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Is the WTO too complicated? Or not complicated enough?

Written by Simon Maxwell

The WTO is certainly complicated, and not just because of the profusion of acronyms and the arcane detail of trade policy. The real complexity lies in the way many different issues are brought to the table, with the idea that losses in one area may be offset by gains in another. There were some obvious examples in Hong Kong: the best known was the EU demanding better access to developing country markets for its manufactures and services in countries like Brazil, as a quid pro quo for reduction in its agricultural subsidies and for further reform of the Common Agricultural Policy (CAP).

In principle, this looks like a good idea, but the practicalities are horrendous: like building a towering house of cards which will collapse in ruins if even one card falls out of place. The difficulties are compounded when every country has an effective veto. The commitment of the WTO to consensus-based decision-making means that 150 players are each building a house of cards, and that each fragile house is linked to all the others. Is it any wonder that progress in the Doha round is highly contested and painfully slow?

An obvious answer to this dilemma is to simplify the negotiation: to hive off issues and take the remainder one at a time. If balance can’t easily be achieved, then cash can perhaps act as a lubricant. The proposals on aid for trade partly serve this function, especially since they include compensation for preference erosion (ODI Opinions 35 'A Preference Erosion Compensation Fund A new proposal to protect countries from the negative effects of trade liberalisation' by Sheila Page http://www.odi.org.uk/publications/opinions/35_preference_erosion_jan05.pdf).

The opposite answer is also possible: to throw even more issues on the table, in order to transform incentives and encourage agreement. These need not be trade issues, and need not be based on quite the same mercantilist calculation. For example, Larry Elliott reported in the Guardian on 19 December:

‘a feeling in Downing Street that trade is now too big an issue to be left to trade ministers, and that if the Doha round is to get anywhere, people with a more strategic perspective must be involved. As one official put it, there is a case for saying that it would be in the interests of the west’s counter-terrorism and immigration policies to be more generous to poor countries . . .’

Whether these ‘interests’ are legitimate or not, it is of course not unknown for economic policy to be linked to strategic considerations. An interesting example came to light quite recently, which interestingly enough refers also to the CAP. writing in Prospect Magazine in January 2006, the UK’s former Europe Minister, Denis MacShane, had this to say about a link between French policy on Iraq in 2002/3 and the reform of the CAP:

‘Chirac’s famous invocation – twice in the same interview – of his willingness to veto any second UN resolution in March 2003 authorising the use of force is often blamed for undermining that united response. Yet France, despite the anti-Americanism of the cultural-media elite in Paris, had always been careful not to get on the wrong side of the US in a crisis. The French aircraft carrier, Charles de Gaulle, was sent off towards the Gulf in the autumn of 2002, and France flew more sorties against the Taliban than the RAF (the UK's Royal Air Force).

What changed the dynamic of European politics was the return of German neutralism as an election-winning force for the unhappy SPD-Green coalition in the election of September 2002. The right-wing candidate, Edmund Stoiber, said that if he became Chancellor, he would not permit US flights over Germany in the event of conflict with Iraq. This appeal proved popular and required Gerhard Schröder to trump it.

He won the election, and Europe suddenly had its biggest state locked into electoral promises that threatened the Atlantic Alliance. Schroder looked for support and validation of his shift to neutralism. In October 2002, he was offering Chirac a secret deal on sustaining the CAP for another decade. But as late as February 2003, the most senior officials in charge of foreign policy in Paris assured me that when the moment came France would not disconnect itself from America. However, Germany was already shaping French policy and giving fresh hope to Saddam that a divided West would allow him to survive.’

So the implication of this article is that if we want to understand French recalcitrance on Iraq, we should look to Germany. Ditto if we want to understand EU recalcitrance in Hong Kong on the CAP.

More than look, it appears that we should also act. NGOs campaigning on the CAP are wasting their time, it seems. Instead, they should concentrate their fire on German neutralism.

This is a challenging thesis, but one worth examining. In fact, I’ve written before, with Karin Christiansen, about this problem of ‘negotiation as simultaneous equation’ in 2002, in International Affairs, the journal of Chatham House. There we cited other examples of global deals, like the linking of global environmental issues to poverty reduction and aid at the Earth Summit in Rio de Janeiro in 1992, or the NEPAD deal which linked more aid to Africa to better governance in the region, an idea central to later initiatives, like the Commission for Africa.

What we said then is that linking too many issues in individual international meetings ‘leads to unnecessary clutter . . . and dilutes the focus.’ But:

'This is where more ambitious ideas of partnership may come into play. Perhaps the individual aid or trade conference is not the place to try to manage an overall relationship – agreeing the overall direction, setting guidelines, managing trade-offs, resolving disputes. Perhaps ‘partnership’ needs explicit attention in a separate forum, with separate arrangements. Perhaps the design and management of an overall partnership is precisely what a political initiative should be about . . .’.

When we wrote those words in 2002, we were thinking particularly about the role of high-level meetings like the G8. We cautioned against the G8 becoming involved in detail for all issues which had a home elsewhere (like trade). Instead we argued that:

‘A general statement of principles is useful, but specific recommendations should be avoided unless they help to unblock negotiations elsewhere. On this reading, it would be a mistake, for example, for the G8 to look for "quick wins" that can be offered to African leaders in return for their commitments under NEPAD. . . What would be useful is to address one or two specific cross-cutting questions – for example, what might (the US) be offered in climate talks to persuade it to improve market access for African exports, or reduce the impact of agricultural subsidies?’

Downing Street’s concern with anti-terrorism and immigration look like good cases for strategic intervention in negotiation as simultaneous equation – with the proviso, again, that these are concerns which themselves need debate. An initiative for a London meeting is therefore to be welcomed. A few points are worth making, however:

  • The quid pro quo needs to be clear. Is the benefit of concessions by the rich countries essentially intangible, in the form of general and eventual prosperity in developing countries, which may lead to less terrorism and less migration; or are developing countries expected to take practical steps in the short term, and if so what?
  • It is worth noting in this connection that one of the sticking points in Hong Kong was that developing countries were mainly asking for concessions in agriculture that they felt had been promised in the past and which had not been delivered. It follows, then, that any agreement to unblock the trade talks would need some measure of accountability on both sides. The London meeting could usefully discuss mutual accountability and put in place concrete arrangements, In our article in International Affairs, Karin and I proposed a role for the OECD alongside developing country counterparts. The UN might be another vehicle. For Africa, the African Partnership Forum may also be useful (http://www.dfid.gov.uk/news/files/africa-partnership-forum.asp). Of course, one of the attractive features of the WTO is that it provides for mutual accountability, backed up by formal dispute procedures.
  • Finally, it is worth asking whether the rebalancing of the scales that could be achieved in London could also make it possible to simplify the post Hong Kong agenda. If one of the problems is that the negotiations are too complicated, and if new and less (or differently) mercantilist objectives are to prevail, then maybe the Hong Kong issues can be winnowed and dealt with more simply, one at a time. Which issues might be dropped or how the issues might be ordered differently is a matter for trade specialists, perhaps. In the end, trade policy must not be too important to be left to trade ministers. Anyway, they are the only ones who understand it.

Note: Several colleagues have commented on this piece. See entries by Sheila Page, Dirk Willem te Velde and Lauren Phillips (all ODI) and Chris Stevens (currently IDS but joining ODI in April).