Stakes are sky high in Hong Kong

To listen to some vociferous non-governmental organisations, failure in the current round of world trade talks would be the best possible outcome.

"Trade talks poised to fail. Good news for people and planet" proclaimed Friends of the Earth on 29 November 29. "Blood on the floor: how the rich countries have squeezed development out of the World Trade Organization negotiations," said Oxfam this week.

The World Bank, the international agency whose job it is to help the world's poorest countries, argues differently. "Existing merchandise trade protection (including agriculture) costs the global economy $287 billion [EUR 244.5bn] a year," says Will Martin, one of the authors of Trade Policy Reform and the Doha Development Agenda, published by the bank.

Developing countries are, relative to the size of their economies, the biggest losers from current trade protection and therefore have most to gain from lowering trade barriers, Martin argues. Half the gains from trade liberalisation would come from reducing

trade barriers between

developing countries, so called "South-South" trade. So trade liberalisation

can capture enormous benefits for rich and poor countries alike.

On 13 December trade ministers from the 148 members of the World Trade Organisation will gather in Hong Kong in the knowledge that the future of the world trading system, an engine not only of global growth but also of global peace, is in danger.

The trade ministers' task will be to salvage the Doha Development Round, the fourth great post-war global round of trade liberalisation negotiations, and ensure that a final agreement will be reached on schedule by the end of 2006.

At stake is the distribution of the gains (and losses) from global economic growth between countries and within them. As a major player in the talks, the 'soft power' influence of the European Union, at the moment the black sheep of the negotiations, is also being tested. So too is the future of the World Trade

Organization, a vital pillar of a post-Second World War system of multilateral co-operation.

Professor Jagdish Bhagwati of Columbia University, one of the world's leading authorities on trade, writes that: "With agricultural trade negotiations deadlocked, the Doha Round of trade talks may appear

dead in the water...but multilateral trade negotiations have generally gone on to close successfully."

But since the end in 1994 of the Uruguay Round - the last successful global effort to reduce tariffs, quota restrictions, subsidies and other clandestine barriers which afflict the world trading system - efforts to take the process further have ended in failure or disappointment.

Nobody disputes that the Doha Round talks are in trouble. Hong Kong was supposed to be the place where the outlines of a final deal would be agreed. This would have left the complex, technical, fine print to be filled in next year, just in time for the US to approve it before President George W. Bush's 'fast-track' authority to negotiate trade accords for the US expires in mid-2007. Instead

the Doha Round is in intensive care.

For the EU, the world's biggest trading bloc with an 18% share of global imports and exports, the rules of the game are essential.

Karl-Friedrich Falkenberg, the Commission's deputy director-general for trade says: "The WTO introduces predictability into trade, not just liberalisation. Defined rules of the game are vital. It's more important to know that a tariff is at a level which is predictable than whether it is set at 5%, 10% or 15%. Predictability allows you, as a businessman, to decide whether or not you want to sell into a particular market." The WTO has also, he says, been an asset in developing international trade. "World markets have never been so open, never had so many participants and never been a source of so many benefits to so many people."

It is this assessment which is most at issue, as international production lines become more complex and countries such as China and India integrate themselves more deeply into a changing world economy.

Who benefits? Western consumers who can buy cheaper televisions and cars? Millions of Chinese peasants who are having to uproot themselves to move to cities for work? Malaysian or European or American workers who are seeing their jobs "outsourced" to countries with cheap labour?

The poorest countries who must now wonder how on earth they will ever catch up with China?

The Doha Development Round is at the heart of the debate about the distribution of the benefits

of so-called globalisation between poorer and richer developing countries and between developing countries and the advanced industrial nations.

But if the negotiations were to fail, what would be lost apart from the long-term economic benefits most economists see as a result of success? Yet another failure would certainly put a big question mark over the future of what is now our most democratic international economic institution, the World Trade Organization. This is a place where, says S. B. Naresh Servansing, Mauritius's ambassador to the WTO, poor countries have clout. At the WTO, decision by consensus mean that a handful of rich developed countries can no longer throw their weight around as they can at the World Bank or the International Monetary Fund.

Failure would also almost certainly accelerate the pace at which countries resort to bilateral and regional trade deals. Not only do such deals discriminate against those outside the charmed circles of participants, they discriminate most against the poorest. "Chinese officials will not even meet with us to discuss trade," said one official from a small developing country recently.

But it is not just the poorer countries who have reason to fear failure. A breakdown in the Doha Round talks might also tip an unbalanced global economy again in the direction of protectionism and depression. There is plenty at stake in Hong Kong.

The Doha Development Round

• Named after the city in Qatar in which they were launched in November 2001.
• Composed of three sets of talks or 'pillars': trade in services, non-agricultural manufactured goods and agriculture.
• Agreement must be reached within each pillar of the talks and across all three pillars. Concessions which developing countries make on services or manufacturing trade liberalisation are to be matched by concessions from developed countries on, for example, agricultural issues, in order to give a balanced overall round.

Stewart Fleming is a freelance journalist based in Brussels.

Article anticipates the December 2005 WTO Ministerial Conference in Hong Kong. Author suggests that although critics would like to see the WTO talks fail, it was the poor developing countries that had the most to lose. Article is part of a European Voice Special Report: 'WTO negotiations'.

WTO: The WTO: Ministerial Conferences: The Sixth WTO Ministerial Conference, Hong Kong, China, 13-18 December 2005 http://www.wto.org/english/thewto_e/minist_e/min05_e/min05_e.htm

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