[OUTLOOK]Opening markets inevitablePascal Lamy, the World Trade Organization director general, announced on July 24 the collapse of the Doha Development Agenda negotiations. The goal of this agenda was to enhance 149 member countries’ growth potential by dismantling barriers against free trade through multinational negotiations. This goal looks unlikely to be fulfilled for a while.
Whether Korea will lose or gain from the collapse of the Doha talks is hard to tell. If the negotiations had led to breaking down most barriers between the countries, Korean farmers would have opposed them. If the talks had led to a small-scale opening of the markets, there would have been few substantial gains for us.
The apparent reason for the failure of the talks between the major six members ― the United States, the European Union, Brazil, India, Australia and Japan ― is that the United States refused demands by the European Union, Brazil and Japan for a further decrease in its agricultural subsidies.
The United States seems to have reasoned that opening markets in the European Union for agricultural products and in developing countries for non-agricultural goods would not be sufficient to compensate for damages that would result from an additional reduction in its agricultural subsidies.
A fundamental reason for the collapse of the talks can be found in the failure to adjust the three areas of dispute ― agricultural subsidies, reduction in tariffs on agricultural goods and cuts in tariffs on non-agricultural products ― among three major members ― the United States, the European Union and a group of developing countries participating in the talks that includes Brazil, India and China.
The European Union and the group of developing countries asked the United States to make deep cuts in its agricultural subsidies. The United States and the group of developing countries asked the European Union for further reductions in tariffs on agricultural products. The United States and the European Union asked the group of developing countries to cut tariffs on industrial goods. A failure in balancing potential gains and losses of different partners over the three issues led to a halt in the talks.
It is too soon, however, to view the collapse of the talks as a total breakdown of negotiations or a retreat from a multilateral trade system. The suspension is a cooling period to examine how much more each negotiating partner is willing to give to receive gains from a deal.
Potential damages from the collapse of the Doha talks will likely be placed on developing countries, including China, advanced countries that export agricultural goods and small- and medium-sized economies that have opened their markets.
If the Doha negotiations stay in stalemate for a long time, belief in a multilateral trade system will weaken. There is also a possibility that countries will attempt to protect their markets and negative effects from such measures will spread around the world.
There is still a chance for the situation to be reversed. If people believe a retreat from a multilateral trade system will make all parties losers, if potential beneficiaries from the talks want to give more, and if the United States makes a concession on its agricultural subsidies, the Doha negotiations can resume before the end of this year.
But if the negotiating partners do not change their stances by the end of this year, a drive for multinational trade talks is highly likely to be lost for a few years more.
Bilateral trade deals, such as free trade agreements, will instead expand around the world. If so, the need for South Korea to pursue a free trade pact with Washington will inevitably increase. Countries like China ― which will feel insecure due to the delay of the Doha talks and the ongoing free trade talks between South Korea and the United States ― Australia, New Zealand and Canada will likely seek free trade agreements with South Korea.
South Korea has achieved economic development for the last half-century, enjoying gains from trade liberalization. Therefore, it should work together with international society for the resumption of the Doha talks in the near future. At the same time, in case multilateral trade systems fail to go forward, South Korea should prepare flexible strategies to pursue bilateral free trade agreements.
Whether multilateral or bilateral, opening markets is an inevitable choice for South Koreans. Regardless of the collapse of the Doha negotiations, South Korea should continue to restructure less competitive fields and adjust domestic systems to fit higher standards.
* The writer is the head of the WTO research team at the Korea Institute for International Economic Policy.
by Lee Chang-soo