Trade. Do despair

The global trade round betrays a hopeless lack of urgency and ambition

LONG before any trade minister sets foot in Hong Kong, it has become clear that next week's meeting of the World Trade Organisation will fall depressingly short of its goals. Officially, the gathering is meant to agree on the broad contours of a deal to free trade in farm goods, industrial tariffs and services. Thanks, in particular, to Europe's intransigence over cutting farm tariffs, that will not happen. The ministers may be able to report modest progress (such as a vague promise to accelerate the elimination of cotton subsidies) but the guts of a Doha deal will be delayed yet again.

By the standards of WTO meetings, delay in Hong Kong would not be disastrous. Two of the past three gatherings (Seattle in 1999 and Cancun in 2003) collapsed in acrimony. A third collapse cannot be ruled out in an organisation where decisions require unanimity, but it seems unlikely. Even the most pig-headed trade minister knows that another breakdown would devastate the WTO as a negotiating forum.

Delay, in contrast, seems painless. The world economy will not swoon just because it has to wait a few months, or even years, to agree on more tariff cuts. Past global trade rounds have broken deadlines as a Greek wedding breaks plates.

All true, but all recklessly complacent. George Bush's fast-track negotiating authority, needed for America to negotiate, expires in July 2007 and is unlikely to be renewed. Regional and bilateral trade agreements are gaining appeal, even though they are inferior to multilateral trade. The Doha talks will not hold politicians' attention forever. Apathy poses almost as big a threat to the WTO as acrimony precisely because its dangers are less obvious.

The Doha dodge

From the beginning, the Doha round asked to be judged as a way of helping the developing world. But the watered-down deal that today seems likely would inevitably frustrate and disappoint its backers - particularly among the poor countries Doha was supposed to help most.

According to the World Bank's latest estimates, a likely Doha compromise would modestly raise global income, but would produce scant gains for poor countries and barely dent the number of people living in extreme poverty ()see page 83. Although economic models do not capture all the gains from liberalising trade, there is little doubt that the Doha round is turning out to be less good for the poor than it could be.

That is partly because the talks have focused too narrowly. Most of the debate has been about freeing farm trade. There has been virtually no progress on freeing trade in services, from transportation to temporary workers, which promise even bigger benefits to poor countries.

Intransigence by rich countries is also partly to blame. Europe is shamefully reluctant (see page 27-29) to cut its farm tariffs, even though poor countries would gain more from better access to rich-country markets than from lower rich-country farm subsidies. Outrageously, Europe's negotiators are touting their protectionism as a gift to the poor. Some of the world's poorest countries already get preferential access to Europe's markets. Lower tariffs for everyone, argue the negotiators from Brussels, would reduce this preference, leaving the favoured few relatively worse off.

That may be true, but preferential tariff schemes are often less generous than they appear. Moreover, the countries that suffer from seeing their preferences eroded need financial compensation, rather than to be used as an excuse for stymieing a deal that, if it is ambitious enough, could help many more poor people.

But if the Doha round fails to do much for the poor, rich countries will not be the only villains. The round's biggest flaw is the mercantilist mindset that has corrupted it. Being "pro-poor" in the Doha context has become synonymous with advocating more exceptions and less tariff-cutting by developing countries. The very poorest countries will have no obligations from a Doha round at all.

This logic is tragically misguided. Developing countries, even the very poorest, would gain most from a trade round that encouraged more tariff-reduction at home, not less. That is both because a lot of their trade is with each other and also because their tariffs are far higher than those in rich countries.

For the poor - and for the WTO, with its credibility wrapped up in the Doha round - the meeting in Hong Kong must summon up more ambition and a radical new approach. Judged by the risible progress in the past four years, neither seems likely. But if Doha is not to be disappointing as well as delayed, that is what trade ministers must secure next week.

Editorial argues that the WTO global trade round betrays a hopeless lack of urgency and ambition.