Protectionism looms as Doha round fails

SEVEN YEARS after they began in Doha, Qatar, the latest round of negotiations over a new global trading agreement has collapsed again in Geneva. The seemingly interminable talks, described by one observer as "like watching paint that never dries", have failed to reach an agreement on removing barriers to capitalist trade.

Dave Reid

A major plank of the right wing neo-liberal project is to remove all trade barriers like tariffs (charges on imports that make it harder to sell goods and services in other countries) so that capitalist companies can exploit markets, labour and resources anywhere in the world.

The failure to reach agreement is a significant setback to the capitalist neo-liberal project of opening up markets to allow the free movement of capital and goods around the world. It opens up the prospect of increasing protectionist measures and bilateral agreements by economies faced with a global economic downturn.

The process of globalisation, that has helped to amass trillions of dollars of wealth for a few thousand capitalists, while billions of working people are in poverty, will be checked somewhat by this setback to 'free' trade.

The negotiations, under the auspices of the World Trade Organisation (WTO), encompassed 153 countries, but only 30 trading powers were invited to Geneva and the final negotiations involved just seven. A stalemate hardened between two main sides: the US and EU, against India and China.

Negotiators reached agreement over liberalisation of trade in services and industrial goods, benefiting mainly the US and EU, but faltered over an agreement covering agricultural goods. India in particular wanted to protect its 200 million farmers from a surge in food imports from the EU and especially American food industries.

Many capitalist commentators are trying to argue the collapse of Doha does not really affect the world economy. Global stock markets rose the day after the Geneva failure. After all, the optimists argue, world trade and globalisation have increased in the last seven years without an agreement.

Most countries levy tariffs to trade below the maximum tariffs agreed in 1993 in the last, Uruguay, round anyway. In fact tariffs are already below the maximum recommended by Doha. The value added to world trade would only have been an estimated $100 billion (or 0.007%) out of global annual trade movements of $14 trillion. In any case new negotiations will begin next year with a new US president or in 2010 with a new European commission.

Protectionism

BUT THIS is putting a brave face on a further ratcheting up of protectionism. As the world economy heads towards an economic downturn there is a growing tendency for national governments to protect their own industries by obstructing imports in a variety of ways. The failure of Doha allows greater freedom for them to do this within the rules of the WTO.

In fact, the failure itself is a reflection of increased protectionism. Neither side could budge because they could not sell an agreement at home. The weak Indian government feared a reaction from farmers, especially the big landowners, if it gave in, and the US trade representative knew she could not get the deal through the US Congress.

More pessimistic capitalist economists are comparing the failure to the trade wars that accompanied the 1930s depression. Jonathan Fenby warned that: "Global trade anarchy would encourage commercial wars, preferential arrangements and competitive devaluations. The post-1929 example provides sufficient evidence of that. The financial crisis that is brewing around us would be hugely aggravated if it were accompanied by the kind of me-first policies that characterised the 1930s" (The Guardian 6.8.08).

There is also a fear that the post-1945 consensus of increased free trade within the capitalist world is breaking down as the WTO itself loses credibility. There is now likely to develop a complex series of bilateral trade agreements between countries and trading blocs outside the control of the WTO, further destabilising the global trading system.

The WTO has been the cockpit within which the developed capitalist economies have been able to enforce increased exploitation of the developing world. But as the New York Times commented: "The battle lines of the new world order were exposed at the World Trade Organisation" (2.8.08).

The loose bloc of China, India and Brazil was able to face up to and resist the US and EU. The current round kicked off in Doha in 2001 just after 9/11 when US power seemed invincible. But seven years on, after the growth of the Chinese and Indian economies and the debacle of Iraq, the world balance of forces has changed and the arm-twisting power of US capitalism has diminished.