WTO: Now for Plan B

The ambitions of the sponsors of the World Trade Organization (WTO) Doha Round of negotiations were seriously clipped last week when the talks again broke down. The head of the WTO, Frenchman Pascal Lamy, has quickly conjured a Plan B, or a “Doha Lite”.

The 153 members of the WTO agreed last week that a full deal is now not possible in 2011. By discounting this year, you can pretty much rule out anything happening until well into 2013 with the prospects of a tight US election in late 2012 in the way. The WTO has therefore agreed to a less-ambitious scope for the global trade talks, putting aside into the hard basket the contentious issues. A deal now theoretically appears feasible to finish a deal by the end of the year. We’ve heard that one before.

The Plan B largely deals with the impacts on cutting barriers (tariffs and quota-free access to goods and services) that disadvantage less-developed countries. The hard stuff includes most of the outstanding challenges in agriculture – which are considerable.

The cut-down proposals come at a time when the world is grappling with rising food inflation which is threatening livelihoods in poor countries where most household cash is spent on food.

Protectionist pressures are increasing globally. The WTO itself reports that the G-20 developed and developing countries have introduced more trade barriers in the past six months than in previous periods since the financial crisis began. The barriers don’t amount to much – just 0.6% of total G20 imports are affected by the measures but this is an increase of 0.3% over the previous six months.

Despite the growth in total trade volumes and value which is forecast for the rest of 2011, the outlook for trade retains some big risks – a few broke European countries; unrest across the oil-producing Arab world; Japan’s recovery from natural disasters, and the increasing fragility of food supplies in the face of rising demand and the impacts of weather on crops. The last thing a large number of countries want to do is sign away their right to protect the price of food to their people – despite the crazy knock-on effects that such selfish devices have on other countries.

Lamy says that the focus on a partial outcome by the end of 2011 shouldn’t mean the remaining work should be ditched. Good luck with that one. Many countries think the process is now largely irrelevant to the trade in agricultural products. Australian exporters shouldn’t expect the deferral to alter what market access or prices can be achieved in the next few years. It will be interesting to watch what spin the Australian Government puts on this after putting all its chips onto the WTO table earlier in 2011.

There’s no denying the optimism in Lamy though. Despite what must have been a soul-destroying realisation that he hasn’t been able to halt the forces of apathy, Lamy bobs up with a broad grin and a new plan. He reminds us of that John Cleese black knight character in Monty Python’s Holy Grail trying to stop travellers crossing a bridge in the forest. After losing his arms and legs in a short bloody battle with no hope of standing and fighting back, he – like Lamy - claims this is “just a flesh wound”.