygen and it has been largely unable to evolve for a decade as a result.  Many WTO members, including the EU and the United States, are already discussing setting up an agreement on trade in services, which could liberalise rules on accounting firms, doctors or insurance companies working across borders.

Many countries are also interested in the idea of cutting tariffs on parts used in renewable energy. Others want to move quickly to capture some of the “easy” wins from Doha, such as reducing cost and red-tape around customs.

But unlike the trade in services, which has an exemption under WTO rules, such side-agreements will only be WTO deals if every WTO member signs up. That is unlikely.

“We do not think that there should be peeling off,” said Indian Trade Minister Anand Sharma.  Without the WTO agreeing, what hope for side-deals?

The WTO says it is unfazed by regional agreements and says they will not distort world trade as long as there are enough of them. If everybody has preferences, nobody has preferences, Lamy says.

Lamy played down the suggestion that breakaway groups would damage the WTO and said they were nothing new. Fear of “plurilateral” agreements was generated by paranoia and mistrust between governments, he said.

Lamy, due to step down in September 2013, argues that it is not up to him, but WTO members, and they have consistently chosen the Doha road.