Doh? Ha!

Dani Rodrik isn’t losing any sleep over the collapse of the Doha Round:

Don’t cry for Doha, by Dani Rodrik, Project Syndicate: …The latest round of [trade] talks in Geneva has once again failed to produce an agreement. Judging by what the financial press and some economists say, the stakes could not be higher.

Conclude this so-called “development round” successfully, and you will lift hundreds of millions of farmers in poor countries out of poverty and ensure that globalization remains alive. Fail, and you will deal the world trading system a near-fatal blow…

But look at the Doha agenda with a more detached set of eyes, and you wonder what all the fuss is about. … It is hard to [support] … the view that the Doha trade round could lift tens, if not hundreds, of millions out of poverty. The best that can be said is that farm reform in rich countries would be a mixed blessing for the world’s poor. Clear-cut gains exist only for a few commodities, such as cotton and sugar, which are not consumed in large quantities by poor households.

The big winners from farm reform in the US, the EU, and other rich countries would be their taxpayers and consumers, who have long paid for the subsidies and protections received by their farming compatriots. But … we are talking about … domestic policy reform and an internal redistribution of income. This may be good on efficiency and even equity grounds. But should it have become the primary preoccupation of the World Trade Organization?

What about industrial tariffs? Rich countries have demanded sharp cuts in import tariffs by developing countries such as India and Brazil in return for phasing out their farm subsidies. (Why they need to be bribed by poor countries to do what is good for them is an enduring mystery.) But here, too, the potential benefits are slim. …

According to World Bank estimates, complete elimination of all merchandise trade restrictions would ultimately boost developing-country incomes by no more than 1 percent. … And … the Doha Round would only reduce these barriers, not eliminate them altogether.

The Doha Round was constructed on … the myth of a “development” round promoted by trade officials and economists who espouse the “bicycle theory” of trade negotiations — the view that the trade regime can remain upright only with continuous progress in liberalization… [It] backfired because the US and key developing countries found it difficult to liberalize their farm sectors. …

[T]he fears underlying the bicycle theory are wildly inflated. … The real risks lie elsewhere. On one side is the danger that today’s alarmism will prove self-fulfilling — that trade officials and investors will turn the doomsday scenario into reality by panicking. On the other side is the danger that a completed “development round” will fail to live up to the high expectations that it has spawned, further eroding the legitimacy of global trade rules over the longer run. In the end, it may well be the atmospherics — psychology and expectations — rather than the actual economic results on the ground that will determine the outcomes.

So don’t cry for Doha. It never was a development round, and tomorrow’s world will hardly look any different from yesterday’s.


Originally published at Economist’s View and reproduced here with the author’s permission.