Last week, world leaders gathered in Cannes, France to discuss the future of the global economy. Key on the agenda were issues surrounding the European sovereign debt crisis, new capital requirements for banks, commodity and food price volatility, and climate change. Also addressed were the challenges facing the multilateral trading system, and specifically, the Doha Development Agenda.
Presently, the Doha Round of international trade negotiations is in a stalemate, with countries not being able to agree on a variety of measures. The source of the deadlock that has prevailed since 2008 is disagreement among a small number of large players on issues of market access -- in particular, the extent of new liberalization commitments, especially for nonagricultural products. With negotiations proceeding for more than a decade, the Doha Round is currently the longest-running round of trade negotiations to date, and the prospects for concluding the talks in the near future are dim.
However, we should not focus solely on market access as a measure of Doha's success -- there are still many benefits that can stem from an otherwise gridlocked round of negotiations. As argued in the most recent Economic Premise, "The WTO and the Doha Round: Walking on Two Legs," there is much that the Doha Round, and the World Trade Organization (WTO) in particular, can do to improve trade conditions around the world.
According to Bernard Hoekman, director of the World Bank's International Trade Department, the WTO is not just a marketplace in which countries exchange liberalization commitments. Rather, it is a vehicle through which governments agree on the rules of the game for policies, and the institution through which implementation is monitored, and negotiated rules and commitments are enforced. Focusing on the rule-setting and enforcement dimensions of the WTO negotiations -- not just the market access components -- is an essential element in reducing uncertainty with respect to the competition conditions firms face. Doing so would enable firms to enter the market with less uncertainty -- something urgently needed to boost investment and create jobs.
In the absence of a speedy conclusion to the negotiations, certain measures can help deliver welfare generating effects. Hoekman rightly argues that greater emphasis could be put on leveraging existing WTO bodies to enhance the transparency of non-tariff measures, to address regulatory concerns that impede liberalization of trade in services, and to launch a dialogue on domestic economic policies that can create negative spillover effects for trading partners.
In the recent Cannes Summit Communique, G-20 leaders affirmed the need to pursue fresh approaches to create confidence and avoid protectionism. Moreover, the G-20 rightly signaled their support for a more effective, rules-based trading system -- at the heart of which is the WTO. Indeed, as the risk of a potential double-dip looms, it is essential to ensure that the global trade agenda has strong footing -- only by standing on two legs can it best support the poor and vulnerable.
This blog was originally posted on the World Bank Institute Growth and Crisis Website.