Over the weekend, a subtle shift occurred in the focus of trade. Perhaps two stories in this morning's FT sum it up. The first
was an announcement that some may see as the death knell of the Doha Round - "WTO admits defeat on Doha deadline":
Pascal Lamy, director-general of the World Trade Organisation, will on Monday ask WTO members to work for a crucial deal on farm and industrial goods by early summer, after key trading powers acknowledged their self-imposed April 30 deadline was out of reach.
The meeting on Friday, attended by about 25 rich and poor WTO members agreed to call off plans for ministerial talks this week.
A new "deadline" was set for this summer. But that makes it very difficult to get an agreement in the necessary final form to submit to Congress before the fast-trade negotiating authority expires next year. While it may be possible to either renew fast-trade or even consider the agreement without it, both are extreme problematic for institutional and political reasons.
The second announcement came from this weekend's IMF meeting - "Shake-up agreed on IMF world trade role":
Leading countries secured a breakthrough in the governance of the global economy at the weekend, transforming the role of the International Monetary Fund and putting it at the centre of a more co-operative effort to resolve trade imbalances.
The IMF was given a mandate to start immediate negotiations between the countries with the largest trade imbalances. Its goal will be to secure agreements to reform economic and exchange rate policies to close trade gaps and prevent a global financial crisis. If successful, it could lead to big changes in economic policies, including an appreciation of China's renminbi.
As another FT story "IMF plaudits on imbalances deal" put it:
The weekend agreement to establish "multilateral surveillance" and "multilateral consultations" to address global trade imbalances may not sound like a breakthrough. The terms are steeped in jargon and the International Monetary Fund lacks the power to force changes to individual countries' domestic economic policies unless they are forced to borrow from it.
But even the most sceptical finance ministers and central bank governors viewed the IMF meeting as a great success. There was finally a shared understanding that huge trade gaps represent the biggest threat to the world economy, they said and a willingness to do something about them.
In my earlier posting on the trade negotiations, I argued that new and multiple mechanisms may be needed for economic discussions. The new IMF focus may be one of these new fora.
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