Real Trade Reform Begins After Doha

06 October 2009

The Australian Financial Review

By John W.H. Denton

Chairman, BCA Global Engagement Task Force

Trade liberalisation is the missing piece of the global policy response to the financial crisis and recession. Trade ministers met in India recently and signalled the best we can hope for is a conclusion to the World Trade Organisation’s Doha round negotiations by the end of next year. The delay is proving costly for Australia and for most other countries. 

First, trading nations don’t gain the benefit of increased access to global markets, or the contribution this makes to business confidence and to providing a better deal for consumers.  For countries in Asia where growth is strongly linked to exports, further liberalisation is especially important. Given four of Australia’s top six trading partners are in Asia, opening up foreign markets is just as important to our prospects.

Second, in the absence of momentum to open up markets, trade barriers have been raised rather than lowered. The United States has just imposed a 35 per cent increase in tariffs on tyres made in China. Recently we have also seen the European Union subject to claims that anti-dumping duties of up to 24 per cent on Chinese steel wire rods were really aimed at protecting European producers.

These decisions mean the US and the EU are sending the wrong signal to other nations at the wrong time. Not surprisingly, China has hinted at retaliation on both fronts. Whatever form it takes, protectionism is damaging to growth and jobs.

There is also a third cost from ongoing delays to trade liberalisation that has not been given as much attention. The all or nothing approach to the Doha negotiations prevents WTO members using flexibility and innovation to liberalise specialised areas of trade. Such flexibility could be unlocked if the formal round were concluded and out of the way.

A way forward beyond Doha was demonstrated by the events of recent history.

In 1996 and 1997, soon after the conclusion of Doha’s predecessor, the Uruguay round, a series of specialised negotiations were held and concluded. One concerned global trade in telecommunications services, another involved information technology, and a further agreement related to banking, insurance, securities and financial services. These were concluded without the constraints of a formal cross-sectoral round of negotiations.

Looking beyond the conclusion of the Doha round in 2010 or 2011, there are important and emerging areas where specialised negotiations might be conducted within the WTO, and where the Australian government could take a leading role.

For instance, there is a need to improve the consistency of rules relating to investment, including protection for investors. This would contribute to greater confidence and stability of investment. It is not directly being negotiated in the Doha round. Another example is electronic commerce and financial services, where there is an opportunity for governments to improve the consistency of national legislation applicable to e-commerce, and to trade in financial information and advice. 

Greater consistency would reduce business costs and enable further growth and development.

Environmental goods and services is an emerging field of trade. It would benefit from improved mutual recognition of qualifications, and a common approach to standards and accreditation. Negotiations might also address tariffs that continue to apply to environmental goods.

A confined set of negotiations on one specific subject is more likely to reduce barriers to trade in areas that can be overlooked within a comprehensive round.

But before specialised negotiations can take place, the Doha negotiations must be successfully brought to an end. This remains the conventional way to drive broad-based liberalisation.

Leadership from the United States, and in particular from President Barack Obama, will be a critical factor. We also need a much greater commitment to trade liberalisation from the EU, China, India and Brazil, together with all the members of the G20.

Business recognises the benefits of the multilateral system, but it will lose its value if it remains at a standstill. Concluding the Doha round, and then quickly moving to open up new and emerging areas of international commerce, are priority issues for the private sector.



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