December’s opportunities

In late 2001, the WTO’s ministerial meeting in Doha, the capital of Qatar, started a new round of negotiations to liberalise international trade. All parties knew that the agenda was ambitious. But it made sense. The world economy was in a poor shape because of the burst dotcom-bubble – massive speculation in shares of internet related businesses, of which many never even made a profit. Adding to the gloom, the terror attacks of 11 September had shattered investor confidence. In this setting, it was good policy to join hands in a multilateral effort to improve the global business climate by liberalising trade. Ultimately, free trade serves everybody. One reason, very simply put, is that the bigger markets are, the more opportunities they offer to sellers and buyers. Another reason is that, while some corporations are big enough to dominate entire industries in some nations, global competition is strong enough to prevent the exploitation of monopolies in most sectors.

The Doha Round, however, never really took off. There actually never was full agreement on what it was supposed to achieve. The USA, the EU and governments from other rich nations wanted the WTO to pass global rules on government procurement, anti-trust policy and other policy-related issues, but the governments of developing countries objected, fearing such rules would restrict their scope for growth and their space for policymaking. This friction was obvious in Doha, but negotiators decided to start the new Round nonetheless, hoping to resolve matters in the course of time.

There was no progress concerning the most contentious issues, however, and that ­meant that the rich nations became less interested in the Doha Round. They began to focus on bilateral trade deals. The downside of this approach is that the proliferation of preferential trade agreements between various countries and regional organisations leads to a confusing multitude of rules which are not only incoherent but, all too often, even overlap. While big multinational corporations can afford to employ enough lawyers to ­manage such com­plexity, small companies are overwhelmed.

Today, the world economy is once again in a poor shape. There was a downturn after Lehman Brothers, the investment bank, collapsed in 2008, and it resulted in the current sovereign debt crises in Europe and North America. Another recession seems likely, and it may yet turn into a global depression. Many rich economies have not fully recovered since 2008, and global demand remains weak.

Multilateral approaches are needed to tackle global challenges. In a time of inadequate demand, an international agreement to open markets could boost confidence all over the world. In an era of accelerating climate change, a global deal could be geared to investing public funds in indispensable new infrastructures and energy efficiency, thus boosting demand. In December, ministers from around the world should grasp the opportunities offered by the WTO’s ministerial meeting in Geneva and the UN’s climate summit in Durban to press ahead with agendas that would benefit all. Well, they certainly could. All they need to do is muster the political will. Will they?