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From Doha to the Next Bretton Woods
AADITYA MATTOO is Lead Economist in the Development Research Group of the World Bank. ARVIND SUBRAMANIAN is a Senior Fellow at the Peterson Institute for International Economics and at the Center for Global Development.See more by Aaditya MattooSee more by Arvind Subramanian
When the Doha Round of multilateral trade negotiations was launched, in 2001, the price of oil was $25 a barrel, a ton of rice cost $170, China's current account surplus was two percent of the country's GDP, U.S. financial institutions were at the vanguard of globalization, and the term "sovereign wealth fund" could have been mistakenly thought to refer to the retirement kitty of an aging monarch.
As of November 10, 2008, oil was going for $65 a barrel, and rice for $515 a ton. China and the oil-producing states have trillions of dollars at their disposal. The U.S. financial system, in the midst of the worst financial crisis since the Great Depression, is teetering between socialization and oblivion. As all these changes have unfolded, the governments involved in the Doha talks have, Nero-like, spent too much time dwelling on minor issues while ignoring the burning questions. After the failure of the recent round of negotiations this past July in Geneva, the international community will be tempted to resuscitate the Doha process. Indeed, as part of calls to reshape the international financial system -- under a proposed Bretton Woods II -- British Prime Minister Gordon Brown has pushed for the completion of the Doha Round.
But this effort to revive Doha seems inadequate because the existing Doha agenda does not respond to the challenges posed by increasing global integration. Fluctuating commodity prices, threats to the economic security of middle-class workers, financial instability, and environmental insecurity have significant global implications that demand a multilateral response. Going forward, a new round of Bretton Woods talks is needed to develop a more ambitious agenda than Doha has and to involve a broader set of institutions than just the World Trade Organization (WTO).
A STALLED CONVERSATION
Since the mid-1990s, world trade has grown rapidly, at a pace of approximately six percent a year -- twice as fast as global economic output. During that time, however, WTO members have not adjusted the maximum levels of tariffs and other barriers that they can maintain on goods and services. In other words, overall trade has flourished, but the multilateral process that governs trade has languished.