Bridges • Volume 14 • Number 2 • May 2010

Wanted: A New Model for Multilateralism

In the January issue of Bridges, Robert Howse advanced some thoughtful proposals for getting the Doha Round moving again. But I doubt they will be enough to speed it up. Indeed, they could even slow it down further, if that were possible. The reason is that they focus on the symptoms, rather than the basic causes, of inertia.

by Guy de Jonquières

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Professor Howse suggests progress could be made by setting aside ‘harder’ issues on the agenda. But he does not say, nor is it obvious, which are the ‘easier’ ones on which agreements are ripe for the picking.

If agriculture, the toughest nut of all, were off the table, would the G-20 be more flexible on industrial tariffs? If NAMA were sidelined, would the US and EU be any readier to cut their agricultural subsidies and trade barriers? And would either scenario make a services deal more likely? These questions answer themselves.

It is also optimistic to suppose that ‘coalitions of the willing’ can break the logjam. Who, exactly, are the willing, and around which issues will they coalesce? Enthusiasts of plurilaterals point to the success of the WTO talks on telecommunications, IT tariffs and financial services in the 1990s. However, they confuse the cart with the horse.

The telecoms deal happened because technological change had undermined the industry’s traditional business model; the IT agreement because enough Asian developing economies dependent on global electronics production chains realised that taxing essential imported inputs was senseless; and the financial services talks were doomed to succeed because failure could have further damaged market confidence during Asia’s economic crisis. But in what other areas today are events as conducive to WTO agreements?

To achieve credibility and momentum, any plurilateral coalition would probably need, as a minimum, to include the US, the EU, China, India, Brazil and Japan, and some smaller developing economies. But it is far easier to count the points on which those members’ national priorities and interests diverge than those that unite them.

That goes to the heart of the problem. It is not just that political attention is currently distracted from the WTO: so it has been for much of the past decade. Nor simply that the organisation’s agenda and negotiating mechanics have lagged behind the times. The deeper truth is that the WTO, and multilateralism more generally, have yet to come to terms with massive shifts in the geo-political and economic landscape.

It is a curious paradox that it took a hegemon to create and sustain the multilateral trade system. However, the end of the Cold War weakened both the overarching strategic rationale for the US grand design and American voters’ willingness to support it. Meanwhile, first Europe, then Japan and now the Brics have emerged to challenge or rival US pre-eminence.

Yet no other country has stepped up to replace US global leadership. Nor is any likely to soon. The EU lacks the necessary political cohesion and clout. Neither China nor India, both preoccupied with pressing business at home, wants the costs and responsibilities that genuine international leadership entails. Japan is equally reticent.

As a result, influence has diffused among different power centres; none can bend others to its will, yet multilateral progress requires the consent or, at least, the acquiescence, of each. That has set up awkward tensions between global institutions’ legitimacy and their decision-making efficiency. Even relatively minor players now flex muscles and thwart consensus with impunity.

Furthermore, while increasingly assertive of their own rights, governments everywhere appear wary of submitting to new rules set from outside. That used to be a US prerogative. Now it has gone global. It was evident at the Copenhagen climate summit and remains so in the Doha talks, where the US and EU are as unwilling to accept legally enforceable WTO ceilings on their existing farm subsidies as are developing countries to bind their tariffs at applied levels.

These are powerful trends. Lack of clear global leadership, divergent national priorities, international rivalry and, in some quarters, growing antipathy to globalisation cannot be tackled by trade diplomats shuffling agendas and procedures in Geneva. If multilateralism is to work better, the remedies must be sought in and between national capitals.

That is one of the strongest arguments for completing the Doha Round, even if the best that can be expected is a modest outcome. The longer it drags on, the greater the temptation for governments to use it as an excuse for not confronting the underlying problems that bedevil the WTO. Only once it is over will we know if they are serious about doing so.

Guy de Jonquières is Senior Fellow at the European Centre for International Political Economy and former World Trade Editor of The Financial Times.