"The Doha round is not dead," Yi Xiaozhun, deputy director general of the World Trade Organization (WTO), announced at the World Bank summit on the future of trade. But as momentum builds for a number of regional trade deals, including the TransPacifc Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the ASEAN economic community, is the need for a multilateral trade deal diminished? Does a new era of service globalisation ushered in by the digital economy mean that these deals are redundant anyway?
Regional trade deals: the end of multilateralism?
Mike Froman, the US Trade Representative, whose country is the driving force behind both TTP and (arguably) TTIP, said multilateral deals remain the ultimate goal of trade liberalisation. However, the Doha round is seemingly stuck in a quagmire of agricultural tariffs and quotas. Doug Irwin, professor of Social Sciences at US Dartmouth College, likened the WTO to a car with one accelerator and 150 handbrakes. He said it is "tough to see it pushing the agenda for trade liberalisation in the short to medium-term".
Clearly not every big economy in Asia is included in TTP and Arvind Subramanian, chief economic advisor to the Government of India, worries that regional deals tend to reflect the dominant economy's "view of the world", but admitted that his country needs "domestic reform to embrace and benefit from globalisation". Mari Elka Pangestu, professor of international economics at the University of Indonesia agreed, arguing that it would be difficult for her country to join the TPP due to the stringent labour and environmental laws included which might require more "liberalisation" than was palatable for many local stakeholders.
China is not part of the current TPP negotiations, but Min Zhu, deputy managing director of the IMF, suggested the pact is strategically significant for China and could have a major impact if it chose to liberalise and join. While not naming China, Froman agreed that excluded countries might face the greatest impact if the agreement pushes them toward reform. He stated that TPP (and, to some extent, TTIP) aims to raise global standards, potentially paving the way for easier multilateral agreements in the future.
The digital economy: true globalisation through services
All panellists agreed that the digital economy represents the next frontier for global trade agreements. Pangestu highlighted changes in global value chains, noting that 70% of a loaf of bread's sale price comes from services. She described the shift from producing "stuff to fluff"—from products to services—creating a more complex system. An example is Indonesian farmers designing logos for Western startups at night, using Google Translate and free design tools, effectively "leapfrogging into the global value chain."
For Froman, the free flow of data is absolutely vital for the next phase of global growth, especially if we are to move above what the IMF is calling the 'new normal'. The barriers to global expansion have been broken down by the internet and other new technologies. For many small and mid-sized businesses, without the scale to set up operations abroad, the digital world is principally how they are engaging with the global economy.
Yi says the WTO has the digital economy and services high on its agenda once the Doha round is concluded, although experience tells us this may be some way off. In the meantime, expect regional deals to lead the way.
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