Canada not following trade winds

With consumer confidence weakening, the U.S. and the Eurozone fumbling with serious budget and debt problems, and the outlook for the next several years one of weak economic growth and job creation, the world needs some bold steps to restore confidence in the future.

With consumer confidence weakening, the U.S. and the Eurozone fumbling with serious budget and debt problems, and the outlook for the next several years one of weak economic growth and job creation, the world needs some bold steps to restore confidence in the future.

One opportunity would come from salvaging the so-called Doha Round of trade talks launched by the World Trade Organization a decade ago with great promise of advancing trade rules and lowering trade barriers. Its underlying goal was to enable developing countries, especially the poorest, to participate more actively in the global economy and thereby reduce poverty. More wealth in developing countries would create new opportunities for the rich countries as well.

But after a decade of talks the negotiations have bogged down in petty details with a lack of political leadership to make the necessary trade-offs for a successful agreement. Yet an 11th-hour revival of the negotiations for a successful agreement would send a powerful message that countries were able to show leadership and put the global economy on a surer course.

At a recent meeting at the WTO headquarters in Geneva, World Bank president Robert Zoellick, himself a former trade negotiator, called the failure of countries to arrive at a new trade agreement “deeply disappointing,” arguing that a trade deal would do much to restore global growth.

Some 60 years ago, visionary leaders, their attitudes shaped by the Great Depression of the 1930s and the Second World War that followed, created the open trading system now known as the WTO.

“Today, in the aftermath of the global financial crisis and concerns over sovereign debt, we find ourselves at another critical juncture in history where the same visionary leadership is needed,” Zoellick said, urging WTO members to “get bolder” and “think big.”

But Doha’s problem is that the leaders of the major countries lack vision despite the inclusion in every G-20 leaders’ communiqué of a pledge to complete the Doha Round. Instead, countries, including Canada, are undermining the global trading system by pursuing second-best preferential trade agreements with individual countries.

Canada pays lip service to the WTO but has abandoned its past role as a serious player in the multilateral system. Instead, opportunistic bilateral trade deals are its priority. In its last trade policy review of Canada, the WTO — in diplomatic language — questioned Canada’s commitment to the WTO and the multilateral trading regime.

In addition to free-trade agreements with Peru and the European Free Trade Association, it noted that Canada had signed similar agreements with Columbia, Jordan and Panama and was in negotiations with several other countries and groupings, including the European Union. “While Canada has affirmed that it sees the WTO as the cornerstone of its trade policy, its considerably expanded FTA agenda marks a departure with its past practice,” the WTO review caustically noted.

In the Doha Round the negotiators, as WTO director-general Pascal Lamy complains, are preoccupied with cutting tariffs or limiting subsidies. “But these issues are increasingly impacted — even overshadowed — by dramatically shifting patterns of trade, new centres of production and competition, new social demands and volatile financial flows and exchange rates.”

Addressing these issues, and defining the shape of globalization in the years ahead, requires far-seeing leadership. But leaders today think in terms of a zero-sum world, where any country’s gain must be at a cost to another, despite the lessons of history that show that an open system is a positive-sum game where all can gain.

A recent report of a High-Level Trade Experts Group also placed the blame for the imminent failure of the Doha Round on a lack of political leadership, which is apparent as well in climate change negotiations and global reform of financial markets.

The costs of failure, the trade experts said, were unacceptably high.

“Ten years of negotiation has produced the most far-ranging and substantial package of trade liberalization ever put within reach. It would lock in and render irreversible the unilateral liberalization of the last decade, fundamentally reform global farm trade, and provide new market access in almost all the world’s largest markets,” said, warning all this could be lost.

At a time of grave economic uncertainty, the world needs a confidence-building sign that countries and their leaders have the vision and commitment to take bold steps to build a stronger global economy. Completing the Doha Round would be such a sign, but the odds favour failure instead.

It’s questionable whether Canada will even care.

Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.