Skip to main content

Doha

Amidst the continuing noise in the Middle East, economic news has been a lower priority. However, the collapse of the Doha round of negotiations on tariff cuts is a potentially very serious development. The failure to tackle the need for free trade is creating more unstable conditions in the global economy. This is a political issue, but is also a moral issue.

Poverty in Africa could be ameliorated far more rapidly if there was freer trade allowed for African goods. The large tariff barriers of the US and the EU have distorted the global markets for most agricultural goods. Whole markets in cotton, for example are rigged by large subsidy payments in the USA, while Europe insists on subsidies for sugar beet production that undermine the far more efficient cane sugar producers of the West Indies. Since it is uneconomic to invest in production, the West Indian producers have grown more open to other sources of money- like narcotics transportation. Thus, our failure to take free trade seriously poses a threat to our own way of life.

I hope that the collapse of the Doha round may be temporary, but I fear that it may not be. The fact is that global free trade is easier to negotiate during a period of prosperity. As I see the continued increase in commodity and energy prices, and the limits to growth that the inefficient financial system is creating in China, it now seems likely that new instability is emerging in the global economy.

The huge asset price inflation of the past few years now seems set to create a generally more inflationary climate. This makes it quite likely that interest rates will continue to track up, and finally shut down the growth engine of long term cheap credit. The implications of this- a plunge in house prices, for example- could be part of a global economic downturn.

I am pretty gloomy about the current outlook- normal credit ratios have been long since abandoned and I see a significant risk to the financial system as leveraged instruments need to be unwound. The risk in the financial system no longer lies entirely with banks, and a correction may find unexpected holders of complicated financial structures, which they may not even understand.

As I say, the long term boom in the global economy has rested on this greater liquidity and on the fact that China was presumed to have a limitless capacity to manufacture. Neither of these calculations may prove to be correct and while India may be able to take up some of the Chinese slack in the medium term, the short term looks more ominous. Neither do I forget that the Chinese Communist government is an unstable tyranny. Tien-an-men in 1989 may prove in hindsight to have been the precursor to a general revolt against the CPC.

The Middle East is a tinderbox, with the massive miscalculation of the US intervention in Iraq, now threatening the stability of the entire region. Iran continues to seek to provoke Israel into a more dangerous confrontation though its allies in Hezbollah. A wider war in the Middle East is now distinctly on the cards. In any event energy prices seem set to continue to remain close to record levels- reducing the power of the West still further.

I have terrible forebodings- the risks in the system are now increasing on a daily basis.

In retrospect the failure of the Doha round may have a more than totemic significance.

Comments

The history of globalisation is not a shining example of altruism. Most of the liberalisation has been pushed through to the benefit of rich countries and their resident multinationals and at the expense of the poor. I'm glad Doha has failed - now let's bury it. The world doesn't need more dirty back room deals, it needs Europe and America to give the poor world fair access. This can be done unilaterally and bilaterally and is what we liberals should be campaigning for now.
Cicero said…
I wish that free trade could be done bilaterally, but what tends to happen is that the poorer country ends up with a weaker deal: c.f. various US bilateral initiatives. Although the process of trade rounds is a bit like the old joke about sausages (you don't want to know what goes into them) the fact is that previous rounds have been far more beneficial than not- and not just for multi-nationals. The Doha round was especially important, because it was talking about food- one of the few things that particular Africa has a competative advantage in. The only people who benefit from its failure are the global agri-businesses.
Tristan said…
english european:

The collapse of Doha could be a disaster for the poor all over the world, all countries should open up their markets. Bilateralism, as Cicero says, is also usually worse for small countries, they can be bullied by the big countries they make the deals with (to accept things like the ridiculous intellectual property laws we currently have). At least in multilateral talks they can side with big countries against other big countries to try and get their way.

As liberals we should promote three options:
Unilateral opening of markets- for this we need to get the message across that free trade is not a concession (as the mercantalist ministers seem think, as well as vested interests in industry) and that it benefits us.

Multilateral opening of markets- far from perfect, but they give smaller countries recourse to groups like the WTO to settle disputes.

Bilateral opening of markets with no incentives other than the opening of the market and a most favoured nation clause like that Cobden negotiated with France, that is, if you give another country better terms, then you must extend it to us (as we will to you).

We need to dispel the myth of 'infant industry' protection and that free trade is not a concession to be made for being able to protect other parts of industry.
We need to make the benefits to Europe clear as well as the benefits to the developing world.

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop...

One Year On

  Head vabariigi iseseisvuspäeva! Happy Estonian Independence Day! It is one year since I stood outside the Estonian Parliament for the traditional raising of the national flag from Tall Hermann tower. Looking at the young fraternities gathered with their flags, I was very sure that Estonia too would soon be facing the aggression of the criminal Russian regime. A tragic and dark day. 5 eyes intelligence had been clear: an all out invasion was going to happen, and Putin´s goals included- and still include- "restoration" of Russian imperial power across Europe, even to the Atlantic. Yet there was one Western intelligence failure: we all underestimated the guts of the Ukrainian armed forces, the ZSU, and its President and people. One year on, Estonia, and indeed all the front line states against Russia, knows that Ukraine saved us. Estonia used that time to prepare itself, should that "delayed" onslaught ever be unleashed, but equally the determination of Kaja Kallas, ...

A Hard Frost

  After a week of slush and damp, tonight there is a hard frost in Tallinn. The general election campaign has started with the parties submitting their lists of candidates and announcing their programs. The polls seem to show a polarization of views. Although the Liberal Reform party of PM Kaja Kallas is set to remain as the largest party in the 101 seat Riigikogu, the steady rise of the far right EKRE seems to place them firmly in second place, replacing the Social Liberal Centre Party, who seem set to lose several seats. In addition to the Conservative Isamaaliit and the Social Democrat SDE, there is a fair likelihood that a new party will join these in Parliament, namely the Business/Green minded Eesti 200. The Greens and the Libertarian "Right wingers" look like they will struggle to gain seats. A Moderate Reform/SDE/E200 coalition would be a good outcome, but the numbers will have to fall just so, otherwise there remains the chance of another Centre/Isamaa/EKRE coalition...