A gloomy start to trade talks

A gloomy start to trade talks

Trade talks pessimism is a well-known phenomenon. As weary negotiators converge to Geneva in the next few days to rekindle the Doha Round, they must wonder if their efforts will be another futile sally.

The Doha Round (also called a development round) was supposed to give developing countries a taste of benefits from trade liberalization. A countless number of meetings, ministerial conferences and talks later, there is no light at the end of the tunnel. Disputes of agricultural subsidies by rich nations (the US in particular), access to non-agricultural products in developing countries, implementation issues and a long list of complaints have ensured a deadlock.

Can this trade round be completed successfully? There are two parts to that answer: economic and political. In economic terms, there is no better time than now to push for trade liberalization. On the one hand, countries such as India are reeling under inflation due to supply constraints. They can do with a dose of cheap imports. On the other hand, there are supply-rich nations (the US and European Union being two examples) that could reap benefits from trade in agricultural commodities. This is not a zero sum game: In India, demand for food is only going to increase as the income levels of the poor rise, while rich country farmers will always need market outlets. Similar stories can found elsewhere in the world.

Politically, of course, the situation is very different from 2001 when the Doha Round negotiations were started. The US is on a much weaker wicket. Domestically, the country is in the midst of a no-holds-barred, scorched earth, fight between rival parties which see no bigger enemy than each other. A trade deal is unlikely to pass through the Senate. China, the other pillar of the global economy, too is unlikely to play ball. Its outlook turns mercantilist with every passing day (what else does one call a country with a stonemasoned exchange rate?). The Chinese formula is simple: exports yes, imports no. This worked well before the 2008-09 financial crash, but not any more.

There is no easy way out of this mismatch between economics and politics. Part of the answer lies in the time lag between the two: Politics is usually about surviving for the next few months, while poverty and hunger have been around for a while. People can always wait.

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