Don’t cry too much over the collapse of the Doha round of world trade talks. After seven years of negotiations, failure may be disappointing, but hardly a surprise.
Click here for a trial of breakingviews.com
Even at the outset in 2001, the stated goals of Doha—to redress the deficiencies of the previous Uruguay Round which had offered too little to developing countries—looked ambitious. In the context of 2008, it looked even more so. Demanding the US cut farm subsidies and poor countries cut tariffs in the midst of a global slowdown may make economic sense, but it was always going to test the limits of practical politics.
The immediate cost is small. On most estimates, a deal would have added only about 0.1% to global gross domestic product.
The real risk is that failure will fuel protectionism, both by undermining confidence in existing World Trade Organization rules and by providing the political climate for tariff hikes.
As things stand, most countries will be left with plenty of scope for unilateral increases in subsidies should commodity prices fall or political considerations demand it. That raises the spectre of global tit-for-tat tariff hikes similar to those triggered in the 1930s by the infamous US Smoot-Hawley Act. Even so, this does not feel like a Smoot-Hawley moment. Global trade has continued to boom over the last decade. The real surprise over the latest talks was how close the world came to a deal.
That leaves open the slim possibility Doha could even be revived under new political leadership. A new US president, eager to display global leadership in the midst of an economic crisis, should learn from America’s historic mistakes.