“Trade-plus”: Development and the Politics of the Doha Round
By Susan Sechler and Joe Guinan
This article is taken from Bread for the World Institute's 2005 annual report on the state of world hunger, Strengthening Rural Communities. Download the section below in pdf 
or order the entire report from our online store.
If the Doha Round at the WTO is to live up to its designation as a development round, much will have to happen that is beyond the WTO’s usual scope. Trade alone will not do it.
“Trade-plus” is needed if there is to be any serious assault on global hunger and poverty. The challenge is to fill in the details of what “plus” entails, and then to build the understanding and the political coalitions necessary to drive a genuinely pro-poor liberalization agenda on trade. This agenda will have many components, but its central principle must be the mainstreaming of development issues into the processes and rules by which the world conducts international trade.
The Doha Part of the Equation
The 9/11 attacks on the United States stimulated urgent discussions in the advanced industrial countries about the need for genuine development, with pressure coming from the wider, non-agricultural business sector to deal with agriculture—read as: “get it out of the way”—so they could move forward on the broader trade liberalization agenda. The price of a new trade agreement was the creation of a “policy space” within the trading system to address the development needs of poor countries. Thus, the Doha “Development Round” was born in 2001.
But the developed world, mainly the United States and EU, had underestimated the anger in the developing countries at the outcome of the Uruguay Round (the final round of the General Agreement on Trade and Tariffs, or GATT, the WTO’s predecessor). These countries felt that they were steamrolled in the Uruguay Round on agriculture and on some other issues such as intellectual property rights. Promises had been made and not kept; expected benefits did not materialize.
But the Uruguay Round (1986-94) made one change of great significance for the developing countries. It abandoned the old “two-tier” approach in which the significant negotiations—and resulting obligations—took place between developed countries. This left developing countries, whose markets were too small to matter to the industrial powers, largely out of the loop. The “Single Undertaking” of the WTO formally put all members on an equal footing and gave developing countries a voice in the system. Together, their numbers make them a potentially formidable bloc.
The EU and United States simply did not anticipate the effect this would have on negotiations. Their attempts to initiate a “Millennium Round” of talks given over exclusively to further liberalization were repeatedly blocked. Even once the Doha Round had been launched, the rich countries underestimated the effects of anger over what was seen as their hypocrisy in preaching free trade while maintaining their own agricultural subsidies. In fact, these subsidies have actually increased since the Uruguay Round.
At the ministerial meeting in Cancún, Mexico, in September 2003, an unlikely coalition of developing countries rallied against rich countries—primarily the United States and the EU. This group, the G20, included big, middle-income, new-market countries such as Brazil, India and South Africa, as well as the very poorest countries in Africa such as Benin, Mali, Chad and Burkina Faso. The Cancún meeting collapsed, and the Doha Round was stalemated until, in July 2004, the WTO General Council successfully negotiated a new framework agreement—the “July Package”—putting the Doha development agenda back on track.
Barriers to a Successful Doha Round
The truth is that despite the designation of the Doha Round as a “development round,” no real political or substantive preparations were made to ensure that there would be a pro-development outcome. Neither policymakers nor countries nor international institutions were really prepared for it. Whether the players will adapt and the necessary pieces be assembled is now a matter of politics.
Trade delegations are typically made up of civil servants, trade lawyers and occasionally members of the business community, representative of business interests and other top elites in their countries. The narrow scope of participation limits ideas, relationships and knowledge. These limitations are compounded by those of the WTO process itself. The negotiations are inordinately complex and arcane, and the size of the organization—with 148 member countries—makes it cumbersome and bureaucratic. Moreover, the practice of convening smaller groups of countries in the “Green Room” for side negotiations contributes to an atmosphere of suspicion and resentment.
Hovering over these problems are even larger questions of political authority and legitimacy. In the past, under the GATT, trade negotiations were largely confined to removing obstacles to trade at the borders such as tariffs and market access barriers. The WTO, created in 1995 after the completion of the GATT’s Uruguay Round, broadened the mandate of the institutions of the global trading system. Today, in order to make trade work, it is necessary to reach past the border and go deep into issues of domestic politics. Trade has therefore become highly sensitive politically within member countries with decisions taken at the WTO having an impact on vital domestic interests such as employment, education, public health, technological development, flows of capital and labor, and, perhaps most important of all, national sovereignty and democratic self-governance.
Finally, there is the problem of leadership in the WTO. During the GATT—a much more mercantilist system—the United States and Europe worked together and, for better or for worse, showed the determination and leadership necessary to drive the process towards trade liberalization. In the current context, in which there has been progress toward a more rules-based multilateral trading system, there is a vacuum in leadership with the United States and EU either preoccupied with their own parochial interests or at odds over nuisance distractions such as beef hormones, Foreign Sales Corporations and the Boeing/Airbus dispute.
The G20 now has the mantle of leadership by default, but the fault lines in that coalition are apparent: the interests of its leading members--big, middle-income developing countries with burgeoning markets--are far from identical with those of its small and poor members who do not have much to offer trading partners by way of market access concessions.
The timeframe for the WTO negotiations (as well as significant upcoming political events such as the debate over the U.S. Farm Bill) means that interventions that would have a chance for any kind of successful impact on the process need to happen very soon. The WTO Ministerial in Hong Kong in December 2005 may well be a make or break moment and much of the important political groundwork needs to have been laid beforehand.
Domestic Considerations
Some signs on the horizon suggest that powerful farm interests may be about to loosen their grip on U.S. politics and some real reform may become possible. First, there are more powerful constituencies that genuinely want reform. But the most significant pressures for driving farm policy reform may stem from the budget deficit and building fiscal crisis. Given the fiscal crunch making its way through the federal budget process, budget issues should play a role in the Farm Bill debate this time around.
Negotiations on the next Farm Bill are scheduled for 2007, but insiders believe that “field hearings” will be held in the spring of 2005. The reason for acceleration is the recent WTO ruling in favor of Brazil, which charged that U.S. cotton subsidies violate WTO rules.
U.S. Trade Promotion Authority (TPA) is up for renewal in 2005; if not renewed, it will expire in 2007 at the latest. TPA transfers the Constitutional authority Congress has to set the terms of international trade over to the President. Last time around, TPA played a role in allowing politicians representing farm interests to pack the 2002 Farm Bill with ad hoc payments and then push it through by threatening to block TPA unless President Bush signed it into law. What gets included and excluded from the TPA package could make a big difference to the success of the development goals of the Doha Round.
The received wisdom is that the American public is anti-trade and anti-trade-liberalization. But the German Marshall Fund’s 2004 survey, Reconciling Trade and Poverty Reduction, shows that the public actually dislikes “protectionism” and supports trade if part of the package is adequate “protection” for the losers. Thus far, however, “protection” has been largely inadequate: underfunded and badly conceived training programs set against a backdrop of limited unemployment benefits, no portable health insurance and poor secondary education systems in the rural areas hardest hit by the loss of low-wage jobs. Add to the mix immigration policy, labor standards, the environment and anger at the WTO and NAFTA, and the debate over TPA could be a hot one.
Trade and Hunger
It is now widely agreed that trade is crucial to the fight against global poverty and hunger. The potential benefits to developing countries from increased trade far surpass anything possible through aid alone. Estimates vary but liberalizing global trade could generate $2.8 trillion dollars in new economic activity by 2015. The IMF has said that annual gains could be as high as $680 billion, two thirds of which would go to developed countries and one third to developing countries.
If trade is important for developing countries, agricultural trade is particularly important for the poor within those countries. More than two-thirds of the world’s poor live in rural areas, and in many developing countries agriculture accounts for half of all employment. Increases in agricultural trade will feed multiplier effects throughout the rural economies of developing countries. Each additional dollar of rural income generates another $3 in economic activity through increased demand for goods and services across agricultural-related industries as well as in the non-farm sector. Thus, agriculture is at the heart of the Doha Round.
The Doha Round goal of enabling the rural poor to share in the benefits of expanding trade and integrated global markets is well aligned with the UN Millennium Development Goals. Increased trade is essential to both, but is not, by itself, sufficient. “Trade-plus” is needed.
At its most basic level in the multilateral trading system, “trade-plus” means continuing to take into account the needs and concerns of poor countries, a fairly standard approach to what is termed “special and differential treatment,” involving technical assistance, capacity building and flexible implementation. At quite another level it may mean fundamental reform of the multilateral trading system—specifically the WTO—so that a comprehensive approach to development is woven into the fabric and development issues are mainstreamed into the rules and processes by which the world conducts its international trade.
With development and investment policies to help the poor in developing countries grow and purchase what they need, the huge latent demand in those countries could be unleashed. Economic growth under these conditions can set off a continuous loop in which increased trade raises incomes, increases productivity and fosters greater consumption, stimulating further effective demand for imports from the developed world.
To achieve this, political leaders—in particular those in the United States and EU—must be pressed to step in and move the politics of trade negotiations to the high table, away from trade functionaries and ministers of agriculture to those who have the responsibility for the bigger picture and the longer term and have an understanding of what it is that is actually at stake.
How do we get there? Education, pressure, new ideas and making connections between people and organizations. Advocacy groups must pave the way, working first for a broader public understanding of the issues, and second, for the political coalitions that will move sound long-term solutions forward.
Susan Sechler is the U.S. Director of the Trade & Development Program at the German Marshall Fund of the United States, where Joe Guinan is a Program Associate.
