Who wants to lead the world's next trade round?

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The Independent Online

If there is one man who must be watching the Atlantic widen with particular anxiety, it is the guardian of globalisation, Mike Moore. As Secretary-General of the World Trade Organisation, Mr Moore has the task of rescuing our trading arrangements from the disaster of Seattle. He has two deadlines: next month, when the stakeholders in the world economy are to mull over the issues for a new trade round in Geneva: and November, when - in Doha, Qatar - trade ministers of the 141 members of the WTO are supposed to launch that round. A falling-out (sorry, agreement to differ) between America and Europe over the Kyoto environmental deal was followed by an assurance that both would try even harder to agree on a new trade round: but in truth, it does not bode well.

Does that matter? After all, world trade seems to be bowling along nicely without the negotiators. Last year's phenomenal growth in merchandise trade ­ over 12 per cent, in dollar terms ­ matches anything we have seen in the past 50 years. It was, admittedly, boosted by the rising price of oil, driving Middle Eastern exports up in value by over 50 per cent. But even in volume terms, trade grew spectacularly: the rising price of oil went hand in hand with a fall in the price of manufactured goods ­ for the fifth year in succession. Other regions enjoyed a trade bonanza. Only in Western Europe were both growth and trade sluggish. So who needs another trade round?

Well: one group of countries clearly does. Of all the complaints at Seattle, the most rational came from the developing world, which believes the trade playing-field is still stacked against it. Turning against the WTO was, however, an irrational response, since this fragile institution is the only weapon small economies have.

Big, developed economies can batter down barriers, or retreat behind them. Small economies can only beat their fists against the walls. The successful trick in all the past trade rounds was to get the leaders of even the biggest economies to see equitable liberalisation as a plus sum game, and (in the case of the last two American Presidents) as a "cause" in which it was worth risking some flak at home to establish their credentials for global leadership.

A row over the environment threatens that delicate construction of diplomacy and economics. It is not merely that environmental lobbyists are providing the most powerful political assault on "globalisation", or that the WTO has run into most trouble in arbitrating on cases where trade barriers are defended on environmental grounds. It is also that, by refusing to accept that rich, gas-guzzling America has a duty to cut emissions more than industrialising countries, George W Bush has punctured the image of noblesse oblige integral to American leadership.

It is not, to be fair, that Bill Clinton was a great one for enlightened detachment from narrow American interests. He was just smarter at convincing everyone of America's leadership credentials (as well as its economic muscle), enabling him both to secure and gain credit for the Uruguay Round, and to duck out of the firing line post-Kyoto. Before we get too smug, however, it is worth remembering Europe's record on trade. The European Commission pushed through the Uruguay Round over the heads of some pretty recalcitrant European governments, notably the French. On the issues now looming on the world trade agenda, we cannot hope for much European leadership. In particular, Europe is under fire on an issue dear to American hearts, on which only a temporary truce was concluded in the 1990s: agricultural trade.

Agriculture vividly illustrates some of the difficulties in maintaining a global trade regime. Once upon a time, protectionism was justified in terms of security of supply (and the political importance of producer interests).

Over time, European governments began to move towards trade liberalisation ­ partly under US threat, partly in pursuit of cheaper food. Today, however, food safety and animal welfare are issues to which Western societies are becoming increasingly sensitised, and interruptions of trade in response to concerns about one or the other are likely to increase. If the WTO finds itself pig-in-the-middle between anxious consumer groups and angry global producers, it will suffer serious storm damage.

Of course its panels are right to watch for protectionism masquerading as environmental concern. And of course, it is possible to argue that a free market will provide its own solutions to health and welfare issues, without need for restrictions: if people truly value traceability, humanity and locality in food production, they will pay a premium for them in the supermarket. All the same, there are issues on which it is reasonable to set national standards ­ provided (and it is a big if) they are democratically arrived at, and everyone is prepared to live with the consequences.

The difficulty is that the "trade game" involves cross-industry bargaining, with each country discarding some restrictions in return for market access elsewhere. This has been vividly illustrated in the trade regime's greatest success story over the past year, the negotiations with China. While the rich world's protesters berate the WTO as a lackey of the "new colonialism", the Chinese government remains keen to join. Last week's negotiations with the United States had truly remarkable results, not least an agreement to reduce China's agricultural tariffs to single figures. In the previous phase of these negotiations, the European Union did even better than the United States; they now also have to close the deal, but if they can, the path to China's entry looks clear.

For the future of international trade, this would be far more important than anything else that is likely to be agreed at Geneva or Doha. In the struggle to set a new agenda, the WTO will be wise not to be too ambitious. Yet some sense of momentum is important, lest commitment simply drains away.

For all the criticism, the WTO has some claim to be the most functional (or least dysfunctional) of all international economic organisations. It is the youngest. It is the leanest. It can only change by consensus. It cannot invent theories of development, embark on large-scale lending or tell governments what to do with their currencies and interest rates. It can only arbitrate between members on the basis of rules that they themselves have written. It is the least dominated by the United States: neither the International Monetary Fund nor the World Bank has any sway over their host country, but WTO panels have found against the US more than once. Mr Moore may be pushing it a bit to describe the WTO the "final nail in the coffin of imperial and domestic privilege", but he is right to remind us of its essential neutrality.

The WTO has been set up for a bruising year of exhortation and negotiation with a grumpy membership, without strong leadership from the major economies and against a background of popular discontent. At the end of the day, let's hope the world remembers to keep tight hold of Nurse. There is something worse.

Sarah Hogg is chairman of Frontier Economics

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