Can a global trade deal be rescued?

Container ShipCongratulations to Roberto Azevedo, who, it has just been announced, will take over from Pascal Lamy as the head of the World Trade Organisation later this year. Azevedo, a Brazilian diplomat, beat off Herminio Blanco, a former Mexican finance minister who had the backing of many developed countries.

The most obvious and pressing task facing Azevedo is to rescue the so-called Doha Round of world trade talks, which stalled in 2008 and have made little progress since.

In the absence of global progress, a number of bilateral trade talks have sprung up, most recently between the European Union and United States. However, as the Economist noted recently, those talks are already in trouble:

Right now, the pact is in trouble, beset by small-mindedness and mutual suspicion. This is madness. A free-trade pact has never had such support in the chancelleries of Europe, as well as in the West Wing of the White House. It is backed by compelling logic. Yet supporters also know that time is desperately short: this political window may close in just 18 months, says a European official at the heart of the process. This must be done swiftly, on “one tank of gas”, says a senior American.

The risks all involve thinking small. European governments recently sent trade officials to Brussels to a first meeting on their offer to America. Led by the French, envoys from southern and eastern Europe called for a long list of red lines. These covered the usual stuff: agriculture, public services and “audio-visual” content (eg, bungs for French cinéastes, airtime quotas to keep Flemish hip-hop on the radio). That appals Team Obama, though not because Americans are blameless. From financial services to air passenger services, America maintains lots of barriers to trade. The real fear is that if Europe starts setting out red lines, trade sceptics in America will draw their own. What’s more, American trade bureaucrats are “Eeyoreish” and petty, says an insider: a trade pact with Colombia is the summit of their ambition. Then there is Congress to worry about.

Liberals in Europe should be pushing hard to make a deal possible – the benefits to a sluggish European economy could be significant.

However, there are some who view such bilateral agreements not as a route to, or complimentary of, a multilateral deal, but an impediment. Marcel Fratzscher, writing in the FT recently, was one:

Furthermore, bilateralism undermines the few functioning global policy institutions. The WTO has been a success story by being a neutral, even-handed and fairly effective judge on trade disputes. Multilateral rules lose their relevance in a world where bilateral agreements come to dominate.

Why is multilateralism so important for trade? For one, because it gives all nations an equal chance to benefit from globalisation. The risk of trade protectionism and trade wars is another argument in favour of a multilateral approach. Global Trade Alert, an independent academic initiative, has found that trade protectionism is not a ghost of the past but rose sharply in the wake of the 2008-09 financial crisis. Who in the future is going to ensure consistency and a level playing field among the multitude of bilateral trade agreements in the world? And who will be the neutral arbiter when nations clash over conflicting bilateral agreements?

In any case, emerging markets are already the main trading partner for both the EU and US, while their bilateral trade has been shrinking. Take Germany – only 7 per cent of its total exports are going to the US, while 25 per cent go to Asia. The best response to the relative decline of the EU and US is multilateral engagement, not seclusion.

That, though, seems to me overly idealistic. If politics is the art of the possible, trade agreements are its embodiment. If anything such bilateral deals can demonstrate to those countries still sceptical why free trade is so important. And if they fail to do so, well at least there has been a net improvement in trade rather than nothing.

Roberto Azevedo knows the issues well, having been involved with the WTO since its formation in 1995, and having had the backing of the developing countries who are most sceptical of a global agreement may well be a good choice to get the talks moving again.

As internationalists and long-standing supporters of free trade, liberals should use his appointment as a chance to make the case for a worldwide free trade agreement, and for bilateral ones too. Trade is good, for people and for economies, and for those still living in dire poverty in the world is the only sustainable way to improve their lives. Liberals should get behind Roberto Azevedo and make an agreement happen.

* Nick Thornsby is a day editor at Lib Dem Voice.

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3 Comments

  • Hobhouse
    A confidence in the ability to innovate?
    This makes no reference to an evidence-based approach.
    There are plenty of ideas in this world which sound good on paper but which fail in practice. The way to decide between them is not ideology but facts and evidence

  • Alex Macfie 12th May '13 - 7:30pm

    Perhaps the biggest problem with bilateral and plurilateral trade agreements is policy laundering, due to the secretive nature of their negotiations. ACTA was rightly thrown out in the European Parliament, but we must not allow negotiators (whether EU or the other party’s) to sneak in the same sort of obligations about intellectual property laws into a general trade agreement. This must surely be a red line; we must reject any treaty that is being used as a laundry for policies that negotiators know would otherwise be considered unacceptable.

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