Doha Round of Trade Talks
The Real Reason Why It Failed
The Doha round of trade talks was an attempted multilateral trade agreement. It would have been between every member of the World Trade Organization. It was launched at the Doha, Qatar WTO meeting in November 2001. Its goal was to finish up by January 2005, but the deadline was pushed back to 2006. The talks were finally suspended in June 2006. That's because the United States and the European Union refused to reduce agricultural subsidies.
The Doha round process was ambitious. First, all WTO members (almost every country in the world) participated. Second, decisions must be settled by consensus, as opposed to majority rule. Every country must sign off. Third, there were no piecemeal sub-agreements. There was either an entire agreement or none at all. In other words, unless every country agreed with the whole deal, it's off.
The agreement's purpose was to boost the economic growth of developing countries. It centered on reducing subsidies for developed countries’ agricultural industries. That would allow developing countries to export food, something they were already good at producing. In return, the developing countries would open up their market to services, particularly banking. That would provide new markets to the developed countries’ service industries. It would also modernize these markets for developing countries.
Although the agreement negotiated 21 main points, these can be grouped into the following 10 categories:
- Agriculture - Reduce subsidies to 2.5% of the value of production for developed countries. That would only be 6.7% for developing countries. Reduce tariffs on food imports. End subsidies for exports.
- Non-agricultural market access - Reduce tariffs for non-food imports.
- Services – Clarify rules and regulations on foreign-provided services. Developed countries want to export financial services, telecoms, energy services, express delivery, and distribution services. Developing countries want to export tourism, healthcare, and professional service. Countries can decide which services they want to allow. They can also decide whether to allow foreign ownership.
- Rules - Tighten the rules on anti-dumping. Strengthen prohibitions against launching subsidies to retaliate against another country's subsidies. Focus on commercial vessels, regional aircraft, large civil aircraft, and cotton. Reduce fishery subsidies to cut down on overfishing.
- Intellectual property - Create a register to control country-of-origin for wine and liquor. Protect product names, such as Champagne, Tequila, or Roquefort, that are only authentic if they come from that region. Inventors must reveal the country of origin for any genetic material used.
- Trade and environment - Coordinate trade rules with other agreements to protect natural resources in developing countries.
- Trade facilitation - Clarify and improve custom fees, documentation, and regulations. That will cut bureaucracy and corruption in customs procedures. This became an important feature of the Trans-Pacific Partnership.
- Special and differential treatment - Give special treatment to help developing countries. That includes longer periods for implementing agreements. It requires that all WTO countries safeguard the trade interests of developing countries. It also provides financial support to developing countries to build the infrastructure needed to handle disputes and implement technical standards.
Why the Doha Were Talks So Important
If it had been successful, Doha would have improved the economic vitality of developing countries. It would have reduced government spending on subsidies in developed countries, but boosted financial companies. Perhaps they would have focused on developing those markets instead of selling derivatives. That might have lessened the devastation of the financial crisis.
Unfortunately, agribusiness lobbies in the United States and the European Union put political pressure on their legislatures. That ended the Doha round of negotiations. As a result, bilateral agreements have increased. They are easier to negotiate. Whether this is good for developing countries remains to be seen.
The failure of Doha also means that future multilateral trade agreements are also probably doomed to fail for the same reason as Doha. The EU and U.S. agricultural industries won't take the risk of allowing low-cost foreign food imports to take any of their domestic market share.
Similarly, small emerging market countries have seen what the United States and EU agribusiness has done to local economies in Mexico thanks to the North American Free Trade Agreement. So major trade agreements that are in the works are more likely to fail unless there is a level playing field for local farmers.
That includes the Transatlantic Trade and Investment Partnership, the pending agreement between the United States and the EU. It would replace NAFTA as the world's largest trade agreement. But it faces the same obstacles as Doha did. President Trump has not moved forward on the agreement.
European agribusiness can't compete with cheaper American-made food imports. The two countries face resistance in negotiations to end government protection for many food industries, such as French champagne. Most importantly, the EU bans all genetically modified crops, meat from animals treated with growth hormones, and poultry that's been washed with chlorine. United States food producers rely heavily on all these practices to keep food prices low. Doha shows us that these obstacles are difficult, if not impossible, to overcome.
It also includes the Trans-Pacific Partnership. It was pending between the United States and 11 other trading partners bordering the Pacific Ocean. Trump withdrew the United States from it. It would have been bigger than NAFTA, but slightly smaller than the TTIP. In this agreement, the United States and Japan didn't want to remove agribusiness trade barriers. Japan's government heavily subsidizes the country's rice growers. But the 11 other countries moved forward with the agreement.
Why Doha Failed
The main reason the Doha talks collapsed was that the United States and EU weren't willing to give up their agricultural subsidies.
But other sticking points must be resolved if the talks are to resume. First, China, India, and Brazil need to be more supportive of the talks. They must also be willing to take on the leadership role given to developed countries.
Second, the United States, Japan, and China must realize their "currency wars" are exporting inflation to other countries, such as Brazil and India. They must accept the responsibility and not treat their monetary policies as simply domestic issues.
Third, Doha must dangle the carrot of more liberal service export regulations. That would entice the United States and other developed countries. Otherwise, they will move ahead on their own with the Trade in Services Agreement negotiations.
How Doha Got Its Name
Each round of trade talks is named after the location where they began. The Doha round is named for the city of Doha in the country of Qatar. The previous round was called Uruguay, which started in Punta del Este in Uruguay in 1986. The Uruguay talks removed tariffs in developed countries on tropical products. Most important, the talks established the basis to create the WTO itself in 1995.