The Broken Legs of Global Trade

NEW YORK – The Doha Round, the latest phase of multilateral trade negotiations, failed in November 2011, after ten years of talks, despite official efforts by many countries, including the United Kingdom and Germany, and by nearly all eminent trade scholars today. While trade officials in the United States and the European Union blamed the G-22 developing countries’ excessive demands for the failure of earlier negotiations in Cancún in 2003, there is general agreement that this time it was the US whose unwarranted (and unyielding) demands killed the talks. So, now what?

The failure to achieve multilateral trade liberalization by concluding the Doha Round means that the world lost the gains from trade that a successful treaty would have brought. But that is hardly the end of the matter: the failure of Doha will virtually halt multilateral trade liberalization for years to come.

Of course, multilateral trade negotiations are only one of three legs on which the World Trade Organization stands. But breaking that leg adversely affects the functioning of the other two: the WTO’s rule-making authority and its dispute-settlement mechanism. The costs here may also be large.

Until now, preferential trade agreements (PTAs) among small groups of countries co-existed with multilateral, non-discriminatory trade-liberalization rounds. As a result, the rules that govern trade, such as anti-dumping duties and countervailing duties to offset illegal subsidies, were in the domain of both the WTO and the PTAs. But, when there was a conflict, WTO rules prevailed, because they conferred enforceable rights that extended to all WTO members, whereas PTA-defined rights extended only to the PTA’s few members.