Doha Round finally delivers.

(This article appeared in the Economist of December 2013. The Doha round fate is still hanging in the balance)

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                                                  Comments due by Nov. 2, 2014

IT TOOK every bit of the allotted time and then some. In the wee hours of December 6th the members of the World Trade Organisation rose to applaud the successful conclusion of the first multilateral trade agreement negotiated at the WTO. The deal, reached at a ministerial conference on the island of Bali, in Indonesia, is the first fruit to be borne of the long-barren Doha round of international trade talks. But the agreement leaves the future of global talks cloudier than might have been hoped.

Casual observers might be surprised to learn Doha was not already dead, so long and treacherous was the road to the round’s conclusion. Doha, which began in 2001, suffered near-fatal breakdowns in 2003 and 2008. When trade officials worked to resuscitate discussions in 2012 they opted to keep the agenda as simple and attractive as possible. Even so, talks almost collapsed on multiple occasions. Cuba nearly sank an agreement at the eleventh hour, by threatening to oppose any deal that failed to chip away at America’s embargo of the small economy. Over the past few months Roberto Azevedo (pictured above, to the left, with the meeting's host, Indonesia's trade minister), who took over the job of Director-General of the WTO in September, repeatedly warned that this or that disagreement posed a mortal threat to the Bali package. Yet at each turn Mr Azevedo kept the parties at the table until compromise could be reached.

At the heart of the deal is an agreement on “trade facilitation”, or measures to reduce trade costs by cutting red tape in customs procedures. Trade facilitation could cut global trade costs by more than 10%, by one estimate, raising annual global output by over $400 billion, with benefits flowing disproportionately to developing economies. It nonetheless proved a tricky item to settle. Some poorer countries raised concerns about their ability to make the required capacity upgrades, and talks briefly stalled as arrangements for assistance were worked out.

Yet agriculture proved the sorest subject, as ever. Disagreement spanned several issues, the most contentious of which concerned agriculture subsidies. India, its government facing a general election next year, spearheaded an effort to prevent emerging markets from facing challenges at the WTO over subsidies granted to farmers under the aegis of “food security” measures. In the months leading up to the Bali meeting India wrung substantial concessions from rich-world economies, including a four-year “peace clause” that would have granted developing countries protections from such challenges. Not satisfied with that, India later threatened to derail talks unless the issue was reopened. India ultimately won an indefinite waiver, good until a permanent solution can be reached.

Several other disputes received similar papering over. Indeed, while trade facilitation counts as a meaningful achievement, the deal is unlikely to convince sceptics that the multilateral process can produce ambitious reforms—not while those least committed to progress, like India in this case, can threaten to sink an entire agreement unless their demands are met.

Relief at having finally reached a WTO deal will therefore turn quickly to hand-wringing over what should follow. It will fall to Mr Azevedo to read the mood of the membership and chart a course forward. He will emerge from this process with new credibility and a trust in his ability to choose attainable goals. But he will quickly have to make two key decisions: what issues to press and how to achieve them.

Plenty of bullet points remain on the Doha agenda. They include further progress on matters, like the food security waiver, that received inconclusive treatment at Bali, and other long-simmering issues like progress on ending agricultural subsidies altogether. Yet plowing back into such territory risks wasting the momentum of the Bali deal. Mr Azevedo might instead seek to open discussions on fresher subjects. Investment issues provide one possibility; the WTO could work to rein in investment subsidies and set ground rules for when countries can invest across borders without interference. Trade in environmental goods and services, which covers everything from air filters to environmental consulting, is also expected to take centre-stage.

Mr Azevedo will have a more difficult decision in choosing which items to keep on the multilateral docket, for negotiation among all WTO members, and which to let slip into “plurilateral” deals. Plurilaterals can proceed within the WTO, and allow coalitions of willing countries to agree deals that apply only to signatories, and not to all members. Agreements on services and on IT that are now under discussion fall into this category. China’s minister of commerce used a speech in Bali to suggest it supported the use of plurilaterals to move liberalisation forward. It is possible that Bali, while enhancing the role of the WTO as a forum for negotiations, nonetheless reinforced the difficulty in achieving ambitious multilateral reforms.

Still, the landscape for international trade talks looks much different with a Bali deal than without one. The completion of a WTO agreement reflects a broad appetite for trade integration and reduces the risk that regional deals degenerate into a world of Balkanised trade. Not before time.

Why Is Trade Important

                                                          Comments by Oct. 19, 2014

The following is a brief description provided by the WTO of a forum that they held earlier this month. Those of you who find some of these ideas interesting can go to the WTO web pages where the audio of many of these discussions can be found. The audio though is often about 2 hours per round.

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Why trade matters to everyone
This year, the Public Forum will tell the human story behind trade. It will showcase the
myriad connections between trade and people's daily lives and demonstrate how trade
impacts and improves the day-to-day lives of citizens around the globe, whether in
developed or developing countries.
"No nation was ever ruined by trade, even seemingly the most disadvantageous", wrote
Benjamin Franklin in 1774 in a pro-trade pamphlet. Imagine what Franklin might say about
today’s globalized world: trade has become such a pillar of the global economy that we often
do not even realize how often we interact with products and services that come from beyond
our borders. Even a seemingly simple product like your favourite pair of jeans may originate
in one place, be produced in another and shipped from a third country before finding its way
into your local shop. This international production of goods and services contributes to the
development of poorer countries and to the growth of the world economy. Similarly, millions
of products are transported every day across continents and borders to fulfil needs of
consumers from all corners of the world.
Trade creates social and economic opportunities, for consumers, citizens and economic
players. But are these benefits inclusive enough?
Under this thematic umbrella, the following three subthemes will be discussed: trade and
jobs – trade and consumers – trade and Africa.
Trade and jobs
The global economic crisis of 2008 left a lasting impact on the labour market leading to the
elimination of around 50 million jobs. As the world recovers from the economic turmoil, the
rate of job creation has lagged behind. According to ILO figures, global unemployment in
2013 reached almost 202 million and about 400 million more jobs must be created between
2012 and 2022 to keep it from rising further. In this context, how can trade help foster growth
and jobs? Are regional trade agreements the solution? Could the promotion of decent work
create fairer trade and better distribution of the benefits of globalization?
Many global initiatives are currently underway that are designed to promote growth. Free
trade agreements, investment treaties and aid for trade all promise job creation, higher
wages and opportunities for alleviating poverty. Proponents of globalization highlight the
importance of trade in achieving international convergence of labour rights and work
environments. 2
Most economists though believe that trade holds the possibility of both job creation and job
destruction. There is considerable evidence pointing both ways. In 2011, trade between the
United States and the 11 other countries participating in the Trans-Pacific Partnership
negotiations supported nearly 1.2 million jobs in Texas. But some critics also suggest that
NAFTA is responsible for the loss of US jobs.
Some countries have experienced improved standards of living for their people but not all.
What seems clear is that trade alone is not sufficient. A mix of domestic policies in support of
workers, better infrastructure, higher educational performance and sound legal infrastructure
are essential to create the right climate for job creation though trade.
Trade is an integral but not unique instrument of generating growth and employment. What
can therefore be an ideal policy mix for re-stimulating the labour market slump?
Trade and consumers
When tariffs were the major barrier to trade, liberalization was unquestionably beneficial to
consumers, who would benefit from lower prices, greater variety and higher quality. But now
that the world has been stripped off most of tariffs, the non-tariff measures (NTM) in the
forms of sanitary requirements or technical specifications are becoming an obstacle to free
trade. Should regulations which protect consumers, their food, their health and environment
be scaled back? Does the growing number of regional trade agreements pose a threat to the
welfare of the consumers? Or are these standards used by national governments as a form
of neo-protectionism? How best can the balance between free trade and consumer
protection be reached?
In a day and age where e-commerce is booming; flow of Information technology is not
effectively regulated in the global context and neither is international investment. Goods and
services not only flow physically across national borders but are transmitted through optical
fibres and satellites. We are buying things from people we don't know in a currency all of us
don't completely understand, and yet there is no single custodian for the rules that govern
these transactions. How can these gaps be filled? And how can the interests of the
consumers be best protected?
Subjects for discussion may also focus on how intellectual property benefits consumers;
competition policies and consumer protection; services; trademarks and fair trade. The
discussion on trade and consumers is limitless and every angle makes for an important
conversation.
Trade and Africa
Africa is the new frontier for development and the African economies are transforming. In
the last decade Africa has grown steadily at more than 5 per cent, a rate above the
worldwide average. Foreign direct investment has tripled and consumer spending will double
in the next ten years. Economically, this renewal is driven mostly by exports of natural
resources, commodities and improved macroeconomic policies. African countries are as
diverse as they are similar. Most of the continent relies on agriculture but infrastructure and
opportunities are better in some countries than in others. 3
The rule of law is firmly established in some places while in others political instability is all
too common. Yet all of Africa shares an important asset; a young workforce.
Trade has become a necessary tool for development and poverty reduction but what do
Africans get out of open trade? Is growth in Africa inclusive enough? How can value-added
manufacturing be promoted in Africa? How beneficial have the aid for trade initiatives been?
Which policy prescription will allow Africa to enter a new age of economic reforms? What is
the potential benefit for south-south cooperation and intra-Africa trade?
According to the World Bank, in most African countries, women make a major contribution to
trade so can gender equality, education, and health be improved by trade? The possibilities
for discussion are as wide ranging as the diversity of the continent.
Rounding up the Doha Round
A special half day session will be devoted to the Doha Round Roadmap.
After the adoption of the Bali Package at the 9th Ministerial Conference, members’ attention
is now turned to the rest of the Doha Round.
Within the next months, the WTO will build a work program towards the completion of the
Doha Round and this session will gather thoughts and ideas from the Forum's participants on this issue.

The Rise of the Robot

                                                 (Comments due by Oct. 12, 2014)

For decades, people have been predicting how the rise of advanced computing and robotic technologies will affect our lives. On one side, there are warnings that robots will displace humans in the economy, destroying livelihoods, especially for low-skill workers. Others look forward to the vast economic opportunities that robots will present, claiming, for example, that they will improve productivity or take on undesirable jobs. The venture capitalist Peter Thiel, who recently joined the debate, falls into the latter camp, asserting that robots will save us from a future of high prices and low wages.

Figuring out which side is right requires, first and foremost, an understanding of the six ways that humans have historically created value: through our legs, our fingers, our mouths, our brains, our smiles, and our minds. Our legs and other large muscles move things to where we need them to be, so our fingers can rearrange them into useful patterns. Our brains regulate routine activities, keeping the leg- and finger-work on track. Our mouths – indeed, our words, whether spoken or written – enable us to inform and entertain one another. Our smiles help us to connect with others, ensuring that we pull roughly in the same direction. Finally, our minds – our curiosity and creativity – identify and resolve important and interesting challenges.

Thiel, for his part, refutes the argument – often made by robot doomsayers – that the impact of artificial intelligence and advanced robotics on the labor force will mirror globalization’s impact on advanced-country workers. Globalization hurt lower-skill workers in places like the United States, as it enabled people from faraway countries to compete for the leg-and-finger positions in the global division of labor. Given that these new competitors demanded lower wages, they were the obvious choice for many companies.

According to Thiel, the key difference between this phenomenon and the rise of robots lies in consumption. Developing-country workers took advantage of the bargaining power that globalization afforded them to gain resources for their own consumption. Computers and robots, by contrast, do not consume anything except electricity, even as they complete leg, finger, and even brain activities faster and more efficiently than humans would.

Here, Thiel offers an example from his experience as CEO of PayPal. Instead of having humans scrutinize every item in every batch of 1,000,000 transactions for indications of fraud, PayPal’s computers can approve the obviously legitimate transactions, and pass on the 1,000 or so that could be fraudulent for thoughtful consideration by a human. One worker and a computer system can thus do what PayPal would have had to hire 1,000 workers to do a generation ago. Given that the computer system does not need things like food, that thousand-fold increase in productivity will redound entirely to the benefit of the middle class.

Put another way, globalization lowered the wages of low-skill advanced-country workers because others would perform their jobs more cheaply, and then consume the value that they had created. Computers mean that higher-skill workers – and the lower-skill workers who remain to oversee the large robotic factories and warehouses – can spend their time on more valuable activities, assisted by computers that demand little.

Thiel’s argument may be correct. But it is far from airtight.

In fact, Thiel seems to be running into the old diamonds-and-water paradox – water is essential, but costs nothing, whereas diamonds are virtually useless, but extremely expensive – albeit in a sophisticated and subtle way. The paradox exists because, in a market economy, the value of water is set not by the total usefulness of water (infinite) or by the average usefulness of water (very large), but by the marginal value of the last drop of water consumed (very low).

Similarly, the wages and salaries of low- and high-skill workers in the robot-computer economy of the future will not be determined by the (very high) productivity of the one lower-skill worker ensuring that all of the robots are in their places or the one high-skill worker reprogramming the software. Instead, compensation will reflect what workers outside the highly productive computer-robot economy are creating and earning.

The newly industrialized city of Manchester, which horrified Friedrich Engels when he worked there in the 1840s, had the highest level of labor productivity the world had ever seen. But the factory workers’ wages were set not by their extraordinary productivity, but by what they would earn if they returned to the potato fields of pre-famine Ireland.

So the question is not whether robots and computers will make human labor in the goods, high-tech services, and information-producing sectors infinitely more productive. They will. What really matters is whether the jobs outside of the robot-computer economy – jobs involving people’s mouths, smiles, and minds – remain valuable and in high demand.

From 1850 to 1970 or so, rapid technological progress first triggered wage increases in line with productivity gains. Then came the protracted process of income-distribution equalization, as machines, installed to substitute for human legs, and fingers created more jobs in machine-minding, which used human brains and mouths, than it destroyed in sectors requiring routine muscle power or dexterity work. And rising real incomes increased leisure time, thereby boosting demand for smiles and the products of minds.

Will the same occur when machines take over routine brainwork? Maybe. But it is far from being a safe bet on which to rest an entire argument, as Thiel has.

Bradford Delong)