Doha Round Miracles Needed

May 07, 2011


In April 1982 Britain’s immensely unpopular Prime Minister, Margaret Thatcher, declared war on Argentina, which had grasped control of the Falkland Islands, a remote and inconsequential island outpost with a population of a few hundred, and a few sheep. With much patriotic theatre, she sent Britain’s navy nearly 13,000 kilometres to fight off the upstart Argentine invaders. Within three months, the Argentine navy had been routed, Britain’s naval forces returned to Britain as heroes, and Mrs Thatcher had transformed her political future.  Before the invasion, everyone predicted that her Government would be kicked out. After the invasion, she emerged the heroic guardian of her nation, and comfortably won elections held less than 12 months later. Mrs Thatcher with one inspired and audacious move transformed her political future, proving that political miracles can happen.

In the past week, we have witnessed two similar miracles-in-the-making, audaciously executed by troubled and unpopular leaders. In the US, people are talking of a massive turnaround in support for Barack Obama after his US Navy Seals swept into a compound in the Pakistani town of Abbottabad and killed Osama Bin Laden – America’s public enemy number one since the destruction of the World Trade Centre in New York in 2001.

Seven thousand miles away in the UK, Britain’s troubled coalition Government contrived its own miracle-in-the-making: a fairy tale wedding between Prince William and his pretty and sophisticated commoner girlfriend, Kate Middleton. For a Government mired in recession, needing to introduce unpopular cuts in Government services, and even-more-unpopular tax hikes, and facing union strikes and rising unemployment, the perfectly-executed Royal Wedding brought sunshine – quite literally – to the beleaguered nation. Many in Cameron’s Government are now hoping that the upsurge in patriotism stimulated by this marvelously choreographed event can provide their own transformative miracle.

Whether these two miracles-in-the-making can truly transform the fortunes of the Obama and Cameron Governments has yet to be seen, but at present the auguries look good. Politicians often need such miracles. I am sure Donald Tsang has over the past six years often dreamed of the opportunity to create such a miracle in Hong Kong, but with just 14 months left before he must step down, he may be disappointed.

There is another miracle that is urgently needed that is of keen relevance to Hong Kong – and this has to do with the benighted Doha Round of global negotiations on trade and investment liberalization.

Back in 2005, when Ministers from around the world met in Hong Kong, the hope was that a global deal on trade liberalization would be sealed there and then. But they failed. Most Hong Kong people only remember the dramatic protests around the Convention Centre in Wanchai. And now, almost six years later, the talks have floundered. Last weekend, World Trade Organization Director-General Pascal Lamy talked openly about imminent dangers of a failed Doha Round: “We need to be lucid and realistic: failure of the WTO to deliver on its legislative function, failure of the WTO to update the rules governing international trade - last updated in 1995 - by adapting them to the evolving needs of its Members, failure of the WTO to harness our growing economic interdependence in a cooperative manner, risks a slow, silent weakening of the multilateral trading system in the longer term…All Members are aware of the grave risks of the present stalemate, not only for the Doha Round but for our WTO system at large,"

Of particular interest and concern in Hong Kong, Ambassador Fernando de Mateo, Chairman of the WTO Services Negotiating Group, reported “wide gaps between requests and offers” in services, with a number of members complaining of no progress since a stock-taking in the first half of 2010. Specifically, he reported that:

  • In financial services, offers submitted were "well below current levels of liberalization." 

  • In telecommunications, the sector "remained plagued by weak commitments, and signals for improvement had been disappointing." 

  • In energy services, the overall response “was disappointing”. 

  • In logistics services, the report noted “significant gaps”

  • In legal services the report said that there were very few indications that the request would be met.  

  • In audiovisual services, only two out of 29 participants had indicated any intention to improve offers.  

  • In postal and courier services, including express delivery, "...the majority of recipients had not signaled any improvement."

 

For a deal that was supposed to be sealed by July this year, this laundry list of failures points profoundly to imminent failure – and the urgent need for a transformative miracle of some kind.

For Hong Kong, this would be terrible. No economy in the world depends so heavily – for so many thousands of jobs – on the smooth working of the international trading economy, and of easy movement for globalised businesses.

If the Doha Round is declared dead, then the danger of protectionist backsliding is very grave. So many large economies around the world, including the US and many European economies, are facing difficulties not seen for 30 years. The temptation to block imports in efforts to protect troubled home industries is immense. The Doha negotiations have been important in keeping these temptations in check. If the Round flounders, other urgent measures may be essential if a downward spiral of protectionism and retaliation is to be avoided. Where is the miracle that will transform Pascal Lamy’s gloomy future?

 

* The translated Chinese version was published in Ming Pao on May 7, 2011.

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