Following the collapse of the latest round of global trade liberalisation talks, fDi phoned up the various international bodies concerned with trade and investment to ask what effect they thought the unsuccessful end to the Doha negotiations would have on crossborder investment. As it happens, they were all on holiday and no comments were forthcoming from the few staffers left behind holding down the forts. Maybe that is an answer in itself.
Most of the main actors involved in the Doha drama concurred that the failure to agree a deal was highly regrettable – even if they disagreed about who was to blame for that failure; for some, it is bordering on a global disaster. The truth, of course, is that trade will go on, just at a higher cost t o most involved.
The same is true of crossborder investment flows: the consequences of the collapse of trade talks are not likely to be catastrophic by any means.
If FDI flows slow down at all later this year or next (and fDi’s in-house data suggest flows are holding steady so far in 2008), it would have more to do with lack of liquidity and a general economic slowdown than inadequate trade liberalisation.
The demise of Doha should not hurt FDI flows too badly; but it won’t help matters either. Even if FDI flows hold up in the absence of a global trade agreement, they will almost certainly have lost the chance of a boost that might have occurred later on down the line. We will never know.
But there is still a chance – not likely to be grasped enthusiastically enough to do much good to global business – to address the larger but often-overlooked issue of non-tariff barriers.
As nice as it would have been to see a lowering of tariff barriers and a reduction in trade-distorting subsidies, the biggest boost to worldwide FDI flows would come from cutting non-tariff barriers.
As EU trade commissioner Peter Mandelson told us in an interview shortly after the trade talks broke down (see Fierce about free trade), non-tariff barriers such as product licensing restrictions and discriminatory investment rules not only stifle free trade but also block the creation of supply chains and thwart market entry for companies interested in expanding into new territories.
For multinational companies, these barriers are the real impediments to overseas investment, and in many ways they are more pernicious than traditional trade barriers.
The death of the Doha dream is worthy of a few tears perhaps, but not so many as the long life and continued health of non-tariff barriers.