Monday, April 10, 2006

Editorial: Beyond the war on terror

British Prime Minister Tony Blair did his best during his visit to New Zealand to remind us there is much more of global interest going on than the war on terror. There is also the matter of global warming, on which he addressed a conference here, and most urgently, as he agreed in an interview for the Herald, the World Trade Organisation's Doha Round.

The four-year-old round has stuttered from failure to survival several times, failing at its big staged meetings, Seattle at the beginning, Cancun at the mid-point and, nearly, at Hong Kong in December. At Hong Kong the trade ministers went into extra time before the European Union made a concession on the issue of agricultural export subsidies that allowed the round to continue.

Difficult as it was, the Hong Kong conference agreed only on a "framework' for final agreement. The detail was still to be done and the WTO aimed to have it done by now. A meeting of trade ministers in London last month did not make much progress. When he was here last week Mr Blair discussed whether another meeting of government heads might be needed to avert a "disastrous" failure.

"At the moment I think there is a real danger of the world trade talks going down," he told the Herald. The poorest countries in the world were "sitting there waiting for us to deliver on what we promised", he said. "If we turn our backs on that I think the consequences will be serious."

How right he is. This is the first global trade negotiation to involve the Third World to a significant degree. Most of the under-developed world has joined the WTO since the last "Uruguay" Round and they have formed a powerful bloc, mainly around the issue of agricultural trade. Led by Brazil and India, the less developed countries want much more access to wealthy markets and an end to export subsidies by those wealthy countries whose over-production depresses prices for everyone else.

At Hong Kong, the Europeans agreed to a date (2013) for the phase-out of export subsidies. In return, the less developed countries are being asked to lower their protective barriers to industrial products, which they are reluctant to do. The Third World, encouraged by aid agencies and sympathisers in the West, is demanding a one-sided Doha deal in which the poorest are given tariff-free access to rich markets while preserving the right to protect their own industries for the time being.

That sort of deal is fool's gold. An economy improves when its resources flow to activities in which it is competitive. Whatever benefit the poor gained from greater access to rich markets would be negated by the continued protection of resources devoted to activities that could not survive exposure to world markets. Unfortunately, rich countries are not in a position to make that point strongly when they insist on protecting their own farmers so generously.

But most of those countries are so rich they can afford agricultural inefficiencies. They do not pretend there is an economic value in protecting and subsidising their farmers, their citizens accept sentimental and environmental reasons for the expense they bear. Third World countries do not have that luxury. If they want a greater share of the world's wealth, they need to restructure their economies along more competitive lines.

Developing countries should be careful what they wish for from the Doha Round, for they might get what they want. The industrial world has little to gain from easier access to poor markets. It is more important that this round leaves the poor with a sense of inclusion and hope - even if the protection they are allowed to keep is self-destructive. The round needs to make progress by the end of this month. It needs another prod.

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