This adds immensely to the pressure to revive, in one last desperate bid, the World Trade Organisation's Doha round.
THE great hope for a new world economic order to emerge from the rubble after the global financial crisis -- the G20 -- is crumbling already.
Peter Sutherland, who was the first director-general of the World Trade Organisation and is now chairman at Goldman Sachs, told The Australian that Canberra, led by Trade Minister Craig Emerson, had a vital role.
"Australia has always played a strong part in world trade, and has never been afraid to voice strong opinions, and now is the time to do it. You can't rely on regionalism as an answer to Aussie prayers," the Irishman said.
"We badly need Australia to speak up, to take the gloves off, and I hear very good things of Trade Minister Emerson."
If the global rules-based system collapses, "the smaller boys -- and that, for this purpose, includes Australia -- will get bounced by the big players".
The top agenda item for last weekend's G20 finance ministers meeting in Paris was to move decisively, in a concerted way, to address the global imbalances that had triggered the crisis and are hampering a full recovery.
Instead, the meeting lamely cobbled together the following paragraph, intended to cover its core priority -- to decide which policies will be outlawed for deepening the imbalances:
"While not targets, these indicative guidelines will be used to assess the following indicators: (i) public debt and fiscal deficits; and private savings rate and private debt (ii) and the external imbalance composed of the trade balance and net investment income flows and transfers, taking due consideration of exchange rate, fiscal, monetary and other policies."
The "indicative guidelines" themselves were left on the table for the next meeting, in Washington in April. The last G20 leaders' meeting, in Seoul, was largely a flop.
But China, the world's second-largest economy and Australia's biggest trading partner, is not about to be browbeaten into conceding anything that may soften the rapid growth that remains crucial to its ruling Communist Party's legitimacy.
Chinese central bank governor Zhou Xiaochuan, underlining this, said in Paris: "External pressure has never been an important factor of consideration, and we have never paid special attention to it."
Such statements do not rule out aligning policies with international requirements -- they just create a distance from the perception of responding to pressure.
Leading economist Peter Drysdale, at the Australian National University, said: "Something has to give. Not all countries can have export-led growth, if that is defined to mean a faster growth rate of exports over imports in all major economies.
"This is what has made the focus on the need for currency re-alignment, and on China as the country that needs to lift its exchange rate, so intense."
Sutherland said the Doha round, which was tantalisingly close to completion, would unleash a fresh wave of international growth. World leaders had to become better informed about the deal, he said.
"Most see it as a quagmire they don't understand. But it's not too complicated. They have to engage," he said. "Failure to reach agreement on the core issues by July at the latest would damage very seriously the whole multilateral trading system, that is already under considerable stress."
Business, he said, had largely switched off the process as it has dragged on for more than 10 years, so "the countervailing lobby to the protectionists is weakening".
At the same time, the alternative, bilateral and regional trade agreements have also failed to produce the gains for which the corporate world had hoped.
"The whole thing has become farcical," he said. "Everyone is fed up to the back teeth with it."
Sutherland has recently written, with leading Indian economist Jagdish Bhagwati, a report on Doha commissioned by the leaders of Germany, Britain, Indonesia and Turkey, on "setting a deadline, defining a final deal".
The report says that the deal, if clinched, "would lock in the liberalisation of the global economy over the last 10 years and lay the framework for another decade of liberalisation".
Sutherland said it was now down to the political leadership of the US, China, India and Brazil.
"I don't see Europe as a major culprit," he said.
In all the previous eight rounds of global trade deals, "nothing was concluded without American leadership", he said.
Is Barack Obama going to seize the day this time? "I simply don't know the answer."
The US President failed even to appoint a WTO representative during the first half of his presidential term -- but has just made an appointment.
The key, Sutherland said, was for the main players "to ask for enough, but not too much". The US had to move away from supporting its agricultural exports, China had to avoid letting its broader arm wrestle with the US "taint" the Doha deal, India had to cut its industry protection, "which is really a tax on developing industry", and Brazil -- the biggest winner from the deal so far -- had to give ground on non-agricultural market access.
"China will be the huge loser if multilateralism doesn't survive", warned Sutherland. That prospect is looming even as the former anti-globalisation forces that drove anti-WTO riots in Seattle are fading.
Nathan Backhouse, director of international trade and investment at Western Australia's Department of State Development, said European trade officials told him on a recent visit that if the financial crisis had been predicted, "everyone would have signed up to Doha".
He said the increase in the membership of the WTO was another factor making agreement harder. Domestically, he said, Australia, including industry, had failed to engender support for Doha because it had not sufficiently quantified, in bottom-line terms, the economic benefits.
Backhouse said industry had also often failed to take advantage of the bilateral and regional trade deals that had been signed since the Doha round languished -- in part because of the complexity of the rules of origin, which Australia policed scrupulously for its own exporters but lacked the resources to scrutinise compliance by imports.
And the big free-trade agreements with Australia's top two trading partners, China and Japan, continue to languish dispiritingly after five years of negotiations.
Most small and medium businesses also lacked the resources, he said, to tap in to the benefits from deals such as the FTA with ASEAN (the Association of Southeast Asian Nations).
The main benefit has been in the "head turning effect" of having the government imprimatur for building business relationships with certain countries.
But Emerson said on a visit to India last month: "Global prosperity and security can only be based on a global trading system and a global market.
"Just as was the case in Australia's great reforms of the 1980s and India's of the 1990s, the case for reform is made clearest in the context of a crisis. Once we stare into an abyss, the difficulties of changing our ways seem manageable.
"It is now the time to brush off this complacency, and to get down to the business of finally concluding this next phase of trade liberalisation. It is time we made history once again."
