John Roughan: Trade talks caught in fatal end game

Students of politics, economics and most other branches of human behaviour sooner or later run into a principle called the prisoner's dilemma.

It is the predicament of people with a collective purpose when they are forced to act as isolated individuals. Classically, it is criminal conspirators when they are caught and separated for interrogation.

It is in the best interest of each individual that all deny guilt. But since none can be sure his colleague in the next cell will not rat on him, it is the next-best interest of each of them to nark.

On TV it works every time. I don't know how reliable the principle is in real policing but as an academic analogy the prisoner's dilemma is terribly powerful. It is always invoked by sociologists and left-wing economists to show individual and collective interests are ultimately not in conflict and that it is to everyone's good to co-operate rather than compete.

Free markets supposedly force people to act like isolated prisoners, bidding down the price of their work because they cannot be sure their competitors will not sell them short. Selfishness is their second-best interest.

Hence it can be argued, employees need trade unions, companies need cartels, consumers need anti-monopoly laws and countries need the World Trade Organisation. Well, the first and third anyway. Prisoner's-dilemma people are rightly wary of the second and almost pathologically suspicious of the WTO.

That always amazes me because there is no better example of the prisoner's dilemma in economic life than the way members of the WTO go about their periodic "rounds" of multilateral negotiation.

Multilateral means everyone negotiates with everyone else more or less simultaneously, towards a collective agreement that must be unanimous.

All member countries of the WTO agree that lowering trade barriers is in their individual and collective interests. If they did not they would not join the organisation. But the bargaining format forces them to treat protection as something to be surrendered only if they see reciprocal "concessions".

They operate on "game theory", as mathematicians call competitions such as the prisoner's dilemma in which every participant's decisions are based on his anticipation of the decision of all other players.

But trade liberalisation is not a game, particularly for the poor countries that have joined the WTO in droves since the discrediting of communism, and you would think Sir Bob Geldof would be raising hell right now at the signs the Doha round will end in disappointment.

The round that Mike Moore launched as WTO director-general five years ago, after an "anti-globalisation" debacle at Seattle, has limped from one meeting of trade ministers to the next, and threatened failure so many times that hardly any of the world's press have bothered to report the latest stalemate.

The pattern set at Seattle has continued. After each highly publicised but inconclusive "summit" trade representatives have agreed to reconvene more quietly at Geneva. They did so again last month and nothing happened.

Time, as usual, is running out. An agreement is needed by the end of the year to be put to the United States Congress before the negotiating licence the Congress has given the President expires this time next year. And the US is coming up to congressional elections in November.

So far, so familiar. Global trade talks have always gone to the brink of collapse before a last minute deal is done.

And, as Moore says, this round will not be allowed to fail. But it depends how you define failure.

At Geneva last month the US and the European Union were holding out against "incremental reductions" in the agricultural tariffs or subsidies of the other. They were demanding "deep cuts" or nothing. This is the crunch.

Unless they agree by the end of the month, they will probably give up until after the American elections, reconvene in December and cobble together another 11th-hour set of incremental concessions, leaking with exemptions.

That would be a miserable return on the rare opportunity Doha presented. This round is the first to begin since the end of the Cold War, the first to involve more than the rich nations.

The post-communist and Third World countries that have joined since the end of the Uruguay Round have formed organised blocs, particularly to press their agricultural interests. After Seattle the political climate was in their favour. Moore put developing countries prominently on the agenda of the "Doha development round".

Under his successors that theme has been lost, but it might have been maintained with a little more help from some of those who parade their concerns.

Geldof, in Auckland yesterday on some travelling celebrity show for corporate functions, had the decency to be embarrassed on TV3 when John Campbell suggested Geldof was saving the world.

Much of the aid he prised from the G8 last year has yet to be appear and the trade he advocated, with less conviction, depends on progress on Doha very soon.

The world is a free market whether the WTO's critics like it or not. Without agreed trade rules and general tariff reductions governments of the richest countries will protect the industries of their voters and make deals with others for usually lopsided benefit.

The favoured partner is likely to be well off too, unless it has some strategic or diplomatic value to the stronger country. If there are any compliant "prisoners" in the global economy today they are the odd Islamic state on the Bush Administration's schedule for free trade agreements.

Now governments doing their trading arrangements on game theory are pursuing regional and bilateral free trade agreements with more urgency than they are giving to the Doha round.

It may be a game for the countries that will continue to prosper if the round fails. For the rest it is no fun. It's a looming tragedy.