World Trade: Why China and India Need to Lead

Mike Moore (former Prime Minister of New Zealand and former Director-General of the World Trade Organisation)

It looks like good news: ministers meeting on the fringes of last week's annual talkfest in Davos, Switzerland, have said there was a glimpse of movement that could allow the resumption of the suspended Doha Development Round of trade negotiations.

Recent talks by ambassadors in Geneva were put on hold because no new instructions had been received from their respective governments that would allow any meaningful progress. The animosity and distrust between key players, such as the US and the European Union, were so bad in the 1990s that phone calls were not returned. It's not quite that bad now; there's enough blame for everyone to share and sometimes there are more effective ways of catching someone's eye than poking them with an accusing finger.

Thankfully, the World Trade Organisation has been enlarged, so it's not just a matter of the big guys making a deal and the rest accepting it. Yet, nothing can be done unless they show some common cause. As always, it comes down to agriculture, where the EU needs to improve on present offers over market access, and the United States must move on domestic support or subsidies.

Then there's the fearful Trojan horse of something called "special or sensitive products" which can mean rice, dairy, sugar, or whatever domestic interests fear could undermine them. If there isn't a real desire to nail down this issue, it will end in tears and disputes, and could make the round pointless for many. For those who have seen their core products, such as coffee, sugar or rice, locked out of the system, it would be a betrayal of monumental proportions. The G20 - a group of 20 developing countries - has shown solidarity and would rather have no deal if it doesn't include substantial progress.

Another few years of the present growth and the world would have seen the greatest, most successful, expansion of the global economy ever. No wonder finance ministers in most places look self-satisfied, even smug. All this has been underpinned by WTO rules, and the countries that have done the best are those which have opened and reformed their economies to be part of this growing global supply chain. Hard decisions by Australia, New Zealand and Britain in the 1980s are being rewarded. Those which have been slower to reform - Germany, France and Japan - have seen slower progress.

China and India are the two economies that have played the biggest role in global growth recently. Those people who feared competition from them should ponder this question: Where would we all be without the appetites of China and India? Their leaders have shown courage by opening up their economies, but they need to go further.

This round needs the leadership of China and India, but both are doing well out of existing rules and agreements. However, protectionist sentiment is always there, and the clouds are gathering in Washington - and have never left Paris.

Japan is showing some flexibility. If China and India can show the way, and if the big guys are prepared to save their taxpayers and reward consumers in agriculture - and if a decent deal is done for the poorest countries - then we have an endgame in sight. Jean-Claude Trichet, the French president of the European Central Bank, has warned of the danger to the global economy and to the fight against poverty if the deal is not done.

The view of some commentators that the Doha round was too ambitious is disappointing. They are the same people who said that we would never launch the round in the first place, and that China posed a threat to the global marketplace and would never live up to its commitments. Getting China into the WTO was, in my view, more important than launching the round.

A recent survey of business, government officials and agencies reports that China has implemented nearly 80 per cent of its WTO commitments. A lot more needs to be done, but in tariff cuts and opening markets it is mainly on target and on time.

(Originally appeared in the February 2, 2007 issue of South China Morning Post in Hong Kong, reproduced here with permission.)