Life Without Doha

by Sean Heather

With everyone Monday morning quarterbacking the collapse of the Doha negotiations there has been no shortage of color commentary and analysis of what happened.  But few have begun to ask, or better yet answer, the question of what happens next?  Yesterday’s WSJ op-ed "Greasing the World Economy Without Doha" by Daniel Ikenson offers a good glimpse into a new direction for global trade policy.

Ikenson rightfully reminds us all is not lost. In fact there is already a significant success story that is a result of the current global trading systems. He further suggests that a more inward focus by countries toward gaining efficiencies with respect to trade facilitation could yield sizeable economic gains.  He makes a very credible case. He rightfully points out that tariffs are only one form of barrier that hinders global trade and market access, he goes on to further list other plagues like "corruption, administrative incompetence, superfluous paperwork, transportation monopolies, and the use of antiquated technology."  Domestic regulatory policies should be added to the list.

Domestic regulatory frameworks worldwide are increasingly in conflict and create market distortions that can be every bit pernicious as tariff barriers. The local nature of regulations severely hinders the global nature of the world’s economy, making it vastly more difficult for companies to compete in multiple markets. In fact, Ernst and Young’s strategic business risks report for 2008 named global regulatory challenges as the number one global business risk. If large multinationals struggle to navigate myriad bureaucracies what hope is there for small and medium enterprises?

Regulators live in different worlds than trade negotiators and international work as part of a regulators normal course of work can be down right foreign. A bridge needs to be built between the trade world and the regulatory world given the proliferation in the number of regulators around the world, the vast number of divergent regulations being promulgated, and the challenges placed on commerce to comply. Additionally, for those governments looking to maintain protectionist policies, regulatory policies offer up an avenue to side negotiated trade deals.

The fact is the Doha round, if it could have successfully been resolved, would have done little to reign in market distorting regulatory policies. Herein lays a tremendous opportunity for global trade policy.

The good news is there are conduits in place with key U.S. trading partners that could use the energy and attention of the business and trade community that had previously been dedicated to Doha. The U.S.-EU dialogue launched last year know as the Transatlantic Economic Dialogue or the Security and Prosperity Partnership of North American that we have with Canada and Mexico are two that immediately spring to mind. Both of these dialogues are prime venues for addressing regulatory challenges to open and competitive markets. In fact, it has been estimated that ironing out regulatory differences between the U.S. and the EU would amount to 2-3% increase in GDP for both sides.

Doha symbolizes the traditional meat and potatoes of trade policy – tariffs.  Combating market distorting regulations and promoting regulatory policies that open and enhance competitive markets will dominate trade debates for decades to come. The time to begin to think about how best to address these regulatory challenges is now.