Dick Kamuganga
7 October 2008
analysis
In the last 60 years, the United States has dominated commerce, pushed nations to open their markets, championed liberal democracy, and achieved military supremacy.
After the fall of the Soviet Empire, American might has gone on unchallenged in the last two decades, but now the tide is changing.
Four months ago Zakaria Fareed, editor of foreign affairs for the Newsweek magazine published a book titled: "The Post-American World-The Rise of the Rest" in which he asserted that America was not declining in global influence but everyone else was rising. Probably there is nowhere else this assertion has been demonstrated recently more conspicuously than in the global trading system at the World Trade Organisation (WTO).
Late July, 2008 the Doha Round of trade negotiations failed for the fourth time in a row (every end of summer, every year in the last four years, the Doha Round collapses) since its launch in November 2001 in Doha, Qatar. It was originally scheduled to end December 31, 2004; this end is not in sight even in the near future according to some analysts.
Political and economic commentaries point to a range of issues as causing failure: that Doha Development Agenda (DDA) was an ambitious, broad agenda; that the "single undertaking" principle of WTO is problematic (which states-nothing is agreed until everything is agreed) in which all 153 politically and economically diverse member nations must agree on everything on the negotiating table to achieve consensus.
Agriculture reform in the rich world is the most fundamental of these. The club of rich nations liberalised their industrial tariffs (US, EU and Canada and Japan, average industrial tariffs are below 5 percent amongst themselves) and they do not perceive that the benefits to reforming their agricultural trade largely in favour of the developing world is worth the political costs in their domestic constituencies to bring convergence in DDA.
The July failure was blamed on US, China and India. The three disagreed over the Special Safeguard Measures (SSM). SSM are mechanisms intended to shield developing countries from having their economies unexpectedly flooded with subsidised agricultural imports. They allow a developing country to temporarily increase customs tariff in response to a surge in import volumes or a sharp decline in prices.
The US favoured use of SSM only when agricultural imports surged above 40 per cent in volume. India and China wanted the mechanism be triggered when imports rose by 10 per cent to protect small poor farmers. The impasse between the three giants led the 10 days ministerial negotiations to collapse.
Analysts have pointed to a new reality and changing global economic equation to put the persistent DDA failure in perspective: First, is that "the rich nations club" (US, EU, Japan, and Canada) are no longer able to "buy up" a few developing countries with special sops as has been the practice in the previous Rounds. The developing world led by India, China, Brazil and South Africa has remained united and refused to yield ground to powerful nations!
Second, since the launch of DDA, three things happened reinforcing the changing global economic equation: American global economic and political leadership has stumbled; China joined WTO (in 2001) and is on the match to becoming the world's biggest exporter; and economic expansion in China (annual average of 10 per cent GDP growth), India (within eight per cent) Brazil (above three per cent) has been faster than any of the "traditional industrial powers", many of which are now at the brink of recessions.
Mr Kamuganga is a trade policy specialist based in Geneva, Switzerland.
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