Quotes of the Day

Gatherings of world trade officials tend to be messy affairs. They are huge. Months before they take place, they are invariably described as "make-or-break," or with some other breathless phrase, and are accompanied by much public posturing. If they don't collapse in mutual recrimination—as did recent World Trade Organization (WTO) meetings in Seattle and Cancún—most of the action takes place in a mad flurry during the last few hours, when previously unshakable national positions suddenly melt away in compromise. Then comes the spin. "Trade negotiators are famous for saying that the agreement they've just struck is not a good one," says an official at the WTO secretariat in Geneva, who jokingly describes the group as the "half-a-loaf outfit—not what we wanted but still better than nothing."

The Dec. 13-18 meeting in Hong Kong is gearing up to fit this same fractious, muddled pattern. Even by the standards of global trade talks, it will be gargantuan: government ministers and their aides from 148 countries are scheduled to attend, not to mention thousands of lobbyists, armies of protesters from around the world, and some 3,500 journalists. What's striking this time is the palpable nervousness in the air. The meeting is billed as critical for wrapping up a new multilateral trade accord, the ninth since 1947. This one is known as the Doha Development Round because it was conceived four years ago in the Qatari capital and is supposed to give a special boost to poor countries. But at a moment of rapid change in the world economy, with China emerging as an industrial colossus and India and Brazil starting to throw their weight around, the stakes in Hong Kong are higher and the pre-meeting positions more intractable than ever. Talks on freeing up agricultural trade are stuck as usual, and without a breakthrough there, little else can happen. Following recent inconclusive talks in London, expectations for Hong Kong are being drastically scaled back. "Unless a miracle happens, I don't see anything emerging in Hong Kong. Nobody I know believes a deal can be struck," frets Jagdish Bhagwati, a specialist in the economics of trade at the Council on Foreign Relations in New York. Pascal Lamy, the director-general of the WTO, acknowledged as much this month when he said that too little progress has been made even to have a full draft text of a new trade accord ready for Hong Kong.

Amid all the punditry, grandstanding and technical talk—the WTO has a language of its own that includes arcane concepts such as "Swiss coefficients" and "amber box support" (don't ask)—it's easy to lose sight of the big question: Does it really matter if the Hong Kong talks sputter and the Doha Round fails? The global economy, after all, has been humming along nicely under the old rules, which date back to the Uruguay Round in 1994. Since the U.S. bounced back from its post-9/11 slide, world economic growth has been more buoyant than at any time in the past three decades. Some experts, including those who support further trade liberalization, say that the damage may be limited if Doha fizzles. Joseph Stiglitz, a former World Bank chief economist who won the Nobel Prize for economics in 2001, points out that one of the key advances of the Uruguay Round was the establishment of an international rule of law for trade and a body to enforce it—the WTO itself. It has delivered some stinging blows to both the European Union and the U.S., including rulings that some of the most contentious subsidies they pay to their farmers, on cotton and sugar, are illegal. Absent a Doha agreement, says Stiglitz, "the best hope for developing countries would be for them to use that rule of law to push back at the U.S. and the E.U. Once they have shown that subsidies are illegal, they can then come back to the bargaining table."

There's no question that the multilateral system governing global trade remains inherently unfair, tilted in favor of the U.S. and the E.U., which have long set the agenda. Failure to correct the flaws means that the politics of trade will just get nastier. The global economy stands to lose out, too. It's widely assumed that new tariff cuts and the removal of trade barriers would substantially boost growth. Estimates of the size of that boost vary widely, from labor union economists, who say it would be minimal, to the University of Michigan, which figures a reduction of trade barriers by even one-third would increase global economic output by $574 billion a year.

But the biggest concern is that a failure to make progress in trade liberalization could mean a lurch toward protectionism. The mood in many parts of the world is turning hostile to free trade in the face of low-cost competition from China in manufactured goods and India in IT services. As evidence, consider how the recent accords that Washington and Brussels struck with Beijing imposed new limits on the growth of textile imports from China—trade barriers that had been eliminated earlier in the year. That sort of backsliding, coupled with efforts by many countries to negotiate bilateral or regional trade accords outside the WTO framework, sends shivers through multinational corporations, who are the first to feel the impact of trade restrictions. The Doha round is needed to "keep in check the ever-present threat of protectionism," says a petition signed this month by the chief executives of 60 companies including Microsoft, Nestlé and corporations as far afield as China and Pakistan. The statement urged governments to "redouble their efforts to break out of the current impasse." A similar plea came from 21 leaders of Pacific Rim countries attending the Asia-Pacific Economic Cooperation Forum in South Korea last week. They issued a statement urging developed countries to be more flexible on farm subsidies so trade liberalization can move forward.

The pressure is intensified by the fact that time is running out. The "fast-track" authority enabling U.S. President George W. Bush to sign off on the Doha round expires in July 2007. That means any agreement that isn't reached by the end of next year could be killed by the U.S. Congress. Hong Kong, a place that epitomizes the benefits of free trade, provides an opportunity to hammer out some of the disagreements so that a deal can be wrapped up in time. Even if the conference fails to produce the outlines of an accord, as now looks probable, it may not be an outright failure. The big question is whether Lamy manages to persuade the delegates to keep the momentum going or, better still, accelerate it. And the clearest sign that he's succeeding will be if all the ministers pile out of their meetings complaining about the half-loaf they've just agreed to accept.

• Peter Gumbel
• The WTO meeting in Hong Kong will be fractious and frustrating, but it may not be the total failure many expect