What Is the Doha Round of Trade Talks?

Why Did It Fail?

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The Doha round sought to lower trade barriers for almost every country in the world. Photo: The Image Bank/Getty Images

The Doha round of trade talks was an attempted multilateral trade agreement. It would have been between every member of the World Trade Organization (WTO). 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 then 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. That means every country must sign off. Third, there are no piecemeal sub-agreements. That means there is either an entire agreement or none at all. In other words, unless every country agrees with the whole deal, it's off.

What Was in the Agreement?

The agreement's purpose was to boost the economic growth of developing countries. It centered around 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 the developing countries.

Although the agreement negotiated 21 main points, they can be grouped into the following ten categories.

  1. 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.

  1. Non-agricultural market access (NAMA) - Reduce tariffs for non-food imports.

  2. 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. 

  3. 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.

  4. 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.

  5. Trade and environment - Coordinate trade rules with other agreements to protect natural resources in developing countries.

  6. Trade facilitation - Clarify and improve custom fees, documentation, and regulations. That will cut bureaucracy and corruption in customs procedures. That became an important feature of the Trans-Pacific Partnership.

  1. Special and differential treatment - Give special treatment to help developing countries. That includes longer time 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.

  2. Dispute settlement - Install recommendations to better settle trade disputes.

  3. E-commerce - Countries won't impose customs duties or taxes on internet products or services.

Why Were the Doha Talks So Important

If 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  EU 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 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 NAFTA. That means 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. However, it faces the same obstacles as Doha did.  

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 important, 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 or TPP. It is another pending agreement, this time between the United States and 11 other trading partners bordering the Pacific Ocean. It would also be bigger than NAFTA, but slightly smaller than the TTIP. In this agreement, it's the U.S. and Japan that don't want to remove agribusiness trade barriers. Japan's government heavily subsidizes the country's rice growers.

Why Was Doha Suspended?

The main reason the Doha talks collapsed was because the United States and EU weren't willing to give up their agricultural subsidies. (Source: "Doha Round...and Round...and Round," The Economist, July 31, 2008)

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 (TISA) negotiations. (Source: "The WTO Bali Meeting," Brookings Institute, November 25, 2013.)

How Did Doha Get 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.

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