Despite Doha Collapse, Free Trade Is Marching On

This article appeared in the Daily Telegraph, UK on August 1, 2008.
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The Doha Round didn't die this week in Geneva. It died fiveyears ago in Cancun, when certain ministers determined that thenegotiations would be more valuable as a stage to dazzle domesticaudiences than as a means to an agreement. This week finallyprovided that clarity.

Although a successful Doha conclusion would have been welcome -if for nothing more than reaffirming nations' commitments to therules-based system and justifying seven years of time and expense -the Round's failure is not a big economic setback.Ironically, it could be the catalyst for further reforms andgreater trade flows.

Since 2001, as negotiators toiled in Geneva, Brussels, andWashington (or watched football in New Dehli), the world economyseems to have gotten on just fine. Trade flows increased by 70 percent and the global economy grew by 30 percent in real terms to $55trillion.

Much of that growth can be attributed to the emergence ofpreviously-slumbering economies, many of which were energised bydomestic reforms, including tariff reductions and improvements tocustoms and other border clearance procedures.

Economists at the World Bank believe these "trade facilitation"reforms could yield greater gains than further tariffliberalisation would.

Tariffs are trade barriers, but so are bureaucratic red tape,logistics bottlenecks, and customs corruption. Reforms inthese areas are already paying dividends for countries rich andpoor, but there is scope for greater improvement still.

If the United States were able to reduce its import and exportclearance procedure time by one day each, annual US trade would beexpected to increase by about $30 billion. That's 50 per cent moreannual trade than is attributed to the pending US-South Koreaagreement.

Contrary to the mercantilist rhetoric of reciprocity, tradeliberalisation is first and foremost a matter of domestic reform.That is why unilateral reforms have accounted for a greater shareof trade liberalisation than have reciprocal agreements during thepast quarter century.

Americans and Europeans don't need incentives from foreigners toabandon agricultural subsidies and barriers, and Indians andChinese don't need pressure from the West to allow foreign banksand telecommunications companies to operate freely in theircountries. The pressure to do the right thing will comesfrom within.

In a globalised economy charactersed by transnational productionprocesses and just in time supply chains, where countries arecompeting for investment and talent as much as they are formarkets, there is little choice but to liberalise. Removethe pretense of reciprocity and the liberalisation willcontinue.