From Seattle to Hong Kong

Jagdish Bhagwati

From Foreign Affairs, December 2005 -- WTO Special Edition

Summary:  There have been eight rounds of multilateral trade negotiations prior to Doha. Although they all ended well, it is important to remember that few went smoothly. Negotiators in Hong Kong now face real obstacles, but there is reason for hope -- if, that is, they have the will and courage to do what is necessary to succeed.

JAGDISH BHAGWATI is Senior Fellow in International Economics at the Council on Foreign Relations and University Professor in Economics and Law at Columbia University. He was Economic Policy Adviser to the director-general of the GATT and a member of the expert group that recently reported on the future of the WTO. His latest book is In Defense of Globalization.

Many of the smaller developing countries have also hesitated because they fear that most-favored-nation (MFN) trade liberalization will erode the value of the one-way preferences they are enjoying under the Generalized Schemes of Preferences and the EU's Everything but Arms initiative. These preferences are relative to MFN tariffs. Many economists had warned the recipients of these preferences that these preferences were wasting assets and that pushing for MFN trade liberalization with coverage for products of interest to these small countries would be a better approach. But neither the donors nor the recipients of the one-way preferences listened. Now, many of these countries want to reduce or eliminate MFN trade liberalization in products where they enjoy preferences. A better approach would be to compensate the countries for the reduced value of their preferences by allocating aid for this purpose to a multilateral agency such as the World Bank.

Lamy has expressed support for these and other uses of "aid for trade." It is now time to advance this agenda with the establishment of a high-powered group, under WTO auspices, composed of informed senior staff from the World Bank and the International Monetary Fund and world-class trade economists. This group could then make concrete suggestions on how the "aid for trade" agenda should be designed and implemented.

A multi-pronged approach along these lines would help surmount the few obstacles that remain. There is little here that is not doable, and Hong Kong will help us concentrate our minds. All it needs now is good vision, traction, and the determination to see it through.