What Explains the Failure of the DOHA Trade Negotiations? What lessons can the African Continental Free Trade Area (AfCFTA) learn from the failure of the Doha Trade Negotiations?
By Godfrey Onen Omony Kerali
Introduction.
The Doha trade round was declared dead by some scholars when deadlines were missed several times until 2006 when the agreement came to an impasse. And as the trade negotiations stayed dormant for 7 years from 2008, the Doha Rounds finally came to an end in 2015 during the Nairobi ministerial meeting when trade ministers from more than 160 countries failed to agree that they should keep the negotiations going(Financial Times December 2015, New York Times January 2016, Lester, 2016).
This paper aims to explain the Doha trade round based on liberal trade theory/liberalism principles; the failure of the Doha trade round and lessons learned, and conclusion.
Theoretical Framework.
To understand the Doha Trade Round, it is imperative to understand the establishment of World Trade Organization (WTO) under which the Doha operated, and the establishment of the Doha Trade Round all of which are based on the principles of liberal trade theory.
Liberal Trade Theory advocates a free market approach with minimal or no political interference from states, to ensure efficient allocation of resources, and maximum growth. It emphasizes trade liberalization which is the removal of restrictions or barriers to trade tariffs, such as duties and surcharges, and non-tariff barriers, such as licensing rules and quotas between states in order to promote free trade. Liberalism also advocates for international cooperation in matters regarding trade, economic governance and dispute resolution. However, it is also significant to note that, liberal trade theory does not critique the basic underlying assumptions of the liberal paradigm as it does not for instance enquire into the origin of comparative advantage such as how different cost structures are initially established. Liberal trade theory is also prescriptive as it suggests that the welfare of individual states and that of the world would improve if countries produce goods and services based on their comparative advantage(O’Brien & Williams 2016).
The Doha Trade Round.
The Doha Trade Round was the latest round of trade negotiations among the WTO membership commenced in November 2001. Its aim was to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules in order to facilitate increased global trade. The main aim of the DOHA Trade Negotiations was to facilitate the trade in agricultural products of develpoing countries dependent on the export of agricultural products. The Doha began with a ministerial-level meeting in Doha, Qatar from 9 November to 14 November 14, 2001, trade ministers from member countries met in Doha during which they agreed to undertake a new round of multilateral trade negotiations. Because the Doha Trade Round also incorporated development as the core issue in contrast to the previous rounds and the greater influence of developing countries in setting the plan of action at Doha, the Doha Trade Round came to be known aslo as The Doha Development Agenda(DDA). The Doha Declaration set a deadline for conclusion of agreements on all trade negotiations by January 2005. The developed countries represented by the the United States (US), European Union (EU), Canada, and Japan, while the major developing and emerging countries were represented mainly by China, Brazil, India, and South Africa. However, progress of the trade negotiations was stalled after the breakdown of the July 2008 negotiations. Despite the breakdown of negotiations, there were repeated attempts to revive the talks, but without success. Intense negotiations, mostly between the US, China, and India, were held at the end of 2008 seeking agreement on negotiation modalities, an impasse which was not resolved. During the Doha Trade Round, there were negotiations in specific areas of importance notably market access for agriculture, services, and non-agricultural market access (NAMA) products; trade-related aspects of intellectual property; Special and Differential Treatment (S&D); trade facilitation; WTO rules; improvements to Dispute Settlement Understanding. These negotiations were held under the auspices of subsequent ministerial meetings took place in Doha, Qatar in 2001,Cancún, Mexico in 2003, Hong Kong in 2005, Geneva, Switzerland in 2008, Bali in 2013, and the last one in Nairobi in 2015 (WTO,2022). Hence, the aims of the Doha Trade Round and the thematic areas it covers follows the principles of liberal trade theory /liberalism described in the introduction section as it advocates for removal of barriers to trade, promotes international cooperation in order to facilitate free t
Thematic Areas of Doha Trade Round.
Agriculture was one of the most important areas of negotiation because it makes up the backbone of many developing and least developed countries, and it is important for global food security. It is important to note that, negotiations on agriculture began as early as 2000 under Article 20 of the WTO Agriculture Agreement (WTO,2022) which had been required under the last round of multilateral trade negotiations in the Uruguay Round of Talk, (1986-1994). However, some members, including the United States, wanted to expand the agriculture and services talks to allow trade-offs in order to achieve greater trade liberalization. Under agriculture, negotiation was aimed at reducing agricultural trade barriers, the elimination of agricultural export subsidies, cuts in trade-distorting domestic subsidies, major improvements in market access for manufactured goods from developed countries, and more open trade in services (Congressional Research Service Report, 2012, Patnaik, J. K., & Patnaik, J. K., 2007, Schwab, 2011, WTO,2022). The Doha trade round aimed to eliminate agricultural export subsidies by 2013 (Ayub Mahmood 2007).
To implement Non-Agricultural Products Market Access (NAMA), trade ministers negotiated to reduce or eliminate tariffs on industrial or primary products, with particular focus on tariff peaks(tariff rates above 15% often to protect sensitive products from competition). The negotiation further aimed to reduce the incidence of non-tariff barriers such as import licensing, quotas and other quantitative import restrictions, conformity assessment procedures, and technical barriers to trade especially for developing and least-developed countries (Congressional Research Service Report, 2012, Wise & Studer, 2016: 158). While in the liberalization of services trade, negotiations were held on labour mobility from the developing countries to developed countries so as to achieve considerable benefits such as high-tech and managerial skills in order to achieve human capital development.
The negotiation on Trade-related aspects of intellectual property (TRIPS) was centred on the licensing of medicines and patent protection which involved the delicate balancing of interests between the pharmaceutical companies in developed member countries that held patents on medicines, on one side, and the public health needs in developing countries. The Doha declaration on the TRIPS Agreement and Public Health recognized that WTO Members with insufficient or no manufacturing capabilities in the pharmaceutical industry could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement (Congressional Research Service Report, 2012).
As the WTO General Agreement on Trade in Services (GATS) commits member countries to enter into negotiations on specific issues and to enter into successive rounds of negotiations to progressively liberalize trade in services (WTO,2022), the negotiations on Special and Differential Treatment (S&D) for developing countries was taken up at the Doha ministerial meeting and declared that special and differential treatment is an integral part of the WTO agreement as this would give developing countries longer periods for implementing agreements, require that all WTO member countries to safeguard the trade interests of developing countries, and provide the much needed finance to build the infrastructure, institutions and mechanisms needed to handle disputes and implement technical standards in developing countries (Amadeo, 2021).
Trade facilitation in the Doha trade round was part of the Singapore issue during the 1996 ministerial meeting(transparency in government procurement, trade facilitation, trade and investment, and trade and competition) that was pushed at successive ministerial meetings by Japan and Korea, and the European Union, but was opposed by many developing countries, while the United States accepted some or all of the issues but at various times, and prefered negotiation on market access. The trade facilitation issue aimed at improving the efficiency of international trade, the harmonization and streamlining of customs procedures such as duplicate documentation requirements, processing delays, and unequally enforced importation procedures, rules and requirements in member countries(Congressional Research Service Report, 2012, WTO,2022). The ministerial declaration also recognized the need and urgency for enhanced technical support and capacity building in this area(WTO,2022).
In negotiating the WTO rules, the Doha Round focussed on clarifying and improving discipline under the WTO agreements on antidumping and subsidies. Of particular interest was fisheries subsidies which is of utmost importance to developing countries and least-developed countries. This was taken up by a group of 15 developed and developing countries notably Brazil, Chile, Colombia, Costa Rica, Hong Kong, Israel, Japan, Mexico, Norway, Singapore, South Korea, Switzerland, Taiwan, Thailand, and Turkey as they opposed the use of antidumping actions by the United States and other developed nations as disguised protectionism . Although they made numerous proposals to reduce the antidumping and amount of duties, this required a change in U.S. laws which was beyond the capacity of the Doha Round of Trade (Congressional Research Service Report, 2012).
In negotiating improvements to Dispute Settlement Understanding(DSU),members agreed that negotiations should be based on the work already done with room for any additional recommendations for better settlement of trade disputes(Congressional Research Service Report, 2012, Amadeo, 2021). They aimed to agree on improvements and clarifications in May 2003, at which time steps shall be taken to ensure that the results enter into force as soon as possible(Congressional Research Service Report, 2012).
Why did the Doha trade round collapse?
In explaining the merciful death of the Doha Round of Trade negotiations, this paper will refer to the thematic areas of negotiation, and the ministerial meetings between 2001 and 2015 during which the negotiations were held. Although member countries agreed they would reach a single, comprehensive agreement containing a balance of concessions at the end of the negotiations, the negotiations proceeded at a slow pace and characterized by lack of progress on important issues and persistent disagreement between developed and developing countries on nearly every aspect of the agenda. Although few issues were resolved, they were mostly in agriculture. Important to note is that, the negotiation of modalities, or the methods and formulas by which negotiations are conducted, remained elusive many years after the beginning of the round of negotiaitons. The stalled, dragged on and leading to the failure of the Doha negotiation. The failure of the Doha negotiation is attributed to the following factors despite the intense and promising negotiations during Doha ministerial conference (2001),Cancun ministerial conference (2003),Hong Kong Ministerial Meeting (2005), Geneva Ministerial Meeting (2008), Bali Ministerial Meeting (2013),Nairobi Ministerial Meeting (2015).
The members were not able to resolve their differences over the Singapore issues (transparency in government procurement, trade facilitation, trade and investment, and trade and competition) backed Japan and Korea, and the European Union(EU), and strongly opposed by many developing countries, while the United States prefered negotiation on market access. Although the EU reduced some if its demands, several developing countries still refused any consideration of the issues(Congressional Research Service Report, 2012).
The wide divide between developing and developed countries across all areas of negotiation was a major obstacle. A good example was the U.S and EU agricultural proposals and that of the Group of 20, that had differently diverging approaches to special and differential treatment. The EU and developing countries wanted the US to reduce it’s domestic subsidies to $ 22.5 billion or below, although the EU prefered a US subsidies to stand at $ 15 billion or even less (Ayub Mahmood, 2007). These led to the eventual collapse of Cancun ministerial conference (September 10-14, 2003) as it ended without agreement on a framework to guide future trade negotiations, and the agreed deadline of January 1, 2005 was not be met.
The 20-20- 20 proposal for the United States to accept a ceiling on domestic farm subsidies under $20 billion, a 54% minimum average cut to developed country agricultural tariffs, and a tariff ceiling of 20% for developing country industrial tariffs was met with criticism by all sides and was not adopted at the Geneva meetings. This led to the collapse of the Geneva ministerial conference. Lack of consensus by developed and developing countries on agreement on modalities to submit tariff schedules for agriculture and NAMA, the revised services offers, and a consolidated texts on rules and trade facilitation led to the collapse of Hong Kong ministerial conference as the deadline of end of 2006 conclude all negotiations was not met(Congressional Research Service Report, 2012).
The negotiations on Special and Differential Treatment (S&D) was also split along a developing countries – developed countries line. SDT Treatment has become a more complex issue and area of contention in recent years as a number of developing countries have become increasingly competitive such that both industrialized developed countries and the developing countries have become more reluctant to consider Singapore, South Korea, Brazil, China, and India as developing countries. This led to developed countries less willing to offer SDT to major developing countries. Even some landlocked and small developing countries wanted to create additional categories of SDT for lower-income countries which are not always accepted by developed countries. This explains why it was difficult to reach consensus on STDs. As a result, two deadlines were missed for making significant recommendations on SDT. And to benefit from SDT gains, developing countries needed to offer concessions on other issue areas in return. Hence with the suspension of Doha Round negotiations, the status of these proposed STD became uncertain thereby leading to the failure of the Doha Trade Round (The International Centre for Trade and Sustainable Development (ICTSD) and the International Institute for Sustainable Development (IISD), February 25, 2003: 1-4, Wise & Studer, 2016: 155).
The Doha negotiation on trade-related aspects of intellectual property failed because the U.S. argued that the TRIPS draft did not include enough protections against possible misuse of compulsory licenses. The US also sought a limit on the diseases that would be covered by the TRIPS draft, but rejected by other countries refused. The United States further opposed the TRIPS draft’s promised not to bring up a dispute case against developing countries that issued compulsory licenses for certain medicines. Developed countries further argued that more advanced developing countries could use the generic medicines to develop their own pharmaceutical industries despite the proposal for countries to voluntarily opt-out or promise not to use compulsory licensing(Congressional Research Service Report, 2012).
The weight of different and diverging state interests, and the frustration caused by the Doha stalemate forced member countries to negotiate bilateral and regional trade agreements because of their ease of negotiation: the United States in particular, pursued a series of bilateral talks with advanced developing countries aimed at determining what specific market access commitments those countries could offer thereby leaving developing countries without any offer to negotiate and re-negotiate. Hence the United States concluded the Trans-Pacific Partnership with Japan, Vietnam and nine other countries; the US and the European Union negotiated the Transatlantic Trade and Investment Partnership; while China (a non-party to the Trans-Pacific Partnership), signed many bilateral and regional trade agreements and proposed a 16-country trade agreements that included India and Japan in. This led to the failure of the Doha Trade Round (New York Times, 2016). It can be argued that, the Doha Trade Round killed itself by dragging on negotiations for a long time and not meeting deadlines.
Failure to make fundamental concessions by developed countries espcially US and the EU countries and developing countries like China and India contributed to the failure of the Doha Trade Round. After the inception of the Doha trade round, the US and EU committed to trade agreements that promoted development in poorer countries without demanding them to reduce import barriers at the same level as industrialized developed countries. But as developing countries, particularly China’s and India’s exports exceeded their imports, rich countries started to demand China and India to lower their import barriers and cut subsidies to their farmers. This was rejected by both China and India and both insisted on sticking with the original principles. This caused huge disagreements between developed countries and China and India thereby resulting in stalemates and the eventual failure of the Doha Trade Round ( New York Times, 2016).
Domestic Politics. The wealthy developed countries faced the furry of strong domestic lobbies in agriculture, textiles, steel, and other older sectors of the economy, thereby creating pressure for trade distorting restrictions of various kinds including subsidies, tariffs, quotas, voluntary export restraints, and the like. Because of these political constraints, governments of developed countries were not able to sustain processes of economic liberalization needed to facilitate international trade (Ravenhill, 2017:54) as they prioritized their political survival to the Doha trade round.
The geopolitical and geoeconomic tension between rising and powerful member states also takes credit for the failure of the Doha Trade Round. The stalemate in the Doha Round of multilateral trade negotiations reflected the rising tensions between old and new powers and the challenges of continuity and shift in the international order. The Doha Trade Round epitomized the new geopolitics of multilateralism. The difficulty of reaching a consensus on trade negotiations after many years was a symptom and an early warning of the emerging and widening global governance gap in the international system (Baracuhy, 2012). The rise of China, Brazil and India has had an impact on the WTO negotiations as the resultant geoeconomic change has affected the negotiating structure and processes of the Doha Trade Round such that, the US can no longer shape the international trading regime to suit it’s objectives and interests. Hence the impasse between the old and rising powers continued to generate tensions and frustrations in the Doha Trade Round leading to the failure of the negotiation (Baracuhy, 2012). The trade war between the US and China characterized by imposition and ncounter-imposition of tariffs also brought the Doha Trade Round to a stalemate as each side never wanted to reduce tariffs in the round of negotiations, that would benefit the other. However, despite the geopolitical and geoeconomic tension between old and rising power, some progress were still made in the Doha Trade Round. This is seen in the continued round of talks during the Bali ministerial conference in 2013, and Nairobi ministerial conference in 2015.
However, despite the failure of the Doha Trade Round, developing countries in particular need WTO-monitored comprehensive multilateral trade agreements in order to secure global market access for their products to enable them earn more export revenue to increase their GDP and fund their development projects. WTO-monitored comprehensive multilateral services trade agreements would also enhance their capacity building and promote human capital development. Perhaps the Doha Trade Round was called off prematurely by the WTO.
What Lessons can The African Continental Free Trade Area (AfCFTA) learn the failure of the Doha Trade Negotiations?
Following the collpase of the Doha Trade Negotiations, The African Continental Free Trade Area (AfCFTA) can pick a leaf from the achievements and failure of the Doha Trade Round as some some lessons were drawn. The Doha did not have a clear direction and a better sense of which elements of global governance to cover, and which are covered by other organizations. This applies not just to agriculture, but to a wide range of economic policy areas. The Doha Agenda was complex to run and manage as it involved a set of many developed and developing countries with different geopolitical and geoeconomic interests, different political and economic systems bundled together in the Doha structure, with complex set of tariff formulas, nonn-tariff formulas (Tarasofsky and Palmer, 2006). Perhaps the Doha Agenda would not have failed if all the member countries were liberal democracies, with similar economic systems based on liberal principles as it would have made the governing of the organization slightly easier as it would be easier to reach consensus. The failure of the Doha Trade Negotiations is there a lesson for The African Continental Free Trade Area (AfCFTA) to negotiate both bilateral and multilateral trade deals as a single entity with one voice with pre-determined terms favourbale to the member countries.
Conclusion
This paper shows that the Doha Trade Round failed because of a combination of several reasons both within and beyond the control of ministerial talks and the WTO; the talks stalled and the negotiations failed under the weight of disagreements, geopolitical and geoeconomic tensions. Nevertheless some progress was made and Doha trade round lasted from 2001-2015 showing some resilience of the WTO and Doha Agenda and the success of liberal principles because trade was liberalized and the volume of trade increased although not as much as if the trade negotiations had not taken long and stalled, and even after the terrorist attack on the USA in november 2001 and during the global financial crisis of 2008 as resources and attention were diverted towards the global fight against international terrorism and bailing out the global economy.
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