It is now three-and-a-half months since Pascal Lamy called his “time out” on the Doha negotiations. In late July it became obvious that several of the major players had hit a brick wall in terms of negotiating flexibility. In principle, what was visible on the table or believed to be in various back pockets was a deal of some considerable value. It would not have brought about a nirvana of open trade and fair competition globally, but it would have generated some important market access opportunities for most, if not all, players in the system. It would have injected some added value into the development dimension of world trade – especially through trade facilitation as well as Aid for Trade commitments.

But it was not to be. On the face of it, this package was condemned as just not ambitious enough; it was “Doha Lite”. For the United States, Europe, Japan and India were not doing enough to open agricultural markets and Brazil’s negotiators were holding back on services and industrial tariffs. For Europe, there was not enough from the Americans on winding back domestic farm subsidies to provide a counterweight of observable political pain for whatever the EU did on agricultural market access. There was also too little on the table from the emerging market leaders. Brazil wanted more on agriculture from both the US and the EU. India wanted something on services – a dossier barely touched so far by the farm-obsessed negotiations. Japan, along with its allies among the more protected agricultural economies thought too much had already been conceded. Most developing countries despaired of securing a real development package while the elephants argued about their farmers.

Now, those of you close to these negotiations will regard this résumé as a gross over-simplification. And it is. Of course, the finer structures of the Round are extremely complex. We could spend the day exploring them, and even then we would barely break the surface. I think, however, we would be wasting our time. The lingering near-death state of the Doha Round is not the result of a failure to resolve complex mathematical equations. That may be how it often appears – with the key dossiers all reduced to a series of precise formulae into which we need to plug a few figures to secure just the right balance of ambition and exception. And, hey presto, the deal is done.

No, the real question one keeps returning to is this. How can it be that an initiative which prevailing rhetoric from political leaders suggested was – and is – of such overwhelming importance can be so easily set aside? Recently, one has had the impression that perpetual life support is regarded by doctors and close family alike as very much the best option for the patient. We cannot turn off the machines because we have built up too many expectations of eventual recovery and good health; and it would not be attractive to admit failure. On the other hand resuscitation is tricky. For a start, the patient may not end up as vigorous as we would like. For a second, the family has to admit that the stricken one was always a somewhat difficult member of the clan – not especially easy to live with. And, of course, there are several impending marriages to attend to – much more fun but they do require a lot effort and that will leave few of us free to build the patient up again once he gets off the respirator.

Now, I appreciate that those of us who participated in the Uruguay Round can be real bores about it. At the risk of massed raised eyebrows, I will draw one brief lesson nonetheless. Namely, that for such a major negotiation to succeed there must be a generally and deeply perceived notion of potential loss if it were to fail. I do not feel that sense of potential loss right now. I hear a lot of wailing and chest beating; I hear the right things being said. The sound bites are always perfectly honed. Yet it is all rather sotto voce. The broader, noisier message is that politics is complicated and difficult, political capital limited and that there are a whole lot of tougher issues to face. How true, but then when was it otherwise?

I would only say this, if such an assessment of political priorities is going to force the world to relive the economic fragmentation that lead to the foundation of the GATT almost sixty years ago, then it will be a very high price to pay for the loss of the Doha Round. It will be far more of a loss than simply foregoing advantages from a few market access negotiations. If the DDA goes out of the window so, eventually, may the effective functioning of the multilateral trading system. It will not happen next month or next year, but insidiously and almost imperceptibly. Unchecked, it could reach the point where we will see huge loss of economic opportunity. We will risk irreconcilable commercial confrontation between nations and a foundering of growth even among the economic tigers at protectionism sets in. The poorest will remain where they are right now.

I would make a second minor point on the Uruguay Round to correct the idea that after the failure of the 1990 Ministerial meeting in Brussels negotiation was somehow put on ice for a year or more. In fact, just three months after Brussels the negotiations were re-launched as a result of a small refiguring of the European position on agriculture. While the Round continued to run into constant squalls – as would the Doha Round whenever it is resurrected – enough progress was made, quickly enough, for eventual success to again become a credible outcome.

If I say that, it is because negotiators today should not be kidding themselves that the Uruguay Round provides a precedent for lengthy periods of “time out”. As the dithering goes on so the credibility of the Round diminishes and the ceiling of tolerable political heat for adjustments in negotiating positions falls with it. Failure will begin to look a respectable, cost-free, option.

For the moment, all eyes are on Washington. We shall have to wait and see whether or not the change of control of Congress will make a significant difference to the Doha Round. We can only hope that some measure of bipartisanship will return to the Capitol on trade issues. That helped us in the Uruguay Round but has been largely absent ever since. With or without a bipartisan Congress, however, all Presidents want to sign trade agreements, preferably with the minimum of constraints. That, at least, will not change.

The United States has control of two factors that will dominate the negotiating environment in Geneva in the coming six months. First, will there be a new farm bill that readjusts domestic support programs or will the existing legislation, from 2002, simply be rolled over for a period? That will be a political judgement for the Administration and Congressional business managers. Budgetary pressures and the expectation of dispute settlement rulings in the WTO will have an influence, no doubt. All should become clearer early next year, and with that some clarification of the scope for movement in the US negotiating position.

A second political judgement for the Administration will be whether to seek renewed Trade Promotion Authority – or “fast track”, as we used to call it. That will be a tough call. Viewed from where we are now, renewal is not an outcome that Doha negotiators have any right to rely on.

Knowing that we need more than six months to conclude the negotiations, is an absence of TPA a terminal condition? Not at all. It is too often forgotten in Geneva that the US President is always free to negotiate on trade. What is necessary, for the confidence and peace-of-mind of negotiating partners, is that the President has fast-track Congressional Authority to conclude and present trade agreements.

Thus, as with any major trade negotiation, the prospects for the Doha Round come down to a question of political will and vision. If that will and vision does not exist now, will it in six months? I cannot tell. However, if there is a will to conclude then there are two basic scenarios.

The first is for a short-term settlement, with the essentials worked out by next spring. This will encapsulate the terms that are politically bearable as of now. That means taking what was on the table as of last July with the addition of what was quietly promised at that time and some modest extra efforts here and there. Such a package would include respectable services commitments, some minor rulemaking, a big agreement on trade facilitation, all supported by Aid for Trade. It would not revolutionize global trade but would be well worth having and would deliver some creditable development goals. And it would show that multilateralism can deliver, before all credibility is lost.

The second option is to continue pushing relentlessly for a more and more ambitious deal; notably on the market access side. I believe that to choose such an option would be a mistake. First, there is no guarantee of ultimate success – and a big risk of failure, particularly if a new US President changes tack in 2009. Second, in the best of circumstances there would probably be no deal before 2010. Third, the Doha agenda is important, but narrow. It is already five years old. There is other business to be done in the multilateral system. There is a case to be made that we never really analysed or understood what a coherent trade-development agenda should look like. Investment and competition policy were ditched from Doha, but in the longer term they probably should be part of the system. Is the environmental agenda appropriate and sufficient? Is the institution in need of a re-think? We really cannot wait another five years before we begin thinking seriously about these issues. Allowing the Doha Round to drag on endlessly robs us all of a chance to reassess.

The fourth concern I have about the high-ambition, high-risk, open-ended option is that of proliferating bilateral and regional trade deals. This is not a threat; it is a promise and an existing reality. For a start, over 200 regional trade arrangements have been notified to the WTO or the GATT. These comprise customs unions, free-trade agreements, preferential arrangements benefiting developing countries and services agreements.

Now, I think we can be confident that some part of this increasingly frenetic FTA negotiating activity will come to nothing. Few agreements that are tied up will be genuine FTAs in the sense of meeting GATT/WTO criteria and none will be properly reviewed, as should be the case, by the WTO. Many will founder over agriculture in just the same way the Doha Round has been brought to its knees. Most will only succeed in diverting trade rather than creating it. A good number will impose non-trade criteria on market access benefits. A few may provide useful advances in investment conditions and cooperation on competition policy. The least-developed countries will be largely left out; their fragile competitive position as exporters will be undermined as preferences disappear in favour of more efficient suppliers and their attraction as investment locations will diminish alongside.

I think you get my drift. But if not, let me add the all-important business perspective. This is a world in which the complications and costs of doing business are going to rise. Every one of these preferential trade agreements will have its own peculiarities; notably, rules of origin for assessing whether or not preferential duties apply or not. It is true that large companies can survive such conditions – and where they cannot they will make the appropriate investment decisions. But when we look at the plight of small and medium-size enterprises seeking to enter, let alone thrive in, global markets, we must ask what chances they will have. Whether you call it a regulatory spaghetti bowl or a noodle bowl, it is just not business or development friendly. In a recent speech, Martin Broughton, Chairman of British Airways, said: “A proliferation of bilateral agreements is exactly what we face in the field of aviation. And let me tell you, it isn’t pretty…”.

So, let’s have a Transatlantic Free-Trade Area, just to help things along! In the past, this notion has tended to be a sort of Pavlovian reaction to crises in the GATT and WTO. It has found more reflection in the UK than most other EU members, perhaps (and I say this with some sadness) because this country still feels more naturally drawn to the large continent across the Atlantic than to that just across the Channel. In any event, the fragility of the Doha Round is beginning to generate new calls for a TAFTA. I note that there is no obvious interest in the Commission and the option is not included in its October trade policy strategy paper.

My preceding comments will have made clear why I regard a TAFTA as a fundamentally bad idea. I could only add two points forcibly. First, the divisions on agriculture that divide Washington and Brussels in the Doha Round will not be resolved in a TAFTA. Second, the very high existing trade and investment flows across the North Atlantic would not suggest great added value in a major FTA exercise. The real question is what can be done between the US and EU that would make sense. What might be realizable, in a reasonable timeframe, and not have detrimental effects either on other economies or on the multilateral trading system in general and the Doha Round in particular. Indeed, what can be done that would serve as a positive model that might one day be emulated in a multilateral context.

First, of course, we must recognize that we are not working on a blank slate. The Transatlantic Business Dialogue has been working away diligently, for some years, on the nuts and bolts of trade and investment conditions. It has focused on regulatory and technical barriers, and made progress. Emphasising innovation, it has recently selected healthcare as a trial sector in which enhanced regulatory cooperation could draw significant mutual benefits. In parallel it is looking to promote intellectual property protection, stimulate joint public-private partnerships in research and foster innovation clusters. Energy efficiency is also on the table.

This all makes eminently good sense. But it does not alter the fact that effective solutions on agricultural subsidies, market opening, GMOs and food health and safety issues will only have durable force if cemented within multilateral commitments. It does not alter the fact that the big ticket disputes – like those on Airbus/Boeing, GMOs, Foreign Sales Corporations and steel safeguards – are no more likely to be resolved in an FTA than big ticket disputes involving Canada, Mexico and the US within the NAFTA machinery. Above all, in today’s globalized economy, no preferential trade arrangement – even between the two elephants of world trade – can hold together without a credible and efficient multilateral trading system in the background.

So, come what may on the bilateral front, the leaders of the transatlantic community must never be deflected from their focus on the WTO. If they do not make it work, then little else will work.

The day job must remain the Doha Round. The patient must be woken in the coming weeks and it is the responsibility of Washington and Brussels to do the waking. Thereafter, we need a sense of ambition, for sure, but the medicine needs to be taken with a strong dose of realism and practicality. The Doha Round will not give us everything we ever wanted; and it was never likely to. Once again, let us not make the best the enemy of the good.