Monday, 19 September 2011

On the multilateral trading system and less developed countries

By Xavier Cirera

World Trade Organization Director-General Pascal Lamy, in a speech on 6 September to CUTS International in Delhi, said that the multilateral trading system of the future would have to address the pressing challenge of advancing the Doha Round: ‘to find the political courage and the pragmatic steps which will lead our Members to have an honest negotiation'.

It is very unrealistic to expect any progress in the Doha Round. There is clearly not enough willingness on the side of developed and emerging markets to conclude the Round. In addition, the current economic climate of slow growth in OECD countries is not the most conducive environment within which to reach any agreement, since it is in times of crisis and slow growth that protectionist constituencies gain strength.

So what are the implications for the poorer countries of no agreement? Clearly, the liberalisation commitments for the poorer countries of a hypothetical Doha agreement would have been minimal. So not much action on this area. In addition, these countries already have significant preferential access in developed countries’ markets via preferential schemes. Therefore, little additional access to these markets would have been achieved, although an agreement on the reduction of agricultural subsidies in developed countries could have been a very positive outcome for some least-developed countries (LDCs). In general, one may be tempted to conclude that as far as LDCs are concerned, the failure of the Doha Round is not a big deal.

However, the financial crisis of 2008 has shown two important things. The first is the central role of exports in the recovery. The second is the growing importance of South-South trade. The multilateral trading system is not only about North-South trade, but also about South-South trade, and it is important to reduce trade barriers between emerging and developing countries in order to foster South-South trade integration. Therefore, with or without Doha, it is important that the multilateral trading system ensures advances in this area and, more importantly, that no new protectionist measures are introduced that affect LDCs’ access to Southern markets.