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When it comes to the World Trade Organization’s Doha Round of trade negotiations, the resolution of the G-20 meeting in Toronto can be characterized as vapid. The best the G-20 could do was reiterate its support for achieving an agreement and direct negotiators to “report on progress at our next meeting in Seoul where we will discuss the way forward.” In other words, nothing is expected to happen.

Originally scheduled to end in 2005, the Doha negotiations have dragged into their ninth year. The centrality of the WTO in the trading system is disappearing as its members increasingly pursue their trade interests through bilateral agreements.

While an agreement on the round would offer substantial economic benefits by reducing farm subsidies and opening up new markets, political obstacles inhibit its conclusion.

Many observers assign blame to the complexity of 153 members reaching consensus on an agenda with dozens of issues, but the heart of the matter is far simpler.

If the United States and China stepped up to the plate with new offers, the momentum for a speedy agreement would be unstoppable.

Political considerations prevent this from happening. US President Barack Obama has pushed trade policy to the back burner. He needs nearly unanimous support from congressional Democrats to enact his domestic agenda.

Trade agreements are risky business because many Democrats depend on unions that believe free trade means lost jobs.

To counter their arguments, the administration needs to sell trade agreements as a credible strategy to boost US employment by doubling exports.

The administration also needs strong support from Republicans who are allied with business.

Thus far, US firms are lukewarm about the Doha Round because it seems to offer little new from the large emerging economy markets, especially China.

This is no surprise. China is reluctant to make new concessions, having made formidable concessions in the talks that led to its accession to the WTO in 2001.

Citing these “contributions,” it has adopted the I-already-gave-at-the-office stance when asked to contribute more.

But US firms long ago pocketed the concessions China made when it acceded, and see no reason to make new concessions and get nothing in return.

In 2001, the Chinese position was eminently reasonable. Beijing agreed to liberalize its economy to a much greater degree than existing members at its level of economic development.

China faced immense challenges to meet its accession obligations. It would have been unreasonable to expect more concessions if the round had been concluded in January 2005, as originally agreed.

But it is now 2010. China has adapted to the world trading system to a degree that has surpassed all expectations. Its merchandise exports have exploded from $267 billion in 2001 to an estimated $1.55 trillion in 2010.

The rule-based WTO regime is ideally suited to China’s needs today and in the decades ahead. China has a huge responsibility to sustain and nourish the world trading system rather than simply reaping its benefits.

In short, given the passage of time, China now needs to put additional offers on the table.

Among these offers, China should agree to join the WTO’s Government Procurement Agreement, which binds its participants to minimal transparency and fairness in allocating contracts for government purchases.

This should apply to provincial governments as well as the central government.

This would ensure foreign products enjoyed nondiscriminatory treatment and quieten foreign concerns about China’s controversial “indigenous innovation” program.

China also should volunteer to join sectoral liberalization agreements in chemicals, electronics and environmental goods and services.

Finally, China should be at the front of talks to liberalize services, not dragging the rear. These would be widely recognized as new and meaningful concessions.

If China acts as a leader in the trading system it should be recognized as one. In its WTO accession agreement, China reluctantly agreed to be treated as a nonmarket economy in antidumping duty cases until 2015.

Again, as a nonmarket economy, China agreed that its exports could be subject to special safeguards with a lower trade impact threshold (“market disruption”) than normal safeguards applied to other WTO members.

This provision was invoked by Obama in the tires case last year. Finally, China agreed to annual compliance reviews of its implementation of the accession agreement, something China views as humiliating.

In return for Chinese concessions, we propose the United States and other developed countries grant China market economy status, with normal remedies in antidumping and safeguard cases, and also end the annual compliance reviews.

If the United States and China are on board, other major players will feel pressure to contribute. India, with its interest in maintaining open markets in information services, should join the services talks.

Brazil and other successful developing countries should do likewise and make concessions on industrial products.

These proposals could make the Doha Round a political winner. Major concessions by China and a few other emerging countries would be seen in the United States as evidence of greater market access in countries that count.

China would not only advance its status as a full participant in the world trading system but also as the leader that delivered the benefits of the Doha Development Agenda to all developing countries.



Gary Hufbauer is a senior fellow at the Peterson Institute for International Economics. Robert Lawrence is a senior fellow at Peterson and a professor at Harvard University’s John F. Kennedy School of Government.

East Asia Forum