Lest we forget

Enjoying the greatest, sustained economic expansion, beating the 1950s and 1960s, it is easy to take for granted the conditions and global framework that makes this success possible.

First, let's celebrate that in the past 50 years, life expectancy has increased by 20 years, infant mortality rates have dropped by two-thirds. Thirty years ago, Ghana's income equalled South Korea. Now, South Korea's income equals Portugal's. Malaysia and Haiti were equal in 1950. Burma and Thailand had equal incomes in 1945. Forty years ago, Japan was a developing country. The system can work if governments do the same thing.

The Doha Development Trade round offers the opportunity to lift hundreds of millions of people out of extreme poverty. But there are problems, almost a crisis. All multilateral trade rounds managed under the umbrella of the General Agreement on Trade and Tariffs, now the World Trade Organisation, are in crisis until a deal is done.

Perhaps major players, including China and India, feel things are good as they are now. There are alternatives to a multilateral solution, inferior, potentially dangerous, and multiplying in direct relationship to the lack of progress in the Doha negotiations.

Twenty years ago there were few regional and bilateral trade deals, now there are many hundred. They create trade distortion, trade diversion, some even restrict trade, none have a binding disputes mechanism, most have dozens of exemptions, and few do much in agriculture.

Stimulated

The latest South Korea-US deal excludes rice and, such as all such deals, products new privileges and preferences. This deal has already stimulated Japan and the EU to take more seriously its options with South Korea. Japan and Switzerland are doing a deal that excludes agriculture. Those lightweight deal on agriculture provides yet another opportunity for the protectionists to strengthen their defensive position on agriculture at the World Trade Organisation negotiations.

Many nations now seem to seek preferential deals, one by one, which are easier to sell domestically, but it's basically mercantilism which avoids the hard decisions at home and the long-term costs will be painful.

Ministers love to sign things, this frenetic activity is a poor substitute for direction and multilateralism. It diverts political attention and precious ministerial time. The costs to the greater global trading system are now beginning to be felt. The answer is, of course, getting the Doha Round finalised.

A world economy without a global trading system that can manage, in a clear, predictable, binding way, these disputes would quickly become dark and dangerous.

Despite all I've written about the perils of unilateralism and bilateralism, I'd be doing it if I were in government. There's a terrible cost to being left out. The global economy is facing a "lose, lose" situation. However, we should re-name the present spate of trade deals "Preferential Trade Deals" because they insult the concept of free trade.

Mike Moore is a former prime minister of New Zealand and a former director-general of the World Trade Organisation.