Dead but not buried, Doha is worth resurrecting
By Globe and Mail
Aug. 13, 2008 - A letter to the editor concerning the death of the Doha Round of negotiations for the World Trade Organization -and what should follow -is offered here, courtesy of Dr. Bjorn Lomborg, author and adjunct professor at the Copenhagen Business School.
August 13, 2008
COPENHAGEN -Last month, the Doha negotiations, promising freer trade, broke down, ostensibly over a small technicality in safeguard rules.
In reality, the talks collapsed because nobody – not Europe, the U.S., China, India or other major developing countries – was willing to take the political short-term hit by offending inefficient farmers and coddled domestic industries in order to create greater long-term benefits for virtually everyone. And they broke down because ordinary people really don't care.
After a few exasperated editorials, the world has pretty much dropped the subject and gone back to its usual concerns. This is foolish. Establishing significantly freer trade would help the world combat almost all of its biggest problems. For an astonishingly low cost, we could improve education and health conditions, make the poorest people richer and help everybody become better able to tackle the future.
We've known for centuries that free trade almost always benefits both parties. Economist David Ricardo pointed out in 1817 that both Britain and Portugal would benefit if they exploited their comparative advantages. Portugal could produce wine cheaply, whereas Britain could produce cloth much more cheaply than wine. By selling one and buying the other, Britain obtains more of both, as does Portugal. The same holds true today when countries, doing what they do best, produce more and exchange it for other goods.
Yet today, with international trade talks stalled and protectionist rhetoric rising, we are instead moving toward building bigger trade barriers. These barriers are supported by deep-pocketed, self-serving corporations and lobby groups, and defended by politicians scared that the redistribution of jobs, income, and wealth resulting from freer trade will hurt their chances of staying in power.
When the Doha trade round was launched shortly after 9/11, there was plenty of international goodwill. But a recent Financial Times/Harris poll in the U.S., Germany, France, the U.K., Italy and Spain found people nearly three times more likely to say globalization is negative than positive.
New research for the Copenhagen Consensus project by Australian economist Kym Anderson shows that if developing countries cut tariffs by the same proportion as high-income countries, and services and investment were also liberalized, the annual global gains could reach $120-billion, with $17-billion going to the world's poorest countries by 2015. But the story only starts here. As economies open up, competition and innovation drive up rates of growth.
More competition means previously sheltered companies must shape up and become more productive. Having more open economies allows more trade in innovation, so that new companies can almost instantly use smart ideas from around the globe.
This means that, over time, the advantage of moving toward freer trade grows bigger: The $120-billion benefit in 2015 grows to many trillions of dollars of annual benefits by the end of the century. And the benefits would increasingly accrue to the developing world, which would achieve the biggest boosts to growth rates.
We have seen three very visible cases of such growth boosts in three different decades. South Korea liberalized trade in 1965, Chile in 1974, and India in 1991; all saw annual growth rates increase by several percentage points thereafter.
There would, of course, be costs. Freer trade would force some industries to downsize or close, although more industries would expand, and for some people and communities, the transition would be difficult. Yet, the overall benefits of a successful Doha round would likely be hundreds of times greater than these costs.
Global fear about free trade leaves the planet at risk of missing out on the extraordinary benefits free trade offers. Free trade is good not only for big corporations, or for job growth. It is simply good.