Guest blogger Robert Wolfe advises G-20 leaders to do no harm and advocates using transparency to keep world trade flowing.
The most important trade advice one can give to leaders participating in the G-20 London Summit is, Do no harm. The risk of harm is real, since the group’s composition and preparatory process, both oriented to financial issues, are ill-suited to trade or the World Trade Organization (WTO). Some countries important in the WTO are not invited to London, but many members of the G20 have little or no role in WTO negotiations in Geneva. Officials responsible for trade policy have not been involved in developing the texts for leaders. Nevertheless many analysts want the G20 to take an activist role on trade. Leaders should resist that temptation in favour of playing a catalytic role.
The G20 cannot ignore trade, but leaders can best help by asking their trade ministers to prepare three reports for the next G20 meeting, likely in November. The first and most important would be on decisions that trade ministers want leaders to take in order to close the Doha Round. The second would be an assessment of the transparency of G20 participants’ trade policy measures taken in response to the crisis, based on the new work of the WTO Trade Policy Review Body discussed below. Finally, trade ministers should be tasked with a preliminary report on the measures necessary to ensure that the future trade agenda supports sustainable development.
AVOIDING HARM HAS MANY PARTS
Do not make commitments whose inevitable breach will embarrass the G20, again, and embarrass the WTO. Be modest in your ambitions. Only promise what the leaders present can and will deliver.
Do not imagine that you can make a deal on the tough nuts left on the WTO agenda. Leaders can help when the task is picking between well-understood, stabilized options. That is not now the case. Do no harm means asking trade ministers to explain themselves to you, not trying to do their work.
Do not call for new items on the WTO’s over-loaded agenda. The Doha Round may not result in much new liberalization, but in the current context what the world needs is to lock in the current level of openness. The Doha Round will do that. Adding or dropping issues is not an option: the interdependent set of bargains is too finely balanced.
Do not call for smaller bits of the Doha package to be negotiated on their own. Whatever its long term role, the “Single Undertaking” is built in to the foundations of the Doha Round.
Do not under any circumstances call for the Doha Round to be suspended for a year while trade ministers work on something else. Trade rounds are like supertankers, hard to start and harder to change course. Don’t try.
Do not call for a formal standstill: defining the meaning of the words consumes valuable negotiating time that ministers do not have, and standstill commitments never work anyway.
Do not call for new institutional mechanisms to monitor the response to the crisis. Reinforce the institutions you already have.
Do not call for new ways of negotiating in the WTO. If Members manage to achieve Doha Round modalities that are acceptable to the US, and Europe; to Brazil, India and China; and to LDCs, then they will have redefined the WTO, without divisive procedural debates. They will have created a multi-tier WTO with widely differing levels of obligation, and they will have done it by finding new ways to engage the key players on any given issue in the negotiations while ensuring overall transparency and inclusiveness. Who could want more governance reform than that? If Members fail to get modalities in the end, governance may prove to be the culprit, but with more than enough blame to go around for the current impasse in the negotiations, worrying about the governance of trade negotiations is a diversion.
Do not promise to avoid protectionism. It is taken for granted that G20 leaders oppose “beggar thy neighbor” policies. But whether or not a given action is or is not protectionist is something that can most usefully be decided through open discussion in Geneva in the context of the broad objectives of the trading system not by simple yardsticks in a G20 communiqué. And absolutely do not promise new negotiations somewhere outside the WTO on what “protectionism” might mean in the crisis. Trade ministers do not have the time. But the G20 can reiterate the basic principles: responses to the crisis should have regard to international obligations, to the challenges facing other countries, and to the needs of the future, especially sustainable development.
THREE THINGS THAT G20 LEADERS CAN AND OUGHT TO DO
Leaders can best avoid harm by seeking to catalyze action elsewhere designed to strengthen the international system, and by using their individual roles at the apex of their own governments to build bridges between conflicting domestic agendas.
First, the G20 has already made a commitment to finishing the Doha Round. Since trade ministers will not want the leaders to make a mess of things, asking them for a report on needed decisions before the next meeting will encourage them to get the job done before leaders have to intervene. (This trick worked well at the 1978 Bonn G7 summit for closing the Tokyo Round and again at the 1993 Tokyo G7 summit for closing the Uruguay Round.)
Second, G20 leaders can support efforts to use trade policy transparency to ward off the dangers of protectionism. WTO Director-General Pascal Lamy argues that the WTO should use its existing monitoring mechanisms to provide a “radar picture” of trade measures taken in the wake of the financial crisis. Leaders should instruct all the branches of their governments to provide the WTO with the information it needs to complete the picture. Better to have an open and perhaps embarrassing discussion of all the new subsidies for factories and banks in the Trade Policy Review Body than risk a flurry of acrimonious disputes that would be a distraction for the WTO and damaging to public support for multilateral trade rules. And better to have that discussion in the context of well-understood WTO norms and principles rather than initiate a distracting debate somewhere else on how best to judge the trade policy implications of crisis response. Yes WTO Members may disagree, but airing the difference in views is better than pretending that some views do not count. Leaders should ask for a report on the WTO assessments for the next G20 meeting, presumably to be held later this year.
In addition, WTO Members should insist that all current transparency obligations are met. The G20 can lead the way by insisting that their own governments be up to date on all their notification obligations under current WTO agreements. All existing monitoring and surveillance provisions should be fully used. Open discussion at home and in Geneva contributes to sustainable development by ensuring that trade policy is made in the light of day. When that happens it is at least possible for a broad public interest, including the interests of the future, to trump narrow particular interests.
Third, the message in the very existence of the G20 as a forum for considering global issues is worth heeding. Developing countries now have a seat at the table. They will throw the opportunity away, however, if they insist on the meaningless Doha Round demand for “less than full reciprocity”. Developing countries cannot use the WTO to advance sustainable development until they accept their full share of responsibility for the trading system.
The question at the heart of the Doha Round, and the one that should concern every leader in the G20, is whether the compromise on which the Bretton Woods system was based can finally incorporate the aspirations of developing countries. That compromise between free trade abroad and the welfare state at home is a paradox. The compromise is based on the assumption, as one NGO put it, “that the multilateral trade system should, if need be, depart from trade liberalization objectives in order to take livelihood concerns into account.” But it is time for developing countries to recognize that every government is concerned for the livelihood of its citizens, and the trade policy actions of every government risk hurting some other government’s citizens. The other side of the bargain therefore is that sometimes the welfare concerns of governments have to be relaxed in favour of more open markets.
But the paradox is even sharper: the classic formulation of the Bretton Woods compromise does not accommodate normative concerns for sustainable development, because collective responsibility for the planet cuts across both unrestricted international markets and respect for the sovereign right of governments to manage their own welfare state. LDCs in particular have legitimate concerns about the capacity of billions of people to adjust flexibly to greater engagement in the global economy, but the ability of the WTO to respond is blunted if provisions must apply to all “developing countries” equally. If Members are to be properly accountable to each other, and for the planet, they they will need to think of new ways to resolve this paradox. But that is a challenge for another day.
Robert Wolfe is Professor in the School of Policy Studies, Kingston, Canada.
This article is part of a forthcoming compilation on a trade agenda for G20 leaders edited jointly by Dr. Carolyn Deere Birkbeck (Global Economic Governance Programme) and Ricardo Meléndez-Ortiz (International Centre on Trade and Sustainable Development (ICTSD)). The compilation will be published in mid-March 2009.
