International cooperation on migration has made remarkable progress since the first High-Level Dialogue in 2006. Seven years ago, the situation was grim. Distrust among states was commonplace. The notion that migration could be constructively discussed at the UN was widely dismissed. But the creation of the state-led Global Forum on Migration and Development, which was born at the 2006 HLD, has fundamentally changed the calculus of cooperation.

In its first six years, the Forum has proved a safe harbor, a place to discuss the challenges of migration in a collegial and non-binding manner. Old paradigms have crumbled; myths have been shattered. Evidence has mounted. Relationships and trust have begun to grow. States and other stakeholders, grounded in fact and practice, are fostering a common understanding of migration and migrants.

The Forum’s value is now self-evident: Approximately 150 countries gather every year to analyze common challenges. Countries that were once silent on migration in international debates are now vigorous participants. Civil society, too, has become a strong and persuasive interlocutor on policy issues.

Now, given everything we know, we must act in more resolute fashion.

Remittances capture migration’s impact in a compelling way: Migrants sent $401 billion to developing countries alone in 2012, triple the amount of overseas development assistance. These flows are far more reliable than other funding sources: When the global financial crisis hit, FDI in developing countries plunged 89%, while remittances dipped just 5%; today, they are growing 9% annually. And remittances go directly to the people who know how to use them best. In Bangladesh, just 13% of households that receive remittances are below the poverty line, compared to 34% of those that do not.

But remittances tell only a small part of the story of how human mobility is shaping our world for the better

Receiving communities, for instance, rely on migrants to help meet critical needs for laborers. They perform the most fundamental tasks, from building roads and homes, to taking care of the very young and the very old.We also know migrants spark innovation: In the US, patent issuance rose by 15% with each1.3% increase in the share of migrant university graduates. Consider as well the taxes migrants pay, the investments they make, and the trade they stimulate.

We have learned, meanwhile, that migration does not take jobs from natives (in net terms): According to one recent study, on average, every new migrant creates one new job, thus expanding the overall economy. In origin countries, migration supports the balance of payments, making it easier to pay for critical imports, access capital markets, and reduce interest rates on sovereign debt.

All this makes our nations and communities more prosperous and resilient.

***

We have denied the lessons of history and the truth about the human spirit for too long. People will move. It is in our restless and inventive nature.

The 21^st century is built on mobility: Capital, goods, and information circulate at low cost and lightning speed. Yet, paradoxically, international migration has become more perilous. It is governed by outmoded notions about human mobility. It is hampered by inadequate policy and legal frameworks. And it is stifled by overriding security concerns.

So while our globalized labor markets seek migrants, and as ever more people seek to move to escape poverty, our patchwork system of international mobility hampers them. Instead, it empowers those who exploit migrants—smugglers and traffickers, crooked recruiters and venal employers. It has severely compromised the human rights of migrants, too many of whom must travel, live, and work outside the protection of laws. It has depleted public trust in the effectiveness of government. And it has undermined our ability to design policies that allow migration to help us achieve our development goals.

Simply put, the current system does not work. There is no good reason, for instance, why some states can protect the fundamental labor rights of their workers abroad and others cannot. It is not acceptable that only about 20% of international migrants can take their social security benefits with them when they return home. And the lives of migrants should never be in jeopardy.

It is now time to begin building a system of human mobility that responds to the realities of the 21^st century. Piece by piece, carefully and systematically, we need to create an adaptable architecture that allows individuals to develop their full potential, communities to better integrate newcomers, companies to access the workers they need, and governments to regain public trust.

***

A decade ago, we the lacked evidence and trust needed to take broad action on international migration. Today, that has changed. The Global Forum on Migration and Development was a critical milestone. Also important was the creation of the Global Migration Group—which brings together 14 UN agencies, the IOM, and the World Bank to coordinate their migration-related work. Regional consultative processes, meanwhile, are proving valuable as places where ideas can be tested and habits of cooperation fostered.

Broader forces are at work as well: Intensifying demographic pressures, globalizing labor markets, and the economic ascendance of the developing world are fundamentally changing how and where migrants flow across the globe. Practically every country in the world must confront the challenges and opportunities of migration, and they can no longer be divided neatly into countries of origin and destination, with opposing interests. Today, developing countries receive as many migrants as do those in the developed world.

As a result, our interests as states and stakeholders are converging, just as a growing evidence base is shedding light on the actions we should be taking.

Success is already evident. On September 5^th, the Domestic Workers Convention will go into force, offering critical protections to tens of millions of the most vulnerable workers, a great many of them migrants. Importantly, the convention has been ratified by countries that did not sign the migrant workers convention of 1990, signaling a new openness to treaties related to migration. Remittance fees, meanwhile, have dropped significantly in recent years.

Also, countries are becoming much more proactive in working with their diasporas: Today, there are 77 offices, bodies, and posts that governments in 56 countries have created specifically to formalize engagement with their diasporas. These initiatives encourage migrants to thicken ties to their countries of origin through investments, human capital transfers, philanthropic contributions, capital market investments, and tourism.  In each of these areas, there is a growing richness in ideas of how to mobilize migrant communities.

Now we must transform this common will and evidence into a more systematic effort to draw out the advantages of migration and blunt its ill effects. The High-Level Dialogue must produce more than new processes like the Global Forum and the GMG. We should conclude our deliberations in October with clear commitments from states and stakeholders for action on specific issues.

***

Migration was not included in the original Millennium Development Goals. But migrants have been instrumental in meeting of the MDGs—from reducing poverty, to improving gender equality, and preventing infectious diseases. Now it is time to make migration a formal part of the post-2015 development agenda.

Migration, indeed, is a test of the relevance of the post-2015 debate. Its inclusion will help us break free of our preconceived notions of how development happens. It is human centered, placing the individual at the heart of our concerns, rather than the agendas of states and development actors. It is universal, as it impacts nearly every country on earth, and its benefits flow both North and South. It is a test of fair governance and effective government, demanding coordinated action not only among states, but also at all levels of government, from the local to the regional to the global.

And by including migration in the post-2015 agenda, we can finally bring migration under the aegis of the United Nations.

The potential ways for doing this are many. Over the past decade, for instance, we have made great progress in reducing remittance costs from almost 15% to under 9%. We have a long way to go on this front. But the scope for action ranges well beyond remittances. The international community could, for instance, make a commitment to innovative polices that reduce fees workers are forced to pay recruiters.

Possible targets, meanwhile, need not be measurable only in economic terms. The post-2015 agenda could aim, for instance, to eliminate discrimination against migrants who are legally present in their territories, particularly with respect to equal wages for equal work, decent working conditions, and access to education for migrant children. Among other targets could be a sharp reduction in human trafficking—as indicated by the volume of prosecutions of traffickers, the number of states offering special legal protection to victims of trafficking, and the number of companies screening their supply chains for forced labor; increasing the share of migrants working at their highest skill level; and reducing the proportion of migrants lacking legal authorization to reside in their country of residence.

Migration stakeholders have developed many ideas for how governments, the private sector, and civil society can build partnerships around mobility policies that (i) reduce discrimination against migrants and protect their rights; (ii) lower the human, social, and economic costs of migration, including those related to recruitment, remittances, and obtaining documentation such as visas and residency permits; (iii) expand opportunities for migrants to more productively invest their earnings and share their knowledge; and (iv) enlist migrants and diaspora organizations in enhancing development in their communities of origin and destination.

***

If integrating migration into the post-2015 agenda demands enormous effort, it is instructive to recognize how limited, in fact, this effort is: It entails persuading development stakeholders to better understand how migration can help them achieve their goals, while showing those responsible for migration how to craft policies that amplify the development impact of migration.

But building a truly dynamic, effective system of human mobility suited to the 21^st century will demand action on all fronts: education, health, housing, and labor, to name a few. This is the next frontier of effective migration governance: coordinated, collaborative action across—and between—entire governments.

If we take on the challenges of migration one by one, they can and will be solved.

Last year, for example, I called on stakeholders to address the plight of migrants affected by acute-onset crises, such as civil conflicts or natural and manmade disasters. My efforts to focus attention on this issue has inspired states to take action. In particular, the United States and the Philippines have offered to lead an initiative to create a framework for action on assisting migrants in acute-onset crises. They are being joined by independent experts, civil society, the IOM, UNHCR, and other states, too.

This issue is not the single most important one we face. But it is a problem where we can envision real, practical solutions. It takes global cooperation from the realm of rhetoric to that of action. It expands the conversation beyond the strict migration and development framing, in the same evolutionary way that the Global Forum has catalyzed international cooperation. It compels more complex coordination that involves not only international organizations, but primarily states, as well as employers and civil society.

We need to take on many more such challenges. Our success will breed more success and greater confidence, reducing the perception that migration-related issues are the third rail of politics. And success also will allow us to more effectively address the legitimate fears publics harbor about the change migration brings.

As such, I urge states to come to the High-Level Dialogue prepared to engage in a vigorous debate on the problems and opportunities related to migration that we believe we have the will and knowledge to address.

We must work tirelessly from the bottom up, solving practical problems related to migration. Smaller groups of states and stakeholders can develop and test solutions to common challenges that might eventually become global standards. This eventually will enable broader collective action. The bottom-up practical approach and the top-down normative one share a common cause: To improve outcomes for migrants and our societies.

The list of challenges we face is daunting. We must develop ways to address the specific needs of women, who now make up half the world’s migrant population; to equitably invest in skills development; to make rights portable; to engage diasporas as development actors; to gather useful data; and to create innovate approaches to mobility like multi-entry visas and migration insurance, to name just a few.

Even if we were to conquer all these challenges, those that remained would be formidable. In the next generation, we must reject—absolutely—the notion that we can have second class citizens in our societies; it is a poisonous idea that has ruined civilizations. A child, no matter where she is in the world, must never be considered “illegal” or placed in detention. No man or woman should ever be jailed for a migration violation—and certainly not in conditions that violate their basic rights.

We are on the threshold of a new era of international cooperation on migration. The High-Level Dialogue is our chance to cross over it.

This article first appeared in the UN Chronicle.

The post Lowering the Costs & Amplifying the Benefits of Migration appeared first on Peter Sutherland.

The Doha Round of global trade talks appears to have died this year, almost without a whimper. While a small portion of the project may be saved, the essential reality is that this is a unique failure in the history of multilateral trade negotiations, which have transformed the global economy since World War II.

Many of the seven previous rounds of negotiations – including the Uruguay Round, which in 1994 created the World Trade Organization as the successor to the General Agreement on Trade and Tariffs – took years to complete, but none died of neglect or disinterest. Today’s indifference is particularly, though not exclusively, evident in the United States. President Barack Obama was silent on the issue in his re-election campaign, and breathed scarcely a word about it in his first campaign, too. One wonders whether what is at stake is even fully understood in some capitals.

Successful multilateral trade negotiations have significantly shaped the world in which we live and have dramatically enhanced the lives of millions of people. Between 1960 and 1990, only one person in five lived in economically open societies; today, nine in ten do.

The rule-based trading system developed by the GATT and the WTO has been embraced by virtually the entire global community. It has provided an effective road map for the former planned and import-substituting economies, facilitating their integration into the global market.

Initially, “globalization” was a dirty word to some. But, even among its opponents, its value for poorer countries came to be recognized, as it helped to lift more than a billion people in Asia out of abject poverty. While much more needs to be done for Africa and parts of Latin America, the Doha Round was intended to assist in providing market access (and therefore opportunity) to many more in the developing world.

The essence of the multilateral system is to be found in two principles: non-discrimination and national treatment. The former is described in trade negotiators’ lexicon as the “most favored nation” principle, which essentially seeks to ensure that trade benefits provided to one country are provided to all. The latter requires member states to provide the same treatment within national borders to trading partners as that provided to nationals.

The non-discrimination principle ensured that global trade did not become a “spaghetti bowl” of preferential bilateral trade agreements. Moreover, a multilateral framework for trade negotiations gave weaker states far more balanced conditions than they would face were they forced to negotiate bilaterally with the likes of China, the United States, or the European Union.

In fact, what we have seen in recent years is an increasing rush to bilateral agreements by the major trading countries and blocs. This has apparently consumed virtually all of their attention. The World Trade Organization has been marginalized, and even what has already been achieved in the incomplete Doha Round appears unlikely to be delivered in a final agreement in the foreseeable future.

The damage to the credibility of the World Trade Organizaion – once lauded as the greatest advance in global governance since the inspired institution-building of the immediate postwar period – may yet prove lasting. Worse, it could have a serious impact not merely on trade, but on political relationships more generally.

One of the World Trade Organization’s great achievements has been the adjudication system that it provided – the so-called Dispute Settlement Mechanism. This independent body has been a resounding success, giving the world an effective quasi-judicial system to resolve disputes between trading partners. But its continued success depends ultimately on the credibility of the WTO itself; it will inevitably suffer collateral damage from a failure of multilateral negotiations.

Indeed, the current rush to bilateral trade agreements has been accompanied by a rise in protectionism. For example, there have been 424 new measures of this kind in the EU since 2008. Furthermore, the EU’s non-discriminatory tariffs are fully applicable to only nine trading partners. Everyone else has “exceptional” treatment.

Next, no doubt, we will have the prospect of a bilateral free-trade agreement between the EU and the US. An EU-Japan treaty is already in the wind, as is a “Trans-Pacific Partnership” to liberalize trade among the US and major Asian and Latin American economies. If either ever comes to pass, which I doubt, a huge share of world trade would be conducted within a discriminatory framework.

Some recognize the risks. In May 2011, Jagdish Bhagwati of Columbia University and I co-chaired a High Level Group convened by the prime ministers of the United Kingdom, Germany, Turkey, and Indonesia to attempt to move the multilateral process ahead. Our sponsors welcomed our recommendations, but that and similar efforts have gained little traction, leaving all countries rushing headlong toward a world full of uncertainty and risk.

It is not too late to reverse the apparently inexorable tide of bilateralism. But the only way to do so is by proceeding with WTO negotiations. Even if the Doha Round cannot be concluded, there may be other routes, such as implementing what has already been agreed. Another alternative might be to advance multilateral negotiations among willing countries in specific areas, such as services, with other WTO members joining later.

But if we are to move forward rather than revert to earlier, more dangerous times, the US, in particular, must reassert a constructive role in multilateralism. The US must lead again, as it did in the past. And now it must do so with China at it side.

This article was first published on Project Syndicate in December 2012.

The post The Rise of Bilateral Trade Agreements is a Threat to Free Trade appeared first on Peter Sutherland.

Many of the seven previous rounds of negotiations – including the Uruguay Round, which resulted in the establishment of the World Trade Organization (WTO) in 1995 as the successor to the General Agreement on Trade and Tariffs (GATT) – took years to complete, but none died of neglect or disinterest. Today’s indifference is particularly, though not exclusively, evident in the United States. President Barack Obama was silent on the issue in his re-election campaign, and breathed scarcely a word about it in his first campaign, too. One wonders whether what is at stake is even fully understood in some capitals.

Successful multilateral trade negotiations have significantly shaped the world in which we live and have dramatically enhanced the lives of millions of people. Between 1960 and 1990, only one person in five lived in an economically open society; today, nine in ten do.

The rule-based trading system developed by the GATT and the WTO has been embraced by virtually the entire global community. It has provided an effective road map for the former planned and import-substituting economies, facilitating their integration into the global market.

Initially, “globalization” was a dirty word to some. But, even among its opponents, its value for poorer countries came to be recognized, as it helped to lift more than a billion people in Asia out of abject poverty. While much more needs to be done for Africa and parts of Latin America, the Doha Round was intended to assist in providing market access (and therefore opportunity) to many more in the developing world.

The essence of the multilateral system consists in two principles: non-discrimination and national treatment. The former is described in the trade negotiators’ lexicon as the “most favored nation” principle, which essentially seeks to ensure that trade benefits provided to one country are provided to all. The latter requires member states to provide the same treatment to trading partners within national borders as that provided to nationals.

The non-discrimination principle ensured that global trade did not become a “spaghetti bowl” of preferential bilateral trade agreements. Moreover, a multilateral framework for trade negotiations gave weaker states far more balanced conditions than they would face were they forced to negotiate bilaterally with the likes of China, the United States, or the European Union.

In fact, what we have seen in recent years is an increasing rush to bilateral agreements by the major trading countries and blocs. This has apparently consumed virtually all of their attention. The WTO has been marginalized, and even what has already been achieved in the incomplete Doha Round appears unlikely to be delivered in a final agreement in the foreseeable future.

The damage to the credibility of the WTO – once lauded as the greatest advance in global governance since the inspired institution-building of the immediate postwar period – may yet prove lasting. Worse, it could have a serious impact not merely on trade, but on political relationships more generally.

One of the WTO’s great achievements has been the adjudication system that it provides – the so-called Dispute Settlement Mechanism. This independent body has been a resounding success, giving the world an effective quasi-judicial system to resolve disputes between trading partners. But its continued success depends ultimately on the credibility of the WTO itself; it will inevitably suffer collateral damage from a failure of multilateral negotiations.

Indeed, the current rush to bilateral trade agreements has been accompanied by a rise in protectionism. For example, there have been 424 new measures of this kind in the EU since 2008. Furthermore, the EU’s non-discriminatory tariffs are fully applicable to only nine trading partners. Everyone else has “exceptional” treatment.

Next, no doubt, we will have the prospect of a bilateral free-trade agreement between the EU and the US. An EU-Japan treaty is already in the wind, as is a “Trans-Pacific Partnership” to liberalize trade among the US and major Asian and Latin American economies. If either ever comes to pass, which I doubt, a huge share of world trade would be conducted within a discriminatory framework.

Some recognize the risks. In May 2011, Jagdish Bhagwati of Columbia University and I co-chaired a High Level Group convened by the prime ministers of the United Kingdom, Germany, Turkey, and Indonesia to attempt to move the multilateral process ahead. Our sponsors welcomed our recommendations, but that and similar efforts have gained little traction, leaving all countries rushing headlong toward a world full of uncertainty and risk.

It is not too late to reverse the apparently inexorable tide of bilateralism. But the only way to do so is by proceeding with WTO negotiations. Even if the Doha Round cannot be concluded, there may be other routes, such as implementing what has already been agreed. Another alternative might be to advance multilateral negotiations among willing countries in specific areas, such as services, with other WTO members joining later.

But if we are to move forward rather than revert to earlier, more dangerous times, the US, in particular, must reassert a constructive role in multilateralism. The US must lead again, as it did in the past. And now it must do so with China at its side.

The post The Bilateral Threat to Free Trade appeared first on Peter Sutherland.

It remains unclear how long-lasting the effects of Draghi’s intervention – or of the public support offered to him by German Chancellor Angela Merkel, French President François Hollande, and Italian premier Mario Monti – will prove to be. What we can say with certainty is that Draghi’s remarks and the reaction they evoked demonstrate that the fundamental problems of the eurozone are not primarily financial or economic; they are political, psychological, and institutional.

International observers took such notice of Draghi’s commitment to do “whatever it takes” to save the euro because so many of them have come to doubt other leading European players’ commitment to do likewise. (Some of these doubts are, of course, politically or financially self-serving; a certain model of financial capitalism perceives the euro as a threat, and its adherents will do everything they can to bring about its demise.)

But eurozone leaders’ inability to assuage doubt about their commitment to the euro after two and a half years of crisis suggests that the problem is deeply rooted. In their own defense, eurozone ministers point to the raft of reforms that they have introduced over the past 30 months, which will promote economic modernization, the restoration of sound government finances, and closer economic coordination.

Unfortunately, these reforms have all too often served as displacement activity – worthwhile in themselves, but failing to answer unambiguously the question posed with increasing urgency by international markets: Are the eurozone’s largest and currently most prosperous members absolutely committed to its continuation?

No one doubts that Germany and most other eurozone members would prefer the single currency to continue. Today’s uncertainty concerns whether this preference may be overridden by pressing considerations of national politics, or resentment at the slow pace of reform in certain eurozone countries.

Indeed, a German proverb to the effect that “trust is good, but control is better” has been the basis of eurozone leaders’ policy since the developed world’s debt crisis engulfed the single currency’s system of governance. The implication is clear: trust between the members of the eurozone cannot be taken for granted, but must be earned and maintained.

The limitations of this approach have now been revealed. While the eurozone’s richer countries have indeed done much to help their troubled neighbors, they have done so in an obtrusively conditional, transitional, and incremental fashion.

At one level, it is entirely understandable that Germany and other eurozone countries should demand assurances that their resources will not be wasted. But this constant need for reassurance, for the limiting of risk and involvement to the minimum necessary, provokes a fear that at some point Germany and others will judge their partners’ assurances insufficient and the risks run in helping them intolerable. If that happens, the euro’s demise cannot be far behind.

The Treaty of Rome, signed in 1957, represented a noble and ambitious departure in European history. Solidarity and predictability in international relations, based on common institutions and common interests, would ensure Europe’s prosperity and stability much more effectively than had the traditional balancing act of high-wire diplomacy, whose practitioners had too often crashed to the ground.

The euro was founded in this spirit of solidarity, and its contribution to limiting economic and financial instability in Europe over the past five years should not be underestimated. The example of the 1930’s is a reminder of how much worse things might have been. Eurozone leaders’ temptation to revert to earlier, discredited models of European relationships was bearable for a time, but it has now reached the limit of its tolerability.

My impression is that German public and political opinion is beginning to recognize the economic devastation for Europe and Germany implied by a euro breakup. German politicians bear the important democratic responsibility of reinforcing this realization and advocating the steps needed to avert a catastrophe.

It can be no part of a well-functioning democracy for leaders to hide unwelcome truths from their electorates. It would be a delusion to imagine that the eurozone need only follow its current path to ensure the single currency’s future. If nothing else, that current path unacceptably accentuates the differences between member states in a way that is politically and economically unsustainable in the longer term.

The philosophy of control and reciprocity that until now has characterized the eurozone’s approach to its crisis of governance needs to be replaced by one of solidarity and all that follows from it. This means a more balanced economic policy within the eurozone, an enhanced role for the ECB, a real banking and financial union, and a road map to partial and conditional mutualization of legacy debt.

Eurozone leaders have spoken about all of these, but the time has come for unequivocal commitments and a realistic timetable for action. We are now perilously close to the moment when “muddling through” could give way to renewed crisis. So the Bundesbank’s self-righteous zeal in asserting that its responsibilities are somehow graver – and more binding – than those of other central banks is dangerously wrong-headed. “Nein” merely brings calamity closer.

None of Europe’s financial problems would look remotely as challenging today if doubts about the eurozone’s future had been dispelled two years ago, and the reputational and financial costs would have been dramatically less than they have been in the past 30 months. In the long run, solidarity is cheaper for all involved, while its absence could become ruinously expensive in the foreseeable future.

The post Europe’s Solidarity Imperative appeared first on Peter Sutherland.

Europe’s reaction to the historic revolutions in North Africa has vacillated between exhilaration and fear. The natural instinct to celebrate and support democratization across the Mediterranean has been tempered by concerns that the crisis will spill onto European shores.

A few leaders have invoked the post-World War II Marshall Plan as a model for large-scale European development assistance for the region, the aim being to ensure the sustainability of a democratic transformation and generate long-term political and economic benefits for Europe. But the mainstream reaction has been much more fearful: media and politicians throughout the European Union are obsessing about the threat of waves of migrants reaching their borders.

Such a threat should not be taken lightly. Already, the controversy over Tunisian migrants in Italy has started to fray the political underpinnings that allow free movement in the Schengen area. The war in Libya, meanwhile, could lead to many more thousands of civilians fleeing the violence and needing international protection.

So far, nearly 400,000 people have filled refugee camps in Tunisia and Egypt, and an estimated 20,000 have reached Italy’s shores. Dealing with any surge of asylum seekers will require the EU to strengthen its capacity to offer temporary protection and possibly to reconsider how its overall asylum system works. That the Union has been moving towards a common approach to border security, most visibly with the expansion of the Frontex border agency, will be of help here.

But if Europe allows itself to be consumed by the short-term crisis, it risks squandering an extraordinary long-term opportunity. By using this moment strategically and wisely, the EU would have a chance to reframe its relationship with the southern Mediterranean (as it is being redubbed) to promote generational development and growth in ways that can address Europe’s interests, too.

The best way to allay European fears and prevent uncontrolled migration is to establish positive incentives, and the practical means, for potential migrants to stay home most significantly by creating jobs in the southern Mediterranean. After all, the vast majority of migrants leave home reluctantly.

Yet, at the same time, as its baby boomers retire en masse in the coming decade, Europe will need workers at all skill levels. The southern Mediterranean can be the source of this labor, given its huge youth bulge. The trick will be to ensure that migrants are given the chance to acquire the skills that European employers need, and that they have the chance to move in a safe, legal, and orderly fashion.

Policies that help train the next generation of North Africans, and allow them to circulate more freely between Europe and their home countries, are a much smarter solution than the current approach, which sustains illegal migration without meeting Europe’s labor needs. This is an argument not for more migration, but for better migration well thought out and planned.

Of course, if Europe helps North Africa build sustainable, prosperous democracies, this would be the greatest long-term deterrent to illegal migration of all. It is worth recalling that 50 years ago, the largest immigrant populations in northern Europe hailed from Italy, Greece, Portugal, and Spain. As those countries prospered, the migrants returned home: their countries eventually became engines of European growth, and major export markets for Germany, France, and other EU member states. The same arc of development can and should be limned for the southern Mediterranean.

Fortunately, research on migration and development in recent years has helped foster a range of policy tools that Europe should be considering. Experts and policymakers have been devising many innovative programs, including low-cost remittances from migrants to their home countries, efforts to strengthen ties between diasporas and their homelands, and initiatives that help skilled migrants find proper employment, so that qualified surgeons are not driving taxis.

In thinking about how to reframe the EUs relationship with the southern Mediterranean, we should draw on these ideas as expansively as possible. In order to connect our societies in positive ways, we should seriously consider liberalizing trade regimes, opening new avenues for legal migration, and vastly expanding the number of students from the region who come to Europe for education and professional training. After all, it was the youth of North Africa, both at home and abroad, whose notions of freedom helped bring down dictators in Egypt and Tunisia. Their talents and energy should now be cultivated and harnessed to help rebuild their societies.

Responding to the challenges and opportunities of this moment demands the creation of strong partnerships among states, international institutions, and non-governmental actors. Since its inception in 2006, the Global Forum on Migration and Development (GFMD) has provided a much-needed platform for dialogue among states and other stakeholders on issues related to migration and development. Its annual plenary sessions facilitate the exchange of experiences and good practices in a way that transcends traditional North-South conflicts.

Among other changes that it has spurred, the GFMD has compelled governments to understand migration more holistically, and to develop a whole of government approach to addressing the opportunities and challenges that it poses. It also has highlighted the importance to development of protecting migrant rights and of fighting illegal migration.

The Global Forum has done its job by generating and fostering ideas that can make migration benefit the development of countries of origin and destination. It is high time that these ideas are implemented. There could be no greater opportunity for doing so than this strategically crucial window in the history of Europe and the southern Mediterranean. If we do not seize this moment for action, history could well pass us by.

The post Europe’s Migration Test in North Africa appeared first on Peter Sutherland.

The great irony of the drama over Ireland and its planned referendum is that the exercise
of what amounted to a veto by the United Kingdom has left Ireland with no power of veto
over what is now an intergovernmental agreement. In the past, treaty changes have had a
tortuous history often because of their painful passage through the Irish constitutional maze.
Either Ireland and others voted Yes, or the treaty failed. This time if Ireland votes No, the
agreement will be ratified by others and Ireland will be left with no recourse to the European
Stability Mechanism and the funding that may be required from it in the future. This would
have serious consequences for Ireland’s return to the markets.

All of this would be doubly unfortunate as Ireland has been performing well in putting its
finances in order. There is a long road ahead but it is making real progress. Exports are
thriving and foreign direct investment is buoyant. The Irish are not fools. They know how
good Europe has been for them. There is no country, other than Belgium, with a greater
dependence on trade in Europe. The EU’s internal market provides the foundation for
investment and jobs in the Irish economy. The euro is an essential element in this construct;
its failure would be a disaster for Ireland (as for everyone else).

The substance of the “fiscal compact” itself is essential for the euro’s future. It is plainly
unsustainable for a eurozone member to run deficits impairing a shared currency and
leading to the need for bail-outs. As the terms of the proposed treaty provide, the co-
ordination of the economic policies is based on the objective of sound government finances
as a means of strengthening the conditions for price stability and for sustainable growth. So
this agreement is all about ensuring the euro’s healthy survival.

Of course, the initial idea was to revise the EU Treaty, but that was then excluded following
the United Kingdom’s intervention. The second-best option was to enact an agreement
that should have a similar legal status to ensure that commitment to the new rules occurs
at the highest possible level. This new agreement is led by eurozone member states and
is of course open to others, but it shows that the eurozone wants to develop its economic
governance, even if alone. This is as it should be. The intergovernmental agreement
comprising the fiscal compact will give more teeth to what has already been agreed.

Of course, the process needs to go further if the euro’s future is to be assured. A major goal
of the eurozone countries in the past two years has been to reassure markets of the euro’s
durability and the financial stability of its governments. Their efforts have had some success,
but always fallen short of permanent reassurance because global lenders have believed
some important members may be unwilling to do everything necessary to preserve the
euro. Solidarity and mutualisation are watchwords in this debate. The economic and social
strains to which Greece is currently exposed are a poor advertisement for the solidarity of
the eurozone. So the stronger European economies do need to specify the conditions under
which they will ensure a sound banking system, develop mutualised issues of public debt
and balance necessary fiscal austerity with effective policies on growth and jobs.

Over its history, the euro has been assailed by critics who believed or hoped it would
never come into being; that if it did it would rapidly dissolve; that its existence would ruin

the economies of its members; that it would destroy the EU. Despite the now evident
faults in the euro’s original architecture, none of these predictions has been fulfilled. The
developments of the past two years rather suggest that, slowly but surely, member states
realize the euro’s future and their own prosperity are dependent upon their ability to pursue
economic policy in common rather than separately.

This common policy cannot be attained simply on the basis of strict accounting, to ensure
that each member state’s financial contribution matches – in the short term – its financial
benefits from the Eurozone. In another world, it might have been possible to proceed further
on this path of common economic policy. Democratic politics do not always allow this luxury.

When the euro was introduced national governments (including the UK) sought to keep
the greatest possible national autonomy for economic decision-making. Looking back, we
can see that this was inadequate. Much of the past eighteen months has been devoted to
repairing the gaps in the euro’s structure of governance. The process is not yet complete,
but remarkable changes of approach from member states are clear. The ratification of the
agreement is an essential part of this process. This will be appreciated by Irish voters in the
referendum and they will vote Yes.

This article was first published in The Financial Times.

The post Ireland knows what is right and will vote yes in EU referendum appeared first on Peter Sutherland.

Introduction

The Doha Development Agenda (DDA) negotiations in the WTO have reached a point where the shape of a worthwhile agreement can be envisaged even if its final delivery is far from guaranteed. This is, therefore, an appropriate time to look closely at what has been achieved and what has been lost and to seek to reach some conclusions that may brighten the prospects of eventual success.

One way of looking at the challenges to the system, posed by and around the DDA is to consider first what has gone wrong and what has gone right since the Round was launched in 2001. In some senses the exercise has been problematic since its inception. If there is to be something worthwhile at its conclusion we need to understand why progress has been so troubled.

There is also a need to explore why the difficulties encountered in the DDA are, in part, systemic. The World Trade Organization is ten years old. It has surely had its successes; it has equally suffered some disappointments. Those of us who believe in multilateralism as ultimately the safest and surest means of global governance need the WTO to deliver as intended. It has delivered on dispute settlement; it has made significant advances in helping developing countries draw advantage from the system, but it has yet to show its potential as a negotiating machine. That is the test posed by the DDA.

Recognizing the fault lines in the Doha Agenda?

This is not the first time that political enthusiasm to launch a multilateral trade round has overwhelmed political willingness subsequently to negotiate in substance and make concessions. In the case of the Tokyo Round of the GATT, launched in 1973, little happened for more than three years. In the period after the Punta del Este ministerial meeting, in 1986, the Uruguay Round was very slow moving until after the crisis of the Brussels ministerial conference in 1990. However, it is important to note that in the latter case there was a huge job to be done in exploring new areas for trade rules – like services and intellectual property – as well as seeking new approaches on agriculture and dispute settlement before serious practical negotiation was possible.

“the European Commission was to change and with major elections in the US and India – to name just three key WTO members – was optimistic.”

So frustration with slow progress in Geneva is the rule not the exception. From that perspective we should not be over concerned that the Doha Round has not concluded on time and will take at least another two years to reach an outcome. It is true that the timeframe originally imposed was unrealistic: there was never any reason to suppose that this time around a relatively ambitious trade negotiation would be treated with a greater sense of urgency than any other. To imagine a conclusion at the end of a year in which the European Commission was to change and with major elections in the US and India – to name just three key WTO members – was optimistic.

A greater problem had its roots in the sense of balance and ambition within the Doha agenda. The Europe-driven aspiration to drive forward the “Singapore issues” has been a source of internal conflict in the WTO and has held back meaningful progress in other aspects of the Doha negotiations. That is not to say the aspirations were misplaced. It is clear that multilateral agreements on investment, competition policies and government procurement transparency, as well as trade facilitation, could all make good sense from a development perspective. Many poor WTO members recognize the fact. It is equally the case that a broader agenda that held out the hope of valuable new disciplines in areas of importance to developed-country investors might have made easier prospective concessions in agriculture.

However, in pressing the Singapore agenda, some industrial countries failed to appreciate the difficulties that a number of developing nations were having in implementing existing WTO disciplines from the Uruguay Round. Understandably, and notwithstanding the potential advantages, poorer WTO members shied away from the prospect of new obligations that they could not afford to implement but which might in part be enforceable through the dispute settlement procedure. Moreover, there has always been some scepticism that the substantial levels of technical assistance needed for the implementation of existing as well as potential future WTO obligations would be forthcoming.

In short, coming so soon after the Uruguay Round, the original Doha agenda was just too demanding on too many members to be sustainable and meaningful within a short timeframe.

But there were other fundamental faults in the design of the new trade round. The price of inclusion of the Singapore issues was a lack of balance in the contributions to be made in the mainstream negotiations – notably, market access. A traditional multilateral trade round was reinvented as a “Development Agenda”. The lack of reciprocity implicit in the Doha bargain was an illusion. While it has always been the case that least-developed countries contributed little in trade rounds – which may or may not have been in their true interests – the idea that more advanced developing nations could avoid meaningful market opening commitments while industrial members made politically difficult decisions to further open theirs was unreal. From a political perspective, all trade negotiations must provide for a mutual exchange of commercially credible concessions among the key players. Perfect symmetry is never possible, but all sides must return from the negotiating table with something of value for their exporters.

Of course, a major reason for the adoption of the development agenda device was the impact of the anti-globalisation, anti-WTO movements in the late 1990s and thereafter. The idea that developing countries had been “losers” from the global trading system gained so much currency that political leaders of industrial countries and even the WTO itself embraced it. Yet, the notion was always a gross exaggeration, certainly an over-simplification. That too many poor countries have remained poor despite being members of the WTO is hardly in question. That it is a fundamental fault of the institution – or of the treatment of those poor nations within the institution – surely is.

This drift has led to disappointments – the system seems unable to deliver what is needed.

While we can point to elements of the WTO’s rules and practices that are sometimes a challenge for developing countries, the essential principles of the system are unchallenged as a framework for economic progress. Developing countries that maintain highly protected markets, that offer no security or predictability to investors or, indeed, to their own domestic firms, that fail to put in place the institutional structures and practices that encourage rather than hold back trade-led development have been and will be failures. Whether they are members of the WTO or not, will make little difference. The WTO provides a framework for reform and secure access to markets; opportunities that are there to be exploited, but which do not guarantee success.

Somehow the Doha agenda lost contact with these realities. Political leaders have tended to repeat mantras about the shortcomings of the system while failing publicly to defend the institution as an essential support for trade, investment and development. Playing to the gallery of critics is not a responsible position when the critics have no alternative to present as a coherent replacement for the system.

This drift has led to disappointments – the system seems unable to deliver what is needed. There is a need to get back to the essentials and understand clearly what is within the capacity of the WTO to achieve and what lies outside.

Two other trends have made progress within the Doha Round difficult. One is the proliferation of trade agendas outside the multilateral system. The most active of those is the new enthusiasm for regional trade agreements. Together with the spread of preferential arrangements, the energy being put into essentially politically motivated FTAs is detracting from the motivation and capacity of negotiators to secure multilateral agreements. That is not to say there is no value in regional arrangements – it may well be, for instance, that those that are opening up some Asian markets may be beneficial globally. But the reality is that one of the central pillars of the WTO – Most-favoured Nation treatment – has been undermined to the point that it may become meaningless.

A second tendency that has undercut the will to negotiate is, perversely, the success of the WTO’s dispute settlement system. So efficient – and, for the most part, respected – is the system the belief has grown that most trade issues can be resolved through WTO litigation. It may well be that many outstanding differences among WTO members can, indeed, be resolved this way. But it is a dangerous assumption that dispute resolution procedures can indefinitely take all the strain that should be shouldered by collective negotiation among the full WTO membership. That would rightly be criticized as a negation of democratic legitimacy.

What then has gone right with the Doha Round?

The agreement reached by the WTO General Council in July 2004, went some way in correcting the shortcomings and illusions of the original mandate or, at least, the suppositions that underlay the declaration in 2001. In essence, negotiators now have a more confined agenda and an undefined timeframe. All the same, the Doha Round can still provide valuable results for the WTO and its members.

Two elements of the July agreement stand out as offering hope for a very substantial outcome. The decision to eliminate export subsidies and other trade distorting forms of export support was welcome and impressive. Farmers in many nations, who can market their produce competitively, in the absence of these grossly unfair practices, have much to gain if the decision in principle can be translated into a final settlement. It would not be the end of the story of reform in agriculture, but a very important step that, even a year ago, seemed unlikely.

The other outstanding agreement in July 2004 was the decision to move forward with negotiations on trade facilitation rules. It is difficult to underestimate how much could be achieved by such disciplines in easing the difficulties of moving goods across borders in an efficient, secure and non-corrupt manner. This should be a development-friendly negotiation. It should also be an ambitious negotiation, going further than minor clarifications of GATT provisions. However, negotiators are going to need to tackle early on the very high potential cost that will be entailed. Introducing information technology, streamlining administrative arrangements and, above all, reforming customs services to ensure personnel do not need bribes to support even an elementary standard of living, require substantial financial outlays. If the governments of poor nations are prepared to go down these challenging paths then they must have the necessary financial backing as well as technical support to do so.

Apart from these two key dossiers, much was left open in the framework agreements under which negotiators are now operating. In particular, the relative ambition for market access talks – in agriculture, industrial goods and services – is largely undefined. This does not, of course, exclude a high level of commitment at the end of the round. It is to be hoped that a result of significant commercial value can be achieved. However, that will require some of the advanced developing countries making a substantial contribution alongside those of the industrial nations. On this, the 2004 agreement is vague, yet the conclusion is inescapable if there is to be balance and some shared pain in the final outcome.

Even on this sensitive point, however, there is reason for some optimism. After the failure of the ministerial conference in Cancun in 2003, it took a major political effort to get the Doha Round back on track. For all the concerns about multiple trade agendas it was important to see the United States and the European Union leading that political effort. Their respective trade representatives travelled the world and pursued consensus with an energy probably not seen since the end of the Uruguay Round. They were quickly joined by the representatives of key developing WTO members like India, Brazil and South Africa and then by trade ministers from every continent as the potential for an accord became a realistic expectation.

In the final analysis, governments almost everywhere recognized that they had much more to lose than to gain from a further failure that would not merely have ended any hopes for the Doha Round but severely undermined the WTO itself. In a sense it was a crisis to which the membership rose. Not for the first time, or the last, the system needed to be on the point of cracking for good sense to prevail.

At the very least, the WTO found within itself the capacity to find consensus among almost 150 sovereign nations. It is to be hoped that the lessons learned will be remembered. The agreements were far from perfect, far from precise and far less in content than was supposed to be achieved at that stage. Yet it was a step forward. The next steps may be no easier.

Where do we go from here?

Any trade round can only be viewed within a broad political framework. Negotiations never were entirely self-contained or impermeable to domestic interests: but that is less the case now than ever. I will return to the institutional issues that may affect the proceedings: the Director-Generals Consultative Board, of which I am chairman, has reviewed these in some depth. But irrespective of what happens within the Organization, any conclusion of the Doha Round will be highly dependent on a collection of inter-linked external events and decisions that will be taken by governments largely on the basis of domestic political imperatives.

The focus will continue to be on agriculture, even if it is now vital that the other negotiating dossiers catch up with the relatively advanced state of the farm trade talks. The process should, with some luck and much energy and commitment, reach the point of deciding detailed modalities for agricultural negotiations by the end of 2005 when the next ministerial is due to take place in Hong Kong.

However, not even this should be taken for granted. The hiatus in meaningful negotiations caused by the US presidential election campaign and the changeover of the EU Commission will end at some point in the first half of 2005. By then, regardless of the progress made within the Doha Round, both Washington and Brussels will have before them definitive judgements on two key dispute settlement cases. For the United States, it will be the findings of the panel and Appellate Body concerning a range of support policies in the cotton sector. For the European Union it will be the case brought against its sugar regime. The decisions taken by governments on these two sets of WTO findings will inevitably have some impact on the potential reform targets and negotiating modalities to be adopted in the Doha Round.

For the EU, willingness and ability to implement a negative panel finding on sugar will be related to ongoing changes in the Common Agricultural Policy and perhaps to budgetary pressures. These factors will largely determine the stance taken in Geneva and the shape of commitments that may be possible.

Similarly, for the US at least some of the response to a successful challenge to its cotton policies will lie in the sustainability of the current budget deficit. Clearly, if budget adjustments require a cut back in farm spending, it might be advisable for the new administration to look at programmes that have been found to be inconsistent with international obligations. A little further down the road, in any event, there must be negotiations with Congress on a new Farm Bill to replace the spending limits and programmes contained in the 2002 legislation. Again, these are the developments that will ultimately determine what the US can sign on to in Geneva.

Of course, domestic political judgements on reform of the farm trade environment – both market access and domestic support programmes – will have to be made in many countries, developed and developing. Yet the willingness of the two biggest players in the WTO to move significantly will be the determining factor in the contributions that others will make and the political discomfort they will be prepared to bear.

Agriculture is just one example of the political complexity faced by WTO members in pursuing Doha negotiations. Other external changes will also have an impact. So I will now turn to the various trade agendas that intersect, to some degree at least, with the DDA.

The development challenge

The “development agenda” facet of the Doha Round has to be met, of that there is no doubt. While there is no case in their own interests for sheltering developing countries from all the obligations of the WTO whilst offering them all the benefits, it is clear that a better-defined differentiation of obligations may help. The framework agreements on agriculture and non-agricultural market access set out copious arrangements – or potential arrangements – to secure special and differential treatment. The remains of the pre-Seattle “implementation” agenda may still render some modest results. Additionally, members should be able to go further on the Special and Differential Treatment mandate itself. At every point in the agenda there will be continued and increased need for well-focused, efficiently delivered and properly coordinated technical assistance.

It would be a mistake to imagine much of this will assist the integration of poor countries into the global economy; rather, such efforts will provide breathing space for the implementation of WTO obligations where it is most needed. As always, the least-developed countries will be faced with few binding requirements to implement anything of substance generated by the Doha Round.

It is probably best that the world’s poorest countries are left to decide when, how quickly, and to what extent, they wish to make use of the WTO framework to guide their own reforms. It has been well demonstrated that the WTO can have little impact on poverty alleviation in the absence of other more fundamental policy reform. Open markets in the developed countries are of no value while supply-side restraints are extreme and while no credible and stable governmental and institutional structures exist to underpin business development, investment and external trade.

However, other developing countries are not in that situation. Many are successful exporters and are moving fast to dominate global markets in a variety of farm products, industrial goods and even services. Thus, in one form or another – explicitly of implicitly – some differentiation in the treatment of developing countries (outside the LDC group) is going to have to be faced in the Doha Round. Whether we call it “differentiation” or the more formal, and feared, “graduation” a World Trade Organization that is global and inclusive must now fully recognize the class of successful exporters, with increasingly high GDP per capita levels, within its ranks. And those members themselves owe it to the rest of the developing country membership to be so recognized and to take the consequences in terms of higher levels of obligations and commitments.

We should also keep in mind that concessions made by many developing countries may serve merely to bring a higher proportion of WTO bindings within the national tariff or to contract the often large differences between applied and bound rates. In terms of immediate impact on import competition, the results, if any, are likely to be minimal. That is not to say, of course, that investors would not welcome such increased predictability, clearly they would.

Whatever its nature, there will have to be some movement by advanced developing countries. That seems to me to be the basis of a bargain on the basis of which industrial countries will have the political space to consider moving on some of the most testing – and to developing countries, damaging – policies of market protection that remain in place. It is on these foundations that an ambitious outcome to the Doha Round can still be secured, particularly with respect to market access.

The challenge of regional and bilateral trade deals

That the Doha Round is deeply affected by the recent explosion of regional, bilateral and preferential trade arrangements is clear. Whether the increased energy directed towards regionalism is, itself, a reflection of the lack of meaningful outcomes from multilateral activity is probably arguable. Yet all WTO members continue to insist that multilateral trade benefits are the most valuable. This divergence between the pursuit of the optimal and the parallel enthusiasm for the more easily attainable needs resolution if we are to see a conclusion to the DDA within some acceptable period.

Certainly it would be difficult to pretend that proliferating negotiations on regional and preferential trade do other than draw negotiating capacity and attention away from Geneva and the WTO. Few countries have a sufficiently large number of trained and capable negotiators to engage on several fronts at the same time and with the same intensity. The reality is that governments are programming their attention to fit a variety of negotiating schedules. For poorer nations, with the least capacity, that is a serious loss of focus.

There is a natural tendency among trade ministers – whose terms in office are limited – to wish to be seen delivering new trade initiatives. Further, there is now an additional tendency to link bilateral trade agreements as much to urgent foreign policy objectives as to commercial interests. The picking off of “helpful” countries for beneficial trade treatment is only adding to the decline of multilateralism. It is something of a reversion to an era of friendship, commerce and navigation treaties of nearly two centuries ago. The practical trade impact is often minimal but the practice exacerbates the undermining of the most-favoured nation principle – which is fundamental to the multilateral trading system. (It is worth noting, however, that the nineteenth century equivalents, if inspired by foreign policy interests, were founded on full reciprocal MFN treatment.)

The tendency is doubly concerning since the WTO appears incapable of policing – or even monitoring – such agreements. Do they meet the criteria of Article XXIV of the GATT or the “Enabling Clause”? As things are, we shall never know. The issue of making Article XXIV properly and adequately operational is part of the Doha mandate. Yet, there is so far not even a consensus on how and when agreements should be notified to the WTO. As the arrangements spread, there are less and less WTO members with an open mind or an interest in seeing a resolution. Yet, the issue is vital to the future credibility of the institution.

No less worrisome is the treatment of preferences in the WTO. There are a large number of members for whom almost the sole objective in the Doha Round appears to be the safeguarding of their preferences in the major markets. Yet, while local political interests may continue to encourage such a position, the evidence continues to grow that preferences are far from being universally beneficial to those that receive them. As the WTO Secretariat’s 2004 World Trade Report pointed out, the absolute value of preferences are falling as MFN tariff levels fall. At the same time, dependence on preferences can sometimes drive developing economies into product segments where they have little or no comparative advantage. In other words, investment is taking place, on the basis of preferences, which may have no long-term likelihood of viability.

The European Union has begun to take this problem seriously with the start of a negotiating process that should lead to an end, by 2008, of the non-reciprocal preferences of the present Cotonou Treaty with the large ACP group. These will be replaced by a series of reciprocal trading arrangements – the “economic partnership agreements” – with various regional groups within the ACP. The political challenge for the EU will be to support the change with adequate financial and other aid to help agricultural producers and other current preference targets to diversify out of products in which they will no longer be able to compete.

That will begin to provide a degree of fairness in access for poor countries. Too many have been left out under current arrangements providing preferential access to the major markets.

That there should be open access for the least-developed countries seems not to be in dispute – after all, it is an objective of the Doha Round and one which the EU has gone a long way in providing. It is to be hoped that all industrial nations and advanced developing markets will offer undiluted tariff-free, quota-free access to these nations in the very near future. The amount of international trade so covered is not – and cannot – be more that a tiny fraction of the total. Yet the value of providing a few practical opportunities to export – so long as they are not negated by non-tariff restrictions – can be significant in providing a foothold into the global economy.

The challenge of non-trade agendas

The temptation to bring non-trade agendas into the GATT and the WTO is long-standing. Provisions in both treaties allow for policies relating to national security, conservation of natural resources and slave labour, among others, to cut across normal obligations. That is understood, and accepted. More recently, we have seen efforts to bring the WTO to bear on the furtherance of a number of admirable causes. The improvement of observance of international labour standards and other aspects of human rights have been among such causes. On the other hand, equally energetic attempts have been made to keep the WTO away from having any locus in certain policy areas, like the protection of animal species or aspects of certain food safety regulations.

Happily the WTO has so far steered itself around these difficult and publicly controversial issues. The membership has wisely held out against initiatives that owed more to protectionist interests than, for instance, to serious concern for the rights of foreign workers. Furthermore, the dispute settlement system has generated a series of wise and sensitive findings that have encouraged successful resolutions of differences over animal safety and conservation policies.

It is to be hoped that any further temptation at the political level to seek to re-open these questions – and to pursue new ones, like outsourcing – will be resisted. While domestic debate may be necessary to quell disquiet over the loss of jobs and investment to foreign competition, it is for national governments to respond in a positive manner – notably through policies providing adjustment assistance – not to seek to pass the burden back to poorer nations. Certainly, it is difficult to see the Doha Round concluding successfully were there to be any new attempt to push labour rights or additional environmental criteria on to the agenda.

The challenge and opportunity of China

Another intersection of conflicting interests by which the Doha Round may be affected is that concerning China. There is no question that the entry of China into the WTO was a significant success – perhaps the institution’s biggest success since it was established. Equally, there is no question that the extraordinary vitality and growth of the Chinese economy will be of benefit to every other WTO member in the years ahead.

Yet the growing dominance of China as a trader and as a magnet for investment will need to be managed by governments at home and by the WTO, in particular, in the international arena. Presently, the ending of quota restraints under the Agreement on Textile and Clothing is putting particular pressure on rich and poor nations alike. We will undoubtedly see efforts to dampen the force of Chinese competition in this and other sectors.

Clearly, the instruments exist to provide some short-term relief for embattled industries. The Chinese WTO accession agreement provides special safeguard provisions for some years ahead. At the same time, these and other mainstream trade contingency instruments will need to be used correctly and probably sparingly. The global economic stimulus that China can provide – is already providing – is too great to risk having undermined by ill-conceived protectionist reactions.

That too would damage the Doha Round. China is a full participant already. As we move towards a conclusion, in some year’s time, it will be important for China to make a significant new contribution in terms of commitments on market access. China is already a gigantic market for the rest of the WTO – and that means for poor nations no less than rich – and will develop progressively towards one of the largest markets of all. There is, therefore, much to be gained in keeping China constructively engaged in the Doha Round and ensuring it has an interest, and a willingness to contribute significantly, to a worthwhile outcome.

Encouraging civil society to support Doha Round goals

There is no doubting the increased activity and influence of non-governmental organizations in the trade policy field. Let us leave aside the irresponsible groups at the margin who seek only to destroy any international economic arrangement that stimulates trade and investment. More serious development and environmental NGOs – as well as some trade union groups – seem to have understood that even if the WTO may not be their most popular international institution it provides a vehicle for supporting their objectives.

It is regrettable that even some of these groups still tend to misrepresent the nature of the WTO. Yet some of their more targeted work has been exemplary. The campaigns and studies of Oxfam on the sugar and cotton sectors stand out. Indeed, it has long been apparent that if and when powerful NGOs could focus on narrowly targeted trade issues – particularly those relating to poverty alleviation – they could make a big contribution in pushing the WTO towards appropriate advances. In the case of these two agricultural sectors, a combination of NGO campaigning, WTO dispute settlement rulings and some concerted action by WTO members themselves looks likely to make a practical, even dramatic, difference.

Clearly, if even the NGOs have an interest in a successful conclusion to the Doha Round that can only be positive. If they can accept the WTO as part – though a small part – of the answer to the many desperately difficult issues they seek to treat, rather than part of the problem, then we have the basis for a constructive, mutually reinforcing relationship.

My years leading the GATT and WTO secretariat taught me one thing: the people in the institution are motivated not by any desire to reinforce corporate interests; they do their jobs to ensure fair rules of trade support development and wealth creation among ordinary people, and especially the poorest. Thus, in progressively opening up to responsible NGOs – even if that will always stop short of any direct non-governmental involvement – the WTO Secretariat is seeking to establish a degree of partnership. The days when the WTO was a rather opaque institution are long gone. Negotiations are now easy to follow externally and documents are available freely on the Internet, often within hours of them circulating to delegations. It may be that further measures in transparency will be necessary. Some limited access to observe dispute settlement proceedings may be worth pursuing. Additional measures to involve parliamentarians could also be valuable.

NGOs have the tools to do their work in influencing governments in capitals on trade policy issues. But if the WTO is opening up to civil society groups, then those groups must take care to understand the institution. They need to recognize that, even if it has shortcomings, it still represents the lessons learned from a century of war, strife and economic hardship born partly of foolish trade policies.

Giving the WTO the tools to do its job better

We should not exaggerate the extent to which institutional reform will facilitate negotiations. For the most part, if there are difficulties in moving forward it is because substantive differences exists between the participants or that domestic political realities prevent governments from moving constructively towards consensus.

That said, the mechanics of decision-making in the WTO are not necessarily the most efficient. The nexus between ministers, senior officials, the Geneva representatives and the Secretariat is not necessarily the most comfortable or the most effective possible. The method of selection of directors-general has been incompetent and unfair to the recent incumbents. The overall management of the institution’s work ought probably to be in the hands of tighter management structures than the General Council. The consensus rule serves the credibility of the WTO well and lends weight to its decisions when governments are required to change or adjust their policies. Yet, it is cumbersome and sometimes unnecessarily time-consuming. There may be circumstances in which it could be adjusted.

These are all issues that need to be considered seriously. The Director-General’s Consultative Board has done so and it is for WTO members to reach their own conclusions. However, it would be a mistake to insist they can all await the conclusion of the Doha Round. The difficulties in pursuing multilateral negotiations have been glaringly obvious since the launch of the Round in 2001. We still have a very long way to go before the talks can be rounded out. There is nothing to prevent a serious discussion on institutional reform to take lace in parallel. Some changes could well be implemented in a short timeframe; short enough to provide a boost to the Doha process.

Conclusion

The political and institutional environment in which the next phase of the Doha Round will be conducted is extraordinarily complex and will remain so. There is absolutely no guarantee of ultimate success. Indeed, the challenges are sufficiently great for there to be real doubt that a commercially meaningful package can be secured.

Yet such an outcome is needed. There are too many countries and too many people with an interest in advances in the WTO to support economic growth and the assimilation of poor nations into the global economy for failure to be an option. Political spin can, of course, create victories out of thin air. That cannot work in the WTO. We need a large and balanced outcome that all WTO members can justifiably regard as valuable and pertinent to their own national circumstances. As in every other trade round, that means a lot of energy, much commitment and an understanding, by every participant, of the common good.

This article first appeared in The Journal of International Law (Oxford University Press) in 2005.

The post A Cosmopolitan Perspective on the Doha Development Agenda appeared first on Peter Sutherland.

Are we already seeing the beginning of the kind of downward spiral in trade and cross-border investment which turned the 1930s into an economic and political catastrophe?

If so, the outlook is grim indeed, because the globalisation of the past quarter decade has made all our livelihoods much more dependent on international trade and financial flows than in the past. A generation of splitting up and stretching supply chains around the world, of outsourcing and migration, of cross-border direct investment and integration, mean that every person’s living standard depends on what happens in other countries. This has been an astonishing force for growth and the reduction of global poverty for nearly 30 years. But it means the adverse impact of protectionism will be severe.

To see this, consider that in 2006 a fifth of US manufacturing jobs were generated by exports, directly or indirectly (according to the latest annual report of the US Council of Economic Advisers). Workers in these jobs earn up to 18% more than people working for firms not engaged in exports. Other economies are much more dependent on trade than the US, so the threat to living standards from a slump in trade is enormous.

The threat is also imminent. The extent of the integration of most of the world’s economies means 21st century protectionism takes many forms, and we are starting to see most of them. Congress attaches ‘Buy America’ provisions to the government stimulus package. The British government has persuaded oil company Total to give jobs to British workers in order to end wildcat strikes over the employment of Italians. Malaysia’s government has instructed its firms to lay off foreign nationals first. Brazil’s has edged up tariffs on manufactures. Semi-nationalised banks in the US and Europe are pressed to prioritize loans to national companies ahead of foreign ones. Devaluation is welcomed as a useful tool in the policy armoury. As Professor Simon Evenett, of the University of St Gallen, has pointed out, there has been a dramatic increase in the discussion of protectionism in the world’s media, in a reflection of the trend in the policy debate.

The reason for this trend is clearly the slump in exports and cross-border investment during the past few months. No major exporting country has escaped a slump in export volumes since last September. Some of the major emerging economies including Brazil and China have seen a particularly steep decline, given their pivotal role in global supply chains in industries such as apparel and autos. The challenge to policy makers is to halt the downward spiral in demand rather than acting in protectionist ways which will accelerate it.

This is quite a challenge as the scale and complexity of globalisation, the sheer variety of flows of people, goods, and investments across borders, mean protectionism can now take many forms. No longer is it sufficient to prevent tariffs from rising, or to avoid competitive devaluations. Governments need to avoid the many other ways in which they can discriminate against foreign companies and foreign workers – through the regulation of inward investment, through state aid, through tendering processes, through employment laws or health and safety regulations, through instructions to bank managements about lending policies.

It is all too easy to disguise protectionist measures, and all too tempting to engage in them given the political pressures from voters to safeguard their jobs and living standards. Many politicians are continuing to pay lip service to the importance of trade and open economies while advocating measures which will actually undermine the openness which is the only possible engine for restoring growth in the future.

Politicians do of course have to account to their voters. It would be foolish to ignore the political imperatives. However, political leaders have a responsibility to act in the long-term interests of their populations rather than responding to every short-term demand with a quick fix. They also have an opportunity at the forthcoming G20 Summit in London to agree between themselves some principles which will help limit the spread of the virus of protectionism.

At a minimum there are three kinds of measure they must agree. One is support for international as well as domestic lending by banks, including trade credit. International trade and investment flows cannot be sustained without the financial infrastructure which supports them.

The second concerns exchange rates whose movements have been too extreme, and are a source of uncertainty extremely detrimental to trade flows. Over time we will need to see a gradual revaluation of the Chinese currency, as a reduced US balance of payments deficit and reduced Chinese surplus will be needed to rebalance the global economy. Meanwhile, the G7 and G20 should signal their determination to prevent further sharp currency moves.

Finally, and of overwhelming importance, our political leaders must live up to their rhetoric on the need to conclude the Doha Development Round successfully this year. There is little sign so far that any negotiators are taking this pledge seriously, but governments must deliver on it in the coming months. The successful conclusion of the multilateral trade round will be a significant test of leadership, both in its direct impact and in its symbolism. Particular responsibility rests with two countries: the United States and India.

For I am not sure that the lessons of the 1930s have in reality been absorbed by our political leaders. They have poured taxpayer money into bank bailouts, increased spending programs and encouraged central banks to slash interest rates and ‘print money’. But there is no sign that they understand that all the nations of the world economy sink or swim together, and that history’s verdict on their management of this crisis will depend on looking outwards for our lifeboats.

This article first appeared in The Wall Street Journal.

The post Trade Obstacles will only prolong the Economic Crisis appeared first on Peter Sutherland.

Introduction

Making the case for trade liberalisation has always been easy in theory but an uphill struggle in practice. The tyranny of ‘common sense’ insists that exports are good, imports bad and the balance of trade should preferably be in surplus. Economists since David Hume have pointed out the illogic of the everyday notion that the strength of the nation depends on a constant current account surplus.i Sadly, logic still seems to do constant battle with an instinctive mercantilism, just as it has for centuries.

The logic of the case for freeing trade is compelling, to the extent that it is the one thing the great majority of economists seem to agree on. Trade across borders is an extension of the process of specialisation which lies at the heart of economic growth, with mutual benefits arising as each trading partner specialises wherever their comparative advantage lies. Indeed, this kind of specialisation seems fundamental to social organisation, while its geographic scope has extended steadily from its origins in the individual family, household and village until it is now a complex web of global arrangements.ii

Yet although the theoretical benefits of international trade have been well-understood since the days of Hume, Adam Smith and David Ricardo, and the experience of many decades tells us that growth in trade and economic growth have indeed gone hand in hand, trade liberalisation always was and still remains a hard sell. The benefits of trade lie in the expansion of imports: people are able to consume more, and in greater variety, than if all their needs had to be met through domestic production. Comparative advantage is the source of mutual benefits. But the policy debate is conducted entirely in terms of how much it will be possible to expand exports, of access to other markets, which turns trade into a zero-sum battle between competitor firms. Trade negotiations are therefore a morass of competing bids from producers, metaphorically looking over the shoulders of the negotiators on each side of the table.

Mercantilism of this kind has much longer and deeper roots in history than does trade theory. There is little to be gained from wishful thinking about the scope for shedding the light of reason on the dark corners of trade policy. Even so, the practical agenda for those of us who would like to see a successful new trade round has rarely seemed more challenging than it is now. Although the past five years of negotiations have in fact brought within reach an agreement on headline tariff numbers and the supporting commitments, the prospect of a successful conclusion to the round is uncertain. At present (February 2007) it appears extremely unlikely that the Democrat-led Congress will extend President Bush’s fast track negotiating authority, which expires mid-2007. Without an extension, the US almost certainly could not deliver Congressional approval of a trade agreement. If there is to be an agreement, it needs to be reached at least in outline within a month or two.

Where does this prospect of at best a last-minute outline agreement, and at worst complete failure, leave international trading arrangements? During the past five years, with the multilateral talks making little progress, we have seen a growing number of bilateral and regional trade agreements. Jagdish Bhagwati famously described the resulting tangle of arrangements as a ‘spaghetti bowl’, although ‘noodle bowl’ would be more apt.iii Further tangles would seem the inevitable consequence of a failed Doha Round, with all the unpredictability and unfairness which are inherent in a proliferation of differing bilateral deals between powerful and less powerful partners.

The consequences of failure in the multilateral trading system are too great for any of us to consider it with equanimity. It would seriously damage the environment for international trade and investment. I also believe that the gains from a successful multilateral trade round would be so large that we should anyway be moving towards a much bigger game within a few years. The WTO needs an ambitious new agenda. This will require some institutional and operational reforms in the WTO. More fundamentally, however, fresh momentum will require a widespread political commitment to important new goals.

Here, I want to set out the case for a renewed ambition for the WTO, and look at the weaknesses of the Doha round since its launch to draw some lessons about how to accomplish this.

The importance of multilateral trade liberalisation

Ever since the GATT was established in 1948 the growth in international trade and economic growth has been remarkable. Both for the countries rebuilding their economies after the Second World War and for countries such as Korea and Taiwan or more recently China, India and Brazil, making a successful transition from poverty to prosperity, the impact of international commerce has been central. The value of world merchandise exports rose from $58bn in 1948 and to over $1 trillion in 2005. Growth in exports has exceeded GDP growth in most years: during the past 10 years export growth was close to 6% while world GDP growth averaged 3%. In fact, growth in the volume of merchandise exports has averaged over 6% a year since 1950. When trade liberalisation efforts faltered, from 1973 up to 1990, both trade growth and global GDP growth slowed (respectively to 4% and a little over 2% a year on average). The impact of the Uruguay Round, along with NAFTA, the expansion of the EU and autonomous trade liberalisation in Asia (especially China) is apparent in the acceleration in trade growth after 1990. What’s more, developing countries’ share of total merchandise trade has been increasing rapidly, and stood at about a third in 2006.iv

Multinationals are playing an increasingly important role in the growth of trade. Their foreign direct investment has expanded substantially since 1990. The combined expansion of both trade and FDI reflects the splitting up of production chains and the global reallocation of the individual links in the production process. This process has been under way in manufacturing for a quarter of a century and manufacturing output is therefore radically globalised compared with the early 1980s. A third of merchandise trade now consists of trade in components, rather than finished goods, with the proportion still climbing, according to Unctad estimates.

This process of international specialisation is driven by the strategies of multinationals making use of new technologies and taking advantage of policy liberalisation. And it has become increasingly fine-grained. Thus any finished consumer good is no longer really ‘made in’ anywhere, as its components will typically have been designed, manufactured, processed, assembled and distributed in numerous countries. Individual countries possess a range of sometimes surprisingly narrow specialisations, reflecting the specific patterns and histories of multinationals’ relationships with certain suppliers or locations.

The rise in FDI started early in the 1980s due to a combination of factors, including the revaluation of the yen and policy changes, but in the initial stages the weaving of global supply chains primarily linked the OECD economies to each other. A particularly striking example of the scope and scale of these links is offered by the car industry. Japanese manufacturers have partnered with European and US car makers: Nissan and Renault have merged, Suzuki is partnered with GM and Mazda with Ford. Behind each of these global partnerships lies an extensive web of alliances and joint ventures between suppliers all the way upstream to the initial research and design. It is hard to imagine how a product could be more transnational than today’s automobile. It is hard to remember, too, just how contentious this network of relationships used to be, with frequent rows about local content and employment practices, even though one of the original motivations for Japanese manufacturers’ investments in European production facilities was the growing sensitivity of direct imports of Japanese cars to EU markets.

By the late 1980s, intra-EU investment due to the Single Market programme had become especially significant in driving cross-border investment growth. The European context is still driving the process forward. German car industry jobs have gone across the border to the Czech Republic or Poland. A cluster of car manufacturers has emerged in the Czech Republic, with annual volumes approaching a million vehicles, while Hungary has a cluster of engine makers, supplying the engines for one in every 25 cars sold in the world today, while a group of Polish producers specialise in transmission. Meanwhile in their home bases, the western European parent companies have specialised in design and marketing, the higher value activities in the production chain.

Developing countries have been the destination for a rising share of total FDI (although most of this has been concentrated in a handful of countries, mainly in Asia and notably China). The share of the OECD economies in the global stock of FDI has declined from 75% in 1980 to 70% in 2005, according to the Unctad figures, while the developing country share of FDI inflows had risen to over a third in 2003-2005.

The same process of the radical globalisation of supply chains is starting to get under way in services too, promising the potential for significant growth in services trade. The potential this holds for sustaining the continuing expansion of prosperity in countries which take part in this trade is enormous; there is huge scope for specialisation in areas of comparative advantage in the sector which makes up more than two thirds of the developed economies. Exports and imports of commercial services have been growing at 10% a year since 2000, and accounted for just under 20% of total world exports and imports in 2005. This is a highly significant trend. However, the reallocation of supply chains across borders in services is likely to present difficult new challenges. In countries such as the US and UK which are at the forefront of this process ‘off shoring’ has already had a political impact out of all proportion to the scale of the business being outsourced to other countries. Many areas of services are intrinsically politically sensitive, including utilities, education and health care. There is already vast misunderstanding of the scope and role of WTO rules in such areas. It will nevertheless be important for the expansion of services trade, with all the mutual benefits that will bring, that multilateral rules continue to set the framework for services trade and investment.

The point demonstrated by the emergence of these dense networks of trade and investment relationships around multinationals and their supply chains, whether in manufacturing or services, is that the traditional mercantilism of trade relations is less and less appropriate for the global economy. Going into the negotiating chamber to further the narrow interests of national corporate champions is not just ill-conceived but a positively incoherent approach. Even if the interests of national corporations could once sensibly have been conceived as a good proxy for the national interest in any meaningful sense, that is certainly no longer the case. The focus of trade negotiations now ought to be on the creation of a predictable and mutually beneficial environment for the expansion of trade and investment.

The proliferating number of bilateral trade deals do not accomplish this. They make the business environment more complex and unpredictable. A trade deal between two countries, even when they are major trading partners, is not helpful to a company with operations and a supply chain that span many countries. At worst it will complicate business decisions and distort investment, to the detriment of efficiency, and ultimately jobs and dividends. The importance of global multinational production networks is a key reason there needs to be a multilateral trade framework. The efficiency gains from production spanning many countries can only be fully realised if activity within the multinational group and its supply chain is not distorted by differential barriers to trade at the national level.

It is easy to see why bilateral deals have looked appealing, when multilateral talks have seemed hopelessly bogged down. Bilateral agreements are certainly easier than bargains struck amongst 150 partners. They look to offer political advantages, or at least that must be the perception, because bilateral deals are for the most part sealed with actual or desired political allies. In terms of domestic politics, they offer advantages to certain domestic exporting sectors or firms. They also create the scope to attach conditions on, say, labour rights in return for market access, which also frequently pleases domestic political lobbies, although such clauses mainly act as barriers to access for the poorer trading partner. Wider regional agreements do have some value to the extent that they can reciprocally grow trade between neighbouring countries, although this is less effective than a customs union like the EU. A regional arrangement in Africa could in principle have such merits.

But having said all this, there are compelling reasons why bilateral and regional trade agreements make a poor substitute for a multilateral trade round. Above all, preferential trading agreements erode the principle of non-discrimination whereby the best tariff and non-tariff conditions extended to any trading partner have to be extended to all. The preferential agreements thereby favour the powerful, as many weaker partners seeking access to a large market have discovered. They significantly distort trade away from the underlying comparative advantage, and they create rents which are almost always appropriated by special producer interests. They multiply the complexities associated with aspects such as rules of origin, technical regulations, health and safety standards and administrative arrangements. They are far harder to enforce than WTO rules; the WTO’s dispute resolution mechanisms are widely acknowledged to have been very effective.

Partial agreements outside the scope of the WTO lack the power of universal rules and legally binding commitments when it comes to two vital areas. One is the everyday regulation of commerce in a clear and predictable manner. WTO obligations create stability and predictability not only in terms of tariffs but also import licensing, customs valuations, border procedures, local content requirements, anti-dumping and all the other detailed aspects of exporting and importing. This is all rather dull detail, but it has the potential to impose substantial transactions costs which reduce trade growth.

A second key advantage of the multilateral framework is the impact of WTO obligations on the domestic reform process. Economic reform is extremely difficult to achieve politically, and external commitments have often been the means by which domestic opposition to reform has been overcome. It is quite clear in the case of China, for example, that the process of WTO negotiations was central to winning domestic political acceptance of economic reforms which would otherwise have taken far longer to achieve. China’s WTO membership was also the key which unlocked the flood of inward foreign direct investment to the country in recent years. It was always going to be an attractive destination, given the sheer size and potential growth of the economy, but without the assurance of China’s commitment to the multilateral regime, investors would not have been able to justify the risk of investment on the scale which has taken place.

As this example shows, and contrary to the arguments made by some campaigners, developing countries which have so far avoided a wholehearted commitment to WTO rules have the most to gain from trade liberalisation. It is clear that success breeds success in terms of FDI, and the vital step is the initial investment which can follow on from a policy commitment to WTO rules and continuing liberalisation. What’s more, the political economy effects of a successful round in terms of giving an impetus to domestic reforms must be counted amongst the gains, and they could be substantial in many cases. I am convinced that the WTO is probably the most effective tool that governments of poor nations have at their disposal, if only they can use it. They deserve all the technical assistance we can provide, but the political choice is for them to make.

It is unclear exactly how trade policy plays into politics, but to put it at its weakest, it is unlikely that deeper international integration through trade and the implementation of WTO rules will either weaken domestic policy reform or adversely affect international relations. Whilst we know from bitter historical experience that determined politicans can unpick peaceful trading links, with catastrophic economic and political consequences, it must surely be true that building trade will inhibit that kind of destructive politics by making it more costly.

What went wrong with Doha?

It is natural to ask why, if multilateral trade rounds have such decisive advantages, Doha has run into such trouble? There are several possible explanations, each making their own contribution. One of the most important is that there has been a key contradiction at the heart of the Doha Round from the start, and that was its construction as a ‘development’ round.

At the tail end of 2001, the world’s political leaders understandably wanted to make a statement about their commitment to both multilateralism and development. It was the combination of the two which was a mistake. The concept of a development round gave developing countries unrealistic expectations of what they could expect when the process of inevitable give and take within detailed negotiations got under way. No country ever got everything it wanted from a trade round, and the same was always going to be true for developing countries. One-way concessions were never going to be feasible; businesses and politicians in the developed countries would naturally look for commercial benefits from a deal. There are anyway other institutions far better placed to focus on economic development. The WTO’s job is to focus on the creation of a favourable enabling environment for international trade and investment to grow. While the expansion of trade is a necessary (if not sufficient) condition for economic growth, the specifics of a trade deal can not in themselves deliver development. Trade deals inevitably need to incorporate significant elements of reciprocity.

Trying to turn the Doha Round into a branch of international official development aid may therefore have doomed it from the start. The rhetoric was inherently flawed because, as a matter of arithmetic, developing countries could never have gained disproportionately from trade liberalisation as they trade relatively little. Trade liberalisation will always favour most those who already trade the most. The expansion of trade is part of the virtuous circle of economic growth, whereby success starts small and feeds on itself over time. Trade policy can no more offer the silver bullet solution to poverty and the failures of developing economies than can any other policy, whether aid or debt relief. So the nomenclature of a development round raised unfulfillable hopes from the very beginning.

What’s more, the decision to bill Doha as a development round opened the way for a damaging emphasis on the idea that developing countries deserve special treatment, in the sense that they should not be required to make the same commitments to WTO rules as the developed countries. Although it is clear that developing countries do not have adequate technical capacity to move forward at the same pace as developed countries across the whole range of WTO commitments, that is a different matter from arguing that it is undesirable for them to aim to meet those commitments in due course. The avoidance of commitment to WTO rules, under the rubric of ‘special and differential treatment’ is not a true development agenda. It has not had a favourable effect on growth rates in developing countries.

On the contrary, avoiding WTO commitments almost always operates against the long term economic interests of developing countries. It relieves their governments of the pressure to reform. It reduces their attractiveness to foreign direct investors. It slows the growth in their trade. Developing country governments should take on as many WTO commitments as they can, as quickly as they can, and their donors and the international institutions should tell them to do so plainly.

The decision to designate Doha as a development round not only perpetuated the false notion that differential treatment helps developing economies, it also invited the numerous development campaigners to find fault with the WTO negotiations. This would not have occurred in the same way without the scope for erroneous assumptions, due to the designation of the round, about the purpose and nature of trade negotiations. With hindsight, the furies unleashed in Seattle in December 1999 should have acted as an immediate signal to those of us hoping for a further successful round of liberalisation to plunge into a period of engagement with the WTO’s critics, in a bid to explain and educate. It should have given the EU pause for thought in its persistence in promoting an investment agreement, so soon after the anti-globalisation groups believed they had won a victory against the OECD’s proposed Multilateral Agreement on Investment. It should have led the WTO to postpone further talks until after a period of engagement and reflection on some areas of the negotiations which affected sensitive domestic policy issues.

There was at the same time a dismayingly feeble political response to the cacophony of the anti-globalisation and anti-WTO protests. This was as clear a signal as could be of the lack of underlying political support for the Doha Round. Politicians evidently could see no upside in backing the WTO and challenging its critics. Like every other institution, the WTO will have to learn how to hold a constructive debate with the wider public in the internet age. Any new negotiating initiative will become instantly known outside, and almost as instantly interpreted and relayed with additional spin, by interested parties, including lobby groups and campaigners of all types. This puts a real onus on the continuing effort to inform and educate the wider public about the WTO’s role and work. For it is the sentiments and proposals which emerge from the chain reaction of communication between the WTO and the general public which ultimately create the political realities determining countries’ negotiating positions. During the past few years, however, the result has been undue attention paid by politicians to ill-informed and unrepresentative special interests.

There are other culprits for the lack of success. An obvious one is that everyone was in too much of a rush. The Uruguay Round involved an enormous undertaking for all participants, a burden which was widely underestimated. To begin with there was inadequate technical assistance for those countries which needed it, although that has subsequently been corrected. The inbuilt agenda was challenging, requiring the negotiation from 2000 onwards on dossiers including agriculture, services and dispute settlement. Adding industrial market access would probably have been enough; again with hindsight, the EU was mistaken to insist on more at that stage, with its demand for an ambitious expansion of the agenda.

On one level, there has not been a Doha deal because too many of those involved did not want one, or at least not as much as they wanted to achieve other, possibly tactical, objectives. However, there is a deeper explanation for the failure of political will, which puts some responsibility on all of those who failed to engage in creating a more constructive climate of opinion. That includes the WTO itself, and leading politicians and negotiators who did want a positive outcome. The success of the Uruguay Round, negotiated between 1986 and 1993, depended on an extraordinary degree of political risk-taking, with some individuals willing to put their ministerial futures on the line. That political courage has been absent in the Doha talks.

Some responsibility also rests with multinational businesses, which for the most part were slow to engage with their critics, and slow set out the arguments for the positive impact of multilateral trade liberalisation. More open markets, predictable trade rules, consistent application of regulations and competition policy, all are vital for a buoyant investment climate. The failure of the Doha Round will seriously damage the trading and investment environment. It will put at stake the credibility of the multilateral trading system. While this is widely appreciated in business circles, many executives did not see making the case for Doha as one of their priorities, and indeed some industries have – as will always be the case – persistently lobbied for specific trade protections.

Next steps

Time is running out on Doha. It looks unlikely that the Democrat-dominated Congress will approve an extension of President Bush’s Fast Track authority; US bipartisanship in favour of free trade has come to an end. The French presidential elections this spring present another problematic aspect of the political context, as public attitudes in France towards trade liberalisation and globalisation will constrain politicians across the spectrum. The most we can hope for in the next few months is an agreement on key ‘modalities’, and even this may be over-optimistic.

This is all the more disheartening as there is so much already agreed. Take the fraught issue of agriculture, for example. There is a general impression of a yawning chasm between the major participants. The EU feels the extent of CAP reform is not appreciated by its trading partners, but has utterly failed to convince them that things have really changed for farmers in Europe. Further improvements in the EU’s agricultural offer would depend on concessions from others. Yet, despite this apparent impasse, there are key areas of agreement:

The EU has agreed, through WTO commitments on domestic farm support, to carry through the biggest reform of the Common Agricultural Policy in a generation. Once adopted in the WTO, it would be impossible to go back to massive trade-distorting subsidies;

WTO members have agreed to eliminate export subsidies and to discipline other unfair forms of export support by 2013;

The tariff cuts proposed by the G20 countries will open new export markets for agricultural products, albeit with still too many exceptions for ‘sensitive’ products.

There has been substantial progress in other areas too. Brazil, India and other countries have committed to bringing down their high WTO-guaranteed tariffs to close to the tariffs actually being applied, which is a very important signal of their commitment to reform and will bring much more predictability to doing business with those countries.

The trade-facilitation agreement is far advanced, and everyone recognises the importance of faster and more efficient customs clearing and processing procedures. High costs and administrative burdens hinder developing countries from getting their own products across their own borders, and a WTO agreement would also help firms in OECD countries see newly credible markets in developing countries. This is uncontroversial.

All of this could perhaps still form the basis of a meaningful framework agreement before mid-year.

Perhaps this suggestion will look delusionally optimistic by mid-2007. But whatever happens in the near future, we will all – in ministries, in business, in NGOs – need to reflect on what happens next. Nobody can believe that either the outcome (whatever it turns out to be) or the path by which it was reached has been satisfactory. The steps needed can be divided into two areas: practical measures to reform the WTO and its processes; and longer-term steps towards enhancing political commitment to the framework of multilateral trade.

Institutional reform

In early 2005 a Consultative Board which I chaired reported to the Director General on the future of the WTO as an institution.v It was obvious that the organization would have to review its structures and procedures. That remains the case, given that the credibility of the system has been endangered by the near-failure of the Doha Round. Some of our recommendations derive from the need to find manageable and effective negotiating structures.

The Doha Round has been a negotiation by formulae. The desire to make multilateral negotiations more precise and less ad hoc was understandable, but this approach has clearly been much less successful than the pragmatic bilateral give and take which characterised the Uruguay Round. In the case of Doha agriculture, non-agricultural market access and even services for a time were all subject to formulaic concessions covering every conceivable difference of interest. This led to very ambitious headline commitments, attenuated by a myriad of special conditions. The Uruguay Round, by contrast, involved broadly stated objectives met (or exceeded) through intensive bilateral bargaining. The outcomes were on the face of it less predictable, but the pragmatic approach got results. Absolute legal precision is not appropriate where there are immovable domestic political constraints or conflicts. The case for reintroducing greater pragmatism is overwhelming.

Equally important is the need to restore the role of an honest broker in the negotiations. The ‘Green Room’ system of earlier trade rounds was heartily disliked because it privileged the powerful and was too secretive. Yet we have ended up with an even worse situation whereby small groups of major countries have been meeting (everywhere but Geneva) and thereby excluding others from any influence at all in decision-making. After several years of struggling with inclusive negotiations between nearly 150 governments, the Doha Round ended up as a negotiation among just four, then six. It is not obvious that the group dynamic has been helpful. It is hard to believe the energy put into achieving group positions then sticking to them rigidly has helped the negotiations. Limited access meetings are necessary and appropriate in forging the basis for a wider consensus in the negotiations. At some stage in the process either the negotiating group chairperson or the Director General has to do the job of presenting a clean draft text, representing the closest approximation to a consensus position. This can be done with greater transparency, representativeness and accountability than the old Green Room system. The alternatives – either the present morass or a fait accompli presented by a handful of major players – are unacceptable.

Another key to an improvement in procedures is recognition that while transparency is all-important, universal participation is not equivalent to transparency. Equally, it is essential for some negotiations to be conducted in secret. The need for transparency applies to the issues and initial positions, and to the eventual outcomes, but there will always be a need for some negotiations to be private.

Ministerial engagement is also essential, and it came very late in the Doha process. The debate in Geneva is all too often rather narrow and technical, dominated by lawyers and specialist diplomats. The WTO needs to incorporate in its internal debates regular, broad political discussion and engagement with both ministers and the wider public which ultimately shapes the political reality within which any negotiations must take place. This additional dimension will have to be given an institutional shape, separate from the decision-making apparatus, within the WTO.

These principles are reflected in the specific recommendations in the Consultative Board’s report, which range from the timing and management of Ministerial Conferences of the WTO, and the appointment and role of the Director-General to the specific role of the secretariat in Geneva. Any programme of reforms must aim to achieve certain wider goals. One must be to ensure that that there is a continuing debate within the WTO about the nature of globalisation, as an ever-present backdrop to the contractual decision-making between WTO governments. WTO members need to work much harder to build a favourable climate of opinion – amongst pressure groups, the business community, legislatures and consumers.

Enhancing political commitment to multilateralism

Thinking about the institutional basis for political engagement leads to the question of the underlying degree of political commitment to the WTO. It is in the nature of commitment that it means nothing until it is demonstrated in testing conditions. After the fraught negotiations and failures of the Doha Round, with multilateralism in general strained to breaking point, we will see this year whether the key parties will affirm their commitment to the WTO. This will require changes in attitudes in a number of capitals:

The US has always been a driving force behind multilateral institutions, but the credibility of its commitment to the WTO is in doubt. The trading partners of the US must hope that the new Congress will take a more constructive and less confrontational approach to trade, which will depend on the lead given by key figures in the Democratic Party.

The EU needs to be able to negotiate on manufacturing and services without having to stay constantly sensitive to its farm lobby. Although Europe’s trading partners do not fully appreciate how far the EU has moved in reforming the Common Agricultural Policy, part of the reason lies in the continuing attention paid to the interests of the agricultural sector. A second challenge for the EU is for its politicians to advocate the benefits of trade liberalisation to voters, rather than taking the easy, populist route. Attitudes vary from country to country, but in too many cases there is a strong ‘Fortress Europe’ political instinct.

China has benefited enormously from its WTO membership, and has taken full advantage of it. So consumers elsewhere in the world have, in turn, benefited from the growth in exports of Chinese products. While China took an understandably low profile, as a new member, during the Doha Round, its leaders should now take a more active role.

The same can be said of Japan, whose profile is so low it is easy to forget that it remains the world’s third biggest exporter of services and fourth biggest exporter of goods. Tokyo is apparently concerned about the implications of the growth of the Chinese economy for its own strategic role in Asia. If so, an active engagement in the WTO will be all the more valuable.

Finally, Brazil and India must take much greater responsibility for the outcome of WTO negotiations. The same two developing countries dominated negotiations in the Uruguay Round: they are not innocents wandering the dangerous thickets of multilateral trade talks. They have a privileged position; as the largest amongst the developing countries, their views and interests have been given great weight. Yet both have appeared to be driven by doctrine and narrow self-interest, rather than a broader sense of the interests of either developing countries or the WTO membership as a whole.

More broadly, there must be a recognition that the true development agenda lies in making commitments to WTO rules, rather than in seeking exemptions from them under the rubric of ‘special and differential treatment’. This is just as true of NGOs as of developing country governments. The time has come to challenge the nonsense sometimes peddled by campaigners, because if politicians do not challenge the self-promoting interest groups they will find that the empty rhetoric becomes part of the political reality.

Institutional reform and political commitment will both be preconditions for the launch of some big new goals for the WTO. Whatever occurs this year, whatever the fate of the Doha Round, it is important to reaffirm an ambitious multilateral trade agenda. My suggestions would be setting a date for zero tariffs on goods, including agricultural goods; and re-opening agreements on investment and competition policy. In the aftermath of the struggles of the Doha Round, ambition is exactly what we need to reaffirm a commitment to multilateral trade.

Conclusions

The Doha Round negotiations, the first conducted under the auspices of the WTO, were an important test of the ability of the international community to govern a globalised world economy. It is a test we have largely failed so far, but one we can still pass within the existing institutional framework.

Effective leadership in trade requires a shared sense of potential losses in the event of failure as well as potential gains in the event of success. Without a real belief in the downside of failure, political leaders and legislators will not take domestic political risks, as they must in the compromises inevitable in a trade round. As a first step, post-Doha, all WTO members must be clear about the value of multilateralism, especially as we are sure to see still more bilateral and regional trade deals in the year ahead. I think their drawbacks will become more apparent, and governments will return to the multilateral framework. Sooner would be better than later.

It is also important that we are all clear about the relationships between trade liberalization, trade growth and development. Developing country governments – and campaign groups – must be realistic about the nature of trade negotiations and the direct results they can expect from further liberalization. Trade negotiations are not a tool for economic development.

Wholesale institutional change is extremely difficult and rarely occurs without a crisis triggering a widely-perceived need for change. The alternative route is a long, slow effort to build a consensus for reform. We do not – not yet at any rate – have the kind of crisis of geopolitics which would permit wholesale change in the institutional framework for governing international trade and investment. Nor is it necessary to go back to the drawing board. But it will be important to implement some institutional reforms of the WTO.

We should not for a moment forget the huge institutional achievement embodied in the WTO, a rules-based system for economic co-existence in which the powerful are significantly constrained. It is not an unrestrained charter for free trade, but an institution which, to the mutual benefit of its members, offers a structured way to expand trade predictably and fairly. It embodies what Keynes called the “healthy rules of mutual advantage and equal treatment”, principles he regarded as fundamental to the system of international economic management being built after the war. The same principles remain fundamental, and it is to affirm our commitment to them that we need to agree to a new and ambitious set of goals after Doha.

This article was first published in the World Economic Journal in 2007

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A bad deal is worse than no deal at all. On that, at least, U.S. congressmen and Washington’s Doha Round negotiators are at one with Friends of the Earth. But is no deal really better than a worthwhile—if unspectacular—deal? Failure to make a deal at Doha puts at risk the entire multilateral trading system that has served the world so well for half a century, and has been a poverty-reducing driver of globalization. We have reached a critical stage and, maybe, a hopeless one. Yet undeniably agreement is within reach and has been for some time. There are just two possible explanations for the failure to grasp it. The first is that politicians in some major trading countries are fearful of having to sell a compromise settlement, which may generate some heat in their capitals as elections approach. The second is that they are negotiating in good faith and want a deal, but are allowing the perfect to be the enemy of the good.

No trade round ever ended with all parties proclaiming they had secured everything they wanted. There is always a mixture of shared pain and shared benefit. That is the nature of negotiation. The pain is usually perceived rather than real and, in any event, is much less than the overall benefits. Deals were reached in the past partly because the collective interest warranted it—and in a global economy there are few more important shared interests than the health of the multilateral trading system.

The issue now is whether the foreseeable level of achievement makes sense, and could be the basis for a demonstration of political leadership not seen so far in the Doha Round. Certainly, to read some of the statements from U.S. officials and congressional representatives, one could only conclude that what is on the negotiating table—or signalled—is devoid of value. That is not the case. Indeed, the notion of “Doha-lite” is a crude misnomer; a handy, quotable means of avoiding a deal. What is on the table is not “lite.” Take the key political dossier of agriculture:

§ World Trade Organization members have all agreed to eliminate export subsidies by 2013, and to discipline other unfair forms of export support in the same timeframe. That would have been an unthinkable prospect a decade ago.

§ The European Union has agreed to cement the largest reform of its Common Agricultural Policy in a generation through WTO commitments on domestic farm support. Once adopted in the WTO, there will be no going back to massive trade-distorting farm subsidies. The U.S. will also have to make an effort here.

§ New markets for agricultural exporters will open up. Applying a tariff-cutting formula close to that proposed by the “G20” countries (like Brazil, Argentina, South Africa and other big agricultural exporters) would bring new opportunities. Yes, there are too many exceptional conditions. However, sensitive products that escape the mainstream cuts will nevertheless be subjected to quota enlargement and easier conditions within quotas. And bilateral bargaining could improve the attractiveness of the overall package for specific farm groups. Here, the EU must make the effort.

Of course, trade in industrial goods accounts for more jobs than agriculture in the U.S. and in other Organization for Economic Cooperation and Development countries. In this sector too, the gains to be made in market access are very substantial. The application of a “Swiss formula” (at the most likely acceptable level) for tariff reduction would, at a stroke, eliminate peaks in customs duties in industrial countries that have remained remarkably high, despite several trade rounds. That means lower prices in the shops for consumers—especially poor consumers—and cheaper inputs for the manufacturing industry. If we ever get past the current blockage, then there would be the potential bonus of zero-duty sectoral deals in industries of particular interest in the U.S. and Europe.

Now, it will be argued that while industrial countries stand to concede much on market access, the developing nations—and especially the big emerging markets—are giving too little. It is certainly the case that the flexibilities and exclusions from which they “benefit” have a real impact on the potential for opening their markets. Yet it was the U.S. and EU, in their anxiety to launch and move the round forward, that willingly and knowingly agreed on these flexibilities. Remember, this was intended to be the Development Agenda, even if the “special and differential treatment” provided to developing countries is arguably an anti-development agenda. In any event, it is no use coming back at this stage and claiming that the flexibilities were not intended for use.

Brazil and India must offer more than they have to date; but nobody should discount the importance of these and other countries committing to bring most of their high, WTO-guaranteed tariffs down close to the tariffs actually being applied. That commitment brings a degree of certainty and stability to the trading and investment environments that we have not seen before. Many U.S. and European firms will benefit. It represents a big change in attitude and means that the clock of economic reform cannot be turned back.

What else would be in the Doha package? The biggest single advance in the entire round would be a trade-facilitation agreement. This is far advanced already and is hardly controversial. Developed and developing countries recognize the benefits to be drawn from fast, efficient customs clearance and processing systems. Too many poor nations cannot compete in global markets because large administrative burdens and high costs make them unable to get their products across their own borders. For the same reasons, they handicap themselves in the race for inward investment. A WTO agreement would change that. And firms in OECD countries would see credible, new and improved markets as a result.

An agreement to end fishing subsidies remains a possibility, as does freeing up trade in environmental goods. Above all, the opportunities that could be generated by a more convincing negotiation on trade in services are being lost. Unfortunately, none of this can move while the big players refuse to face the endgame in setting the basic terms for concessions in agricultural and industrial goods.

Why is none of this happening? The political agenda is obvious and problematic: mid-term elections in the U.S., followed by presidential and national-assembly elections in France, are probably the most significant events. We cannot conclude the round in time for the expiration of “fast-track” U.S. negotiating authority next year. But a framework “modalities” deal could and should be agreed to, and quickly. Let’s be in no doubt: failure to do it means we will lose everything—and with that, the risk to the world economy is large. Bilateral trade agreements are a pathetic alternative.

One way forward now is for Pascal Lamy, WTO Director-General, to be told to put squarely on the table his best bets on the figures for tariff and subsidy reductions that would command—reluctant but perhaps relieved—consensus support among WTO members. If some still refuse, they will have much to answer for, as the multilateral trading system faces potential disintegration. And they will have robbed the world of a worthwhile trade deal. Good should be acceptable. Perfect is out of reach.

This article was first published in The Wall Street Journal

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