Oliver Griffiths

Why Doha. Why Now.

After nearly five years working on the latest round of WTO negotiations – the Doha Development Agenda - I thought I had seen every possible typo connected with the Qatari capital. Not so. A recent email produced the most amusing so far: the ‘Dodo Round’. Some would argue that is an apt description. They'd argue that Doha is a negotiation that has failed to get off the ground or evolve since its launch in 2001 to address today’s problems and is heading for extinction.  Some see Doha destined to become a historical curio like the famous flightless bird of Mauritius – the only multilateral trade round since the launch of the GATT in 1948 to fail to conclude. 

But the Dodo is making a comeback. Pressure is building for a meeting of Ministers in Geneva within the next two weeks, designed to agree a deal on agriculture and industrial goods. The reaction on the Hill and in the DC trade community? “Yeah right”. But Washington has consistently been down on the Doha Round. In July before the last Doha Ministerial meeting, few in Washington gave the meeting any chance of success, at the same time as the European Commission’s chief agriculture negotiator was buying a box of cigars to share around in Geneva in anticipation of an agreement. The result? A tantalizing near-miss in Geneva - and shock in Washington that a deal had so nearly been done. 

July now seems a lifetime away. We have been through a financial and economic maelstrom. The Dow at the end of July stood at 11,500.  It is now at 8,500. Since then Leaders at both the G20 and APEC summits have put their weight behind a Doha deal this year. The political wind is now behind the negotiation. This has elicited warnings to the US Administration both from business groups and Congress to hold firm and press other countries harder. So it is worth recalling five reasons why we all need this deal and need it now. 

First. A deal will give a boost to the global economy during difficult times measured in hundreds of billions of dollars.  Pascal Lamy, the WTO Director-General, argues that the deal on the table is worth considerably more than the Uruguay Round. Yes, its impact could have been bigger and we need to keep pressing for ambition. Yes, its effects won’t be instantaneous. But it is well worth having. And systemic arguments for a deal are even stronger than any dollar-and-cent valuation of new market access.  

Second, it will bind tariffs at low levels. At the moment there is often a significant gap between bound and applied tariffs.  Getting rid of that differential has real value. The provisional result of a study by the International Food Policy Research Institute is that the difference in trade volume between completing a Doha deal and countries putting tariffs back up to bound levels would be $2,110 bn. To put that figure in context, the total US trade volume (imports and exports) last year was $3,100 bn. Binding tariffs is the insurance policy against tariffs sliding back up – which is a real risk in today’s economic climate.

Third. A deal will cement the status of the WTO. The current financial crisis has underlined the need for effective global governance.  The WTO isn’t perfect but in many ways it is an exemplar for other international institutions. India and Brazil sit shoulder to shoulder with the EU and US in the inner negotiating groups. Each WTO Member has a real stake. The WTO allows countries to either negotiate or litigate away problems. If the negotiation channel fails, how viable is the WTO? 

Fourth. If not now, when? Why are the chances of a deal any better in, say, two years’ time? The word from Geneva is that we have got about as far as we can get at a technical level. What are left are the big political calls. International deals get done because of political attention and leadership. We have it now.   

Fifth. What happens if we don’t do a deal? A proliferation of free trade agreements. The worst distortions in the global trading system, such as agricultural subsidies, won’t be touched. And the poorest counties – for whom this round was started – pay the price.

Posted at 16:37 05 December 2008 by Oliver Griffiths  |  Comments[0]

Trade at the G20 Summit

As we all wrestle with policy responses to the financial crisis, one of the dangers is that failings in financial regulation are somehow seen as repudiating the economic and philosophical bases of Anglo-Saxon capitalism. But we need to be careful. How to regulate structured financial products - which, at least in their recent scope, are a new phenomenon - is a very different question from whether to keep borders open to international trade. The latter is an old debate and one that free traders feel that they have won twice before - first in the UK in the 1840s and second after the second world war. Comparisons between the current times and the Great Depression are already starting to feel hackneyed. But it is worth remembering how border restrictions ushered in by the Smoot-Hawley Tariff Act of 1930 stemmed trade flows and deepened the recession. US exports plummeted from $5bn in 1929 to $1.6bn in 1933.

I spoke with someone from the WTO Secretariat recently about my concerns of brand contamination between the financial crisis and trade liberalisation. His view was that, since its inception, the GATT / WTO has been about setting parameters for international trade, with many painful negotiations over the appropriate rules of the multilateral trade road, rather than letting unregulated markets rip.

Trade is not going to be at the forefront of this week's G20 Summit in Washington. But it will be on the agenda. And rightly so, given the importance of maintaining open markets in propelling us out of the economic downturn. Leaders can send a strong signal - to a sceptical world and to their own sceptical bureaucracies - about the importance of locking in a deal on the Doha Development Agenda this year. Some doubt how much good another exhortation on Doha can do. However, we were tantalisingly close to a deal in July and one thing that the intervening period has impressed on me is the value of tariffs being bound in Geneva. Reducing the level of bound tariffs has real value that we overlooked when the economic going was good. It is our insurance policy against protectionism. Senator Reed Smoot and Representative Willis Hawley didn't have the restraint of the WTO.

Posted at 13:02 13 November 2008 by Oliver Griffiths  |  Comments[0]

Carbon of Origin

Peter Mandelson made a short speech on trade and climate change in Oslo recently that is well worth a read. A couple of things sprang to mind for me.

In the first paragraph of the speech there's an (unconscious?) echo of one of Adam Smith's best quotes. Mandelson said: "A tomato grown and shipped to Europe from Senegal produces less carbon than a tomato grown in an artificially-heated greenhouse in Europe". Compare that to Smith in the Wealth of Nations: "By means of glasses, hotbeds and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about 30 times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of Claret and Burgundy in Scotland?" In defence of the carbon footprint of 18th century Scottish glasshouses, they were probably only solar powered.

It must be the case that a positive trade policy, based on liberalising markets for low carbon technologies, can help in addressing climate change. A negative trade policy designed to punish international free riders is more problematic. There is rightly a lot of interest in the idea of border adjustment measures, not least because the US Congress currently seems so set on the idea. Setting aside the issue of how compatible border adjustments would be with WTO rules (see a debate here if you're interested), any adjustment mechanism would be very difficult - and consequently costly - to operate. In practical terms, with the globalisation of supply chains and individual products now containing parts sourced from many countries, such measures would be a nightmare to implement. They are also likely to produce incentives to game the system. If you thought preferential rules of origin were complex, just you wait until carbon of origin. 

It also feels like using a sledgehammer to crack a nut. It may be axiomatic for some people that US cap and trade legislation without border protection would lead to whole swathes of US industry being wiped out by (especially Chinese) competition. But this hasn't been the experience in the EU under the Emissions Trading Scheme. And the evidence is that cap and trade legislation would have a strictly limited impact in the US too. That's not to belittle the impact on a couple of sectors - but there must be better ways to deal with the problem than overarching border defence. Some free permits perhaps?

My personal nightmare is that if we fail to complete the Doha Round in the near future, one tricky multilateral negotiation cross-fertilises with another tricky multilateral negotiation in the shape of the post-2012 climate change framework. That way madness lies.

Posted at 09:06 09 October 2008 by Oliver Griffiths  |  Comments[3]

Reform the WTO?

Sitting through speeches at trade association dinners is not normally a highlight of the job. I tend to find myself absorbed with the calculation of whether I have taken onboard enough coffee to stay awake but not so much that I will be consigned to hours at home reading whatever comes to hand before I can get to sleep. But Bruce Stokes speaking at the Coalition of Service Industries dinner last week was an honourable exception. One of the issues he touched on briefly was WTO reform. Bruce thought that we are likely to have a de facto pause on trade in the US in the coming years, which should allow us all to think big thoughts on the future of the WTO. 

Having a WTO that works well is important - but I have heard little discussion on it recently, despite the travails of the Doha negotiations. It's probably wrong to think about WTO reform in isolation. Gordon Brown gave an interesting speech at the Kennedy School of Government earlier in the year, looking at the need for reform of the international institutions to meet the challenges of the twenty-first century. What the IMF does will have important knock-on effects for the WTO - multilateral disciplines on currency exchange rates disciplines, for example, would reduce a number of pressures on the trading system. And then there's addressing climate change, which has to be an imperative for all the international institutions but raises a number of thorny trade questions.

Bruce floated the idea that we should reconsider the Most Favoured Nation provision (a cornerstone of the WTO, under which all countries benefit when another country reduces its tariffs). It feels like there is growing support in Washington - partly as a reaction to seven years of Doha negotiations - for creating a two-track system in the WTO, to allow plurilateral agreements among those prepared to liberalise deeply. A Cordell Hull Institute group looking at the world trading system seemed to be leaning this way at a seminar in April.

A two-track system feels to me like the end to multilateral trade rounds. At the moment that may seem a good idea to those who have spent the last seven years of their professional lives on Doha. But from a historical perspective it potentially slays the goose that has laid the golden egg. 

For those interested, the German Marshall Fund is hosting a lunchtime session on WTO reform at lunchtime on Friday, featuring Debra Steger from the University of Ottawa and a former senior negotiator for Canada at the WTO. There will be a couple of sessions on the future of the WTO at the WTO Public Forum in Geneva this week.

Posted at 09:57 26 September 2008 by Oliver Griffiths  |  Comments[0]