The Doha development round of the World Trade Organization-brokered international trade talks is back in the news today, with the U.K.'s Observer reporting that six powerful nations are engaged in "secret talks" to "save the round." For those readers who see the letters WTO and fall into an immediate coma, the gist of the problem is this: the current round of trade negotiations is supposed to be primarily aimed at helping the developing world. But, burned from their experience in earlier rounds, developing nations have been very reluctant to sign on to any new agreements.
Among the usual suspects participating in the new last-minute negotiations are Brazil and India, two countries that are technically still part of the "developing" world, but are also increasingly flexing their muscles with the big boys. And that has activists worried. According to the Observer, if Brazil and India agree to concessions that would open up their manufacturing and service industries to foreign competition, poorer nations could be pressured to follow suit.
The complexity of taking into account the differing needs and stages of development of the 140-plus members of the WTO is one reason why progress is so glacial. Could there be a better way? Reading the Observer this morning reminded me of a proposal in Joseph Stiglitz and Andrew Charlton's recent book, "Fair Trade for All: How Trade Can Promote Development." Based on a scheme cooked up by Charlton, the authors endorse a slicing-the-Gordian-knot solution.
Simply put: All WTO members should "commit themselves to providing free market access in all goods to all developing countries poorer and smaller than themselves." So, for example, a country like Egypt would receive free access to the U.S. and would be required to give free access to Uganda, but not vice versa.
Stiglitz has been a leading critic of how globalization has played out on the world stage, but he is not, by definition, anti-"free trade" or otherwise unmindful of the benefits that can accrue from greater integration of the world's economies. But at every opportunity, he takes pains to point out that, especially for the poorest nations of the world, trade liberalization does not automatically translate into economic growth. Poor nations often do not have the necessary government and market institutions necessary to efficiently allocate resources, and are thus not well situated to thrive in an open environment. The beauty of "Fair Trade's" progressive solution is that the worse off you are, the more you get to protect yourself. But the richer you are, the fewer barriers you can erect.
One thing that such a solution would not address is the plight of industries and workers in advanced countries who come under pressure from competition from less developed nations. And as Stiglitz points out in the Observer article, growing protectionist sentiment in the developed world makes it unlikely that any kind of substantive new trade agreement will be reached, much less a wholesale reconfiguration of the system.
For the Stiglitz-Charlton solution to get some traction, a progressive approach to world trade would have to be matched by a progressive approach to distributing the benefits of the global economy within advanced nations. In other words, instead of cutting taxes on the rich who are currently raking in the proceeds of globalization, politicians in the U.S. should be figuring out how to ensure that economic growth translates into actual benefits for the majority of U.S. citizens.
Let's not hold our breath waiting for that to happen.