Needed: One Push-Start to Doha Round

The Age

By John W. H. Denton
Chief Executive Officer, Corrs Chambers Westgarth

It is vital that the world's major trading nations make a fresh start early in 2006 and rediscover the will to achieve further beneficial trade reform.

Despite delivering great economic benefits over the second half of the 20th century, multilateral trade liberalisation is at this moment in danger of grinding to a halt.

I saw first-hand the present state of the Doha Round when I went to Hong Kong at the end of last year for the World Trade Organisation ministerial conference. There was virtually no progress at all on issues such as reducing tariffs on agricultural products, increasing market access for industrial products and the further liberalisation of trade in services. Decisions on the most substantial issues were again put off till another day. The latest deadline is April 30.

In the weeks ahead, the leading governments within the WTO face a choice. They can either lead us backwards into the wilderness, where trade barriers and other inward-looking forms of protection are stubbornly defended at great economic cost to growth and consumers.

In Hong Kong there were some worrying signs that European nations are looking to go down this path.

Alternatively, governments can make a fresh start and take the outward-looking step of agreeing to a further substantial round of trade liberalisation. It is not too late to prevent the Doha Round from becoming a lost opportunity.

The Business Council of Australia welcomes the initiative of Trade Minister Mark Vaile in Switzerland last weekend when he urged his counterparts to put forward substantial offers in key areas without waiting for others to act first.

Trade liberalisation requires strong, forward-looking leadership on the part of governments but it is worth every ounce of the effort required. History shows that nations that open up their economies by way of mutual agreement have enjoyed great and lasting economic and social benefits. While there is short-term pain in some areas, this is quickly outweighed by the gains.

Australia is a case in point. It is no coincidence that we have one of the most open economies in the world and are experiencing one of our longest periods of economic expansion. China is another example. Since the Chinese Government took the decision to make its economy more open it has sustained growth rates at close to 10 per cent a year.

There are four reasons why WTO nations should go down the path of further trade reform.

First, the removal of trade barriers results in economic efficiencies and gains in the form of increased economic growth. An economic analysis of existing trade barriers has found that, if they were reduced by just one-third, this would add more than $600 billion to the world economy. This would be a great boost to world economic growth well into the future.

Second, the Doha Round offers particular opportunities for underdeveloped nations. When this round began in 2001, all nations agreed to focus on opening up trade so that it would directly benefit developing nations. The World Bank has estimated that, if the Doha Round could result in freeing both agriculture and merchandise trade, 140 million people in the Asia-Pacific region might have the opportunity to escape poverty.

Third, economic growth results in increased income, greater business investment and more jobs.

Then there are flow-on benefits through more opportunities, higher incomes and access to cheaper products for families and individuals. Analysis conducted by the World Trade Organisation has found that on average Australian families save $300 every year in the cost of clothing compared with what the cost would have been if trade barriers had not been reduced on textiles, clothing and footwear.

As the import tariffs on cars made overseas have been reduced, Australian manufacturers have responded to the increased competition with innovation and cost reductions that are delivering better value to consumers. Australian consumers now enjoy the benefits of greater choice, better quality and lower real prices for cars compared with previous decades.

Finally, increased trade and economic prosperity fosters greater stability within communities and between nations. Under a system in which all countries agree to take steps to open up their economies, all those participating share in the benefits.

As a trading nation, Australia benefits from both exports and imports. Exports generate income for Australians. Equally, imports provide business with the inputs they need to compete more effectively.

There is much at stake in the Doha Round. This is why the Business Council believes it is so important that we urge WTO governments quickly to put the lack of substantial progress in Hong Kong to one side, and recommit in 2006 to reducing trade barriers further and opening up their markets to greater international trade.

The Business Council of Australia has joined our counterpart bodies in five other countries to form the World Business Leaders for Growth. Through this international undertaking, business leaders are working to shore up the courage of political leaders to conclude an effective and meaningful round before the end of 2006.