Monday, December 2, 2013

Bhagwati on Doha Lite and Decaffeinated

Jagdish Bhagwati gives his perspective on the state of the Doha Round of world trade talks in "Dawn of a New System," which appears in the December 2013 issue of Finance & Development. It's useful reading as background for the Ninth Ministerial Conference conference of the World Trade Organization that starts tomorrow in Bali.

As Bhagwati looks back at the status of the Doha Round of trade talks that started back in 2001, he considers three options. One choice, which he calls Doha Heavy, represents the grand bargain in which nations all around the world make substantial movements toward reducing trade barriers and government subsidies. This choice isn't happening. But in 2011, a more modest trade liberaliztion deal was on the table that Bhagwati calls Doha Lite. In Bhagwati's telling, this deal was acceptable to developing countries around the world, as well as to David Cameron in the UK and Angela Merkel in Germany, but "Obama was unwilling to confront the U.S. business lobbies, which held out for major new concessions by the bigger developing economies." 

So the choice that remains is what Bhagwati calls Doha Lite and Decaffeinated, which will be discussed starting tomorrow at the conference in Bali. Basically, this agreement would on the "trade facilitation" agenda, which according to an OECD study would emphasize issues like "the availability of trade-related information, the simplification and harmonization of documents, the streamlining of procedures and the use of automated processes." Indeed, the OECD maintains a website of 16 trade facilitation indicators. The OECD writes: "[C]omprehensive implementation of all measures currently being negotiated in the World Trade Organization’s Doha Development Round would reduce total trade costs by 10% in advanced economies and by 13-15.5% in developing countries. Reducing global trade costs by 1% would increase worldwide income by more than USD $40 billion, most of which would accrue in developing countries."

In the context of the world economy, these gains aren't very large--but they are still worth having. Also, as Bhagwati points out, even a Doha Light and Decaffeinated agreement would help support the other aspects of the multilateral trade agreement: setting rules on issues like antidumping and government subsidies, and the dispute settlement mechanism. Bhagwati has characteristically sharp observations to make about the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnerships that are also under negotiation. But like many trade economists, Bhagwati fears that a proliferation of regional trade agreements won't work well as global supply chains become ever-longer and emerging economies like China, Brazil, and India play an ever-larger role in the world economy.