Sunday, July 23, 2006

The vital signs are not good...

The latest on the WTO talks is discouraging.

Trade ministers are due to gather again later today at the lakeside offices of the WTO in what could be a final attempt to salvage a deal.

Diplomats say another failure by the six, who have already made several "last ditch" bids for a deal, would leave the 149-state WTO without enough time to complete all the complex details of a global free trade treaty by the end of the year.

The end-year deadline for concluding the Doha Round, which was launched in the Qatari capital amidst much fanfare in late 2001, is dictated by the 2007 expiry of special US presidential powers to negotiate on trade.

The round has been billed as a once-in-a-generation chance to boost global growth and lift millions out of poverty.

While more talks are scheduled for 7/28-9, without progress today, the outlook is poor.

Mr Lamy has set a further two days of talks for July 28 and 29, but diplomats said without some progress this weekend there could be little point in a further session.

"It is difficult to imagine that we can continue coming here without anything happening," EU Agriculture Commissioner Mariann Fischer Boel said as she headed for the talks.

As for the implications, we just don't know. Some opinions from smarter people than me (a very large population):
Longer-term consequences: The longer-term consequences of a Doha Round failure are serious:

-- Loss of WTO credibility: As a forum for negotiation of trade liberalization, the WTO would be seriously discredited. In the absence of any other global instrument, multilateral trade negotiations would be blocked, probably until the next decade.

-- Free trade agreements: Bilateral and regional agreements would proliferate still further, at the expense of the core WTO principle of non-discrimination.

-- Dispute settlement: The WTO's second main function, adjudicating disputes between member countries about the application of its rules, might initially be reinforced. However, this aspect of its work could also eventually suffer.

-- Multilateral cooperation: More broadly, the setback to the WTO would be damaging to the whole concept of multilateral cooperation.

The Doha Round risks collapse because participants, preoccupied with concerns about the effects of opening their markets, are reluctant to make concessions needed to achieve a deal. Possible consequences of failure for the future of the international trading system could be much more serious.


If that is not pessimistic enough try this:
Fifth, the breakdown of the trade talks would likely precipitate adverse shocks in financial markets. Given current global economic imbalances—with the US current account deficit of more than 7 per cent of GDP and a large and growing Chinese surplus—markets are sensitive already to threats of new trade protectionism and their knock-on effects on capital flows. Markets are good at discounting the value of current commitments but less secure in projecting the impact of new protectionism that could sideswipe financial and currency markets.


That one caught my attention. As we juggle record oil prices, rising interest rates and a jittery stock market, failure of the WTO could be a significant downer for even wealthy investors. While they may seek the safety of the dollar, I am not so sure any more.

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