The Demise of the Development Round

Hopes for a development round in world trade – opening up opportunities for developing countries to grow and reduce poverty – now seem dashed. Though crocodile tears may be shed all around, the extent of disappointment needs to be calibrated: Pascal Lamy, the head of the World Trade Organization, had long worked to diminish expectations, so much so that it was clear that whatever emerged would bring, at most, limited benefits to poor countries.

The failure hardly comes as a surprise: The United States and the European Union had long ago reneged on the promises they made in 2001 at Doha to rectify the imbalances of the last round of trade negotiations – a round so unfair that the world’s poorest countries were actually made worse off. Once again, America’s lack of commitment to multilateralism, its obstinacy, and its willingness to put political expediency above principles – and even its own national interests – has triumphed. With elections looming in November, President George W. Bush could not “sacrifice” the 25,000 wealthy cotton farmers or the 10,000 prosperous rice farmers and their campaign contributions. Seldom have so many had to give up so much to protect the interests of so few.

The talks bogged down over agriculture, where subsidies and trade restrictions remain so much higher than in manufacturing. With 70% or so of people in developing countries depending directly or indirectly on agriculture, they are the losers under the current regime. But the focus on agriculture diverted attention from a far broader agenda that could have been pursued in ways that would have benefited both North and the South.

For example, so-called “escalating tariffs,” which tax processed goods at a far higher rate than unprocessed products mean that manufacturing tariffs discourage developing countries from undertaking the higher value-added activities that create jobs and boost incomes.