Why business must end it

The two most critical priorities on the global agenda, trade and climate change, once again got pushed under the G20 carpet last week in Seoul. Of the two, trade is the most immediately critical. There is a grave risk that the world economy will collapse into a protectionist spiral. The best means to ensure that this does not happen is to conclude the Doha Round. Rather than address the issue seriously, the G20 has again done no more than pray the lid will stay on the protectionist cauldron.

Seoul was a variation on what has become by now a depressingly familiar G20 theme. At the Washington 2008 summit the leaders declared they would instruct their trade ministers to conclude the Round before the end of the year. In April the following year in London it was to be concluded by 2009. In Pittsburgh the moveable feast was postponed to 2010. This June in Toronto, it was deemed safest to opt for the vague "as soon as possible”.

So what did the Leaders’ Declaration from the November 2010 Seoul summit have to say on the subject? The relevant article (43) declares that "2011 is a critical window of opportunity” and consequently "we direct our negotiators … to promptly bring the Doha Development Round to a successful, ambitious, comprehensive, and balanced conclusion”.

Four points:

First, the language is not only depressingly similar to that used in all previous G20 summit declarations, but also to meetings on trade convened by the League of Nations in the late 1920s and early 30s!

Second: 2011 a window of opportunity? With France in the G20 presidency? Nicolas Sarkozy is a visceral protectionist. While leadership could have been hoped for from Korea on trade, any such expectations in respect to France should be rapidly obliterated!

Third, it is not up to the trade negotiators to conclude the Round, but the heads of government themselves. Trade negotiators take orders from their political bosses.

Fourth, and most critical, there will be no conclusion to the Doha Round until and unless big business really commits. In parallel to the G20 summit Seoul hosted a B20 summit of business leaders. The business leaders present did make the case for the revitalization of trade.

However, business does not speak with one voice. One big disappointment at Seoul was that US President Obama and Korean President Lee failed to conclude the bilateral US-Korea FTA. This was a vital litmus test; its conclusion could have served as a lynchpin to a renewed trade agenda. A major opponent and obstacle was the Ford Motor Co.

Business is more active and obstructive behind the scenes and hence more effective than on public platforms.
The global trade scene has undergone unprecedented transformation. A decade ago, in 2000, China was not yet in the WTO and was still a somewhat peripheral actor in global trade. A decade later the erstwhile global trade applecart dominated by the "quad” – Canada, EU, Japan and US – has been completely upset.

China has emerged as the world’s leading trading power, while other "emerging” countries – Brazil, Vietnam, India, Turkey, South Africa, Chile, etc, etc – are both far more present on global markets and demand greater say in global trade governance. Transformations invariably cause turbulence.

The fact that there is turbulence is all the more reason why leadership, good governance and a solid rules-based multilateral trade framework are absolute imperatives. This however is unlikely to happen without business involvement and leadership. Yet, with some notable exceptions, business leadership is sadly myopic and blinkered.

What is at stake is nothing less than the global open market system and capitalism itself. We are, as in the 1930s, at a crossroads. The conclusion of the Doha Round would provide the single most important boost to confidence in the system and also a great stimulus to the world economy. It would also demonstrate the commitment of global leaders to the development agenda.

It is not, one must hasten to add, a panacea. But in the same breath one can also say that failing to conclude the Round soon will exacerbate the forces of protectionism and hasten the demise of capitalism.

Business support, indeed leadership, for the conclusion of the Doha Round is not a matter of idealistic global altruism; it is one of enlightened self-interest and it is an urgent imperative. So, for the prospects of global trade, do not look to the Elysée, but to the CEOs and boardrooms of those 3500 or so multinational companies that account for the bulk of world trade.

It has been said that the main problem with communism is communism, while the main problem with capitalism is capitalists, that they are the agents of their own destruction. As capitalists face the system’s gravest challenge in eight decades, it remains to be seen whether this adage is true.

Jean-Pierre Lehmann is Emeritus Professor of International Political Economy at IMD and the Founding Director of the Evian Group @ IMD. He is the co-editor, with his son Fabrice Lehmann, of Peace and Prosperity Through World Trade, Cambridge University Press.