Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Prime Minister Stephen Harper shakes hands with Japan's Prime Minister Naoto Kan at the G8 summit in Deauville, France. (ANDREW WINNING/Andrew Winning/Reuters)
Prime Minister Stephen Harper shakes hands with Japan's Prime Minister Naoto Kan at the G8 summit in Deauville, France. (ANDREW WINNING/Andrew Winning/Reuters)

Doha: Time to give up and go home? Add to ...

The leaders of the Group of Eight countries expressed "great concern" about the "unsatisfactory progress" of the Doha round of global trade talks.

Whoops. Small correction: The members of the G8 who also are members of the World Trade Organization "expressed great concern about the unsatisfactory progress in the Doha Development Agenda negotiations." Russia's membership in the G8 club has done little to help it gain entry to the WTO, making it one of the few economies of significance that sits outside the mainstream of global trade. But as a result, Russia played no role in the failure to get a deal on Doha after more than nine years of negotiating.

More related to this story

"We reiterate our commitment to advance the process of trade liberalization and rule-making to strengthen the multilateral system, and are ready to explore all negotiating options to bring the Doha round to a conclusion including with regard to the priorities of the least developed countries in line with the Doha mandate," said the leaders of the United States, Japan, Germany, Britain, France, Italy and Canada in their declaration at the end of their two-day summit in Deauville, France on Friday.

Bearing down and "exploring all negotiation options" is one way to respond to the Doha stalemate. There is another strategy that is gaining currency: Give up and go home.

This has been the position of some on the political left from the beginning, of course. But more recently, it is the argument of Susan Schwab, the former U.S. Trade Representative who served under President George W. Bush between 2003 and 2006. Just in case you need a reminder, Mr. Bush wasn't exactly a left-winger and wasn't known to surround himself with those who opposed free markets.

Ms. Schwab caused a stir in policy circles with an article in Foreign Affairs that begins: "It is time for the international community to recognize that the Doha Round is dead." She followed up her article this week with a speech at the Peterson Institute for International Economics in Washington.

Her contention is that negotiations have become so protracted that they are a "dam" to new approaches to trade. Ms. Schwab would send negotiators to Geneva for one last attempt. "If you can't get it done in two weeks, give up," she said at the Peterson event on Tuesday. Her overarching concern is that by sticking with a doomed process, countries are eroding faith in multi-lateral free-trade agreements. At this stage, it's best to take a breather, let hurt feelings heal and start again down the road - maybe in 2013 after elections in countries such as the United States and France.

The failure to conclude Doha is an inconvenience for global leaders who are otherwise busy congratulating themselves on their commitment to free trade. The Group of 20 nations routinely congratulate themselves for resisting the impulse to resort to trade barriers during the financial crisis and global recession. A report by the WTO, Organization for Economic Co-operation and Development and the United Nations suggests that commitment is slipping a bit, but not in a dramatic way.

But there's reason to question just how much credit politicians deserve for this. A new paper by analysts at the Carnegie Endowment for International Peace argues that it has become fairly easy for politicians to resist protectionist pressures. Why? Because there is very little protectionist pressure.

The Carnegie paper suggests that it is time to rethink the political economy of trade. In the 1930s, imports and exports combined to represent 15 per cent of global gross domestic product. Today, trade accounts for 60 per cent of global GDP.

Countries no longer make finished products; they make components of finished products. These supply chains significantly reduce any benefit that could be gained by limiting imports. In many cases, imports levies only would hurt domestic manufacturers, who import components for international branches. Retailers - think Wal-Mart - also count on imports. Unlike decades past, the biggest push is to open borders, not close them.

The Carnegie poses the question: Is protectionism dead? That might be taking it too far. Gary Hufbauer of the Peterson Institute argues that non-tariff measures, such as demands for quality inspections and other paperwork, are a growing problem.

And then of course there's Doha. As Mr. Hufbauer said at an event to mark the release of the Carnegie paper this week, if the members of the G20 really had morphed into committed free trades during the recession, they would have completed negotiations.

Follow on Twitter: @CarmichaelKevin

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories