In the year since the breakdown of the trade talks in Cancun, sentiment has increasingly grown in the developing world that no agreement is better than a bad one. But what would a good agreement look like?
The British Commonwealth recently posed this question to myself and the Initiative for Policy Dialogue, an international network of economists committed to helping developing countries. Our first message was that the current round of trade negotiations, especially as it has evolved, does not deserve even to be called a development round.
Well before the riots that marked the World Trade Organisation talks in Seattle in 1999, I called for a true "development round" of trade talks to redress the inequities of previous sessions. The advanced countries, with their dominant corporate and financial interests, set the agenda for those negotiations. Whether developing countries benefited was of little concern.
Our second message was optimistic: if the agenda of the current round is reoriented towards development, and if assistance is provided to manage implementation and adjustment costs, developing countries can gain much. We analysed which reforms in the international trade regime would most benefit those in the developing world and presented an alternative agenda based on our findings.
The results were perhaps obvious: more people live from agriculture in the developing world than from manufacturing, so agricultural liberalisation must be high on the agenda. Trade reforms must be sensitive to the effects on developing countries, many of which are net importers of subsidised agricultural commodities. But some subsidies, like cotton in the US, are rightly emblematic of America's bad faith. Eliminating this subsidy would help 10 million poor cotton farmers in sub-Saharan Africa.
Developing countries also need access for the unskilled labour-intensive services in which they have a comparative advantage. These were off the agenda in earlier trade rounds, as the US pushed for liberalisation of financial services - thus serving its own comparative advantage. But the global gains from allowing a freer flow of unskilled labour (even temporarily), let alone the benefits to developing countries, far outweigh the benefits from capital market liberalisation. But this issue is not on the agenda.
As tariff barriers have come down, the unfair "fair trade" laws are increasingly being used as America's favoured protectionist tool. Treating foreign and domestic firms the same with respect to competitive practices would stop these abuses. This, too, should be a high priority of a true development round.
The breakdown of the Cancun talks may yet provide an opportunity for deeper reflection. Now that rich countries no longer need to worry about losing the developing world to communism, they have an opportunity to redefine the global economic order according to the same principles on which they built successful national economies: fair competition and social justice.
The development round of trade negotiations begun in Doha in 2001 has, in spite of its name, offered far less to developing countries than one would have hoped.South China Morning Post:
