Editorial: The key to success in trade talks

Some activities are so vital that they simply cannot fail. The World Trade Organisation is in that category. Its failure to agree on another round of trade barrier reductions will be seen, with some justification, as a failure of the whole system of multilateral negotiations. But if the collapse of the Doha Round this week was to be terminal for the WTO, it would not be long before there was a call to re-invent a world trade organisation.

That call would come most strongly from poverty-stricken places such as Africa, for which a 1 per cent increase in trade would do five times more good than the aid and debt cancellation asked of the G8 last year. It is poor places that stand to suffer most from the failure of Doha, not the strong economies whose multinational firms already do most of the world's trade and investment in each other's countries.

Those countries will continue to prosper without better access to each other's markets for agriculture and services, and they will dominate the regional and bilateral trade deals that will now gather pace in the absence of a global agreement. Poorer countries will have no choice but to try to get access to at least one rich market on the best terms they can. The terms are likely to be weighted to the stronger side, and far more demanding than anything under discussion at the WTO.

The failure of the agricultural negotiating group, the"G6", to break Doha's long deadlock is a setback for everyone except agribusiness in the United States, France, Poland and Ireland, the last three the major beneficiaries of European Union largesse. The G6 trade minister's meeting was the last chance for a breakthrough that would have enabled all strands of a global agreement to be tied together in time for ratification by the US Congress before President Bush's trade negotiating authority expires next July.

Their failure is a particular setback for countries such as New Zealand that have unilaterally removed most of their trade barriers. We had little to lose and much to gain from the reduction of the food tariffs and subsidies of others. New Zealand, Australia and other unilateral liberalisers believe protection is nothing to "lose" in a national sense. It is a loss only to industries that cannot survive competition and, temporarily, to those employed in them. They face the upheaval of finding employment in competitive sectors, which no longer carry the costs of protecting the uncompetitive.

The transition, as New Zealand knows, is stressful. But this country today employs more people than it did when it protected domestic manufacturing and the economy is stronger without the cost-plus pricing and poor productivity that protection permits. If all countries could give their voters a better view of their national interest, the WTO's role would be much easier.

Federated Farmers and other interested groups in New Zealand and Australia have responded to Doha's looming failure with a proposal to change the dynamics of the WTO. They suggest the organisation set up a "transparency agency" to assess the costs of protection in each member country and let consumers and taxpayers in those countries know what they are carrying. At least the information might balance the pressure that comes from favoured sectors when they see their protection at risk.

The crucial trade debates would then happen within countries rather than between them. Governments might come to international negotiations with offers their voters will endorse rather than sectoral protections the governments dare not reduce.

If something of this sort can be set up, Doha's failure could turn out to be the spur the world needed to do better.