I don't often agree with Claude Barfield over that the American Enterprise Institute. But on this one, I think he is completely right -- "It's Time to Dump the Doha Development Round." (FYI -- something that trade attorney Bob Lighthizer proposed over a year ago "Stifling the Economy, One Argument at a Time".) As I've written a number of times before, the Doha Round has outlived its usefulness.
In fact, I'm not sure that the Doha Round wasn't outmoded from the beginning. Back in 2001, I wrote a paper on After Doha: What The WTO Is Not Talking About. In that piece I speculated that the Uruguay Round might have been the last major comprehensive round of multilateral trade negotiations. During my Senate staff career, I was involved in the beginning and the end of the Uruguay Round. When we finally passed the implementing legislation, I mused out loud that I thought this would be the last global round of trade negotiations. None of my colleagues agreed - and some of the old hands seemed taken aback at such heresy. They argued that you can only get an agreement by linking everything in a big package. (In diplomacy - this is known as "linkage.")
But the Uruguay Round may have sown the seeds of Doha's failure. The Uruguay Round changed the internal dynamics of trade negotiation. Global trade talks have become too complex and overarching to succeed in one mega-negotiation. The dynamics that made these trade rounds work is no longer present. Trade talks aren't about just trade any more. They are talks about the harmonization of economic rules. As such, the old trade-offs no longer apply.
In previous negotiations, the focus was on tariff reduction. I'll reduce my tariffs on steel if you reduce your tariffs on autos. This allowed for a win-win (from economists point of view) situation that pushed for lower and lower tariffs. Everyone agreed that the end point was lower tariffs. The question was how to get there.
Now it is unclear how the trade-offs work, and in what direction the dynamics points. I'll lower my tariffs on steel if you increase your patent protection to 100 years? I'll allow you to subsidize your aircraft industry if you don't ban my genetically-modified beef? I'll decrease my agricultural subsidies if you reduce regulations on investment banking?
We don't have any agreement on what the end point should be. We have a general idea - "open economies" - but we differ dramatically on what that means and on the specifics.
My 2001 piece also made the point that for all the various issues being raised in the Doha Round, a major piece is missing:
Not on the table is a comprehensive look at policies toward information and other intangibles. We are moving to a knowledge economy. Knowledge is both an increasingly important input into the production process and an end-use commodity in and of itself. As the role of information increases in both our economic and social systems, issues of control of information will become increasingly central to our policy and political debates. Parts of the issue are included in the WTO agenda, such as: Trade-Related Aspects of Intellectual Property Rights (TRIPS); the work program on electronic commerce; trade and investment; and the proposal for a new discussion on technology transfer. Missing from the discussions is the recognition of the interconnection between these areas.
My gut reaction to the trade talks is that we will have to approach each of these economic regulatory issues separately - possibly in separate forums, such as the OECD and the G20. Yes, this being a negotiation, there will be linkage. But the complex web of links will not become so great as to bring the entire structure down.
I, for one would welcome, such as shift. As the I-Cubed Economy matures, these economic harmonization discussions need to be ongoing. We are still feeling our regulatory way - and the economy keeps shifting. It is not as simply a matter as hitting a zero tariff number or eliminating a trade barrier. It is an evolutionary process that we need to engage with other countries real-time and continuously.
That is much more difficult that negotiating a trade agreement - but also much more important.
So, if the Doha Round collapses, let us not take it as a sign of failure. Rather, it is an opportunity to build the new international framework for regulating the new global I-Cubed Economy.
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