Another Doha Round Impasse

July 29, 2008 07:00 PM

via a special arrangement with Informa Economics, Inc.

A likely new direction ahead for trade negotiations

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

As I thought for a while, the Doha drama ended up a comedy of errors, as trade protagonists from the U.S., India and China could not settle entrenched differences and instead will leave Geneva with a mandate to change the process and perhaps the underlying negotiations.

The key disagreement centered on measures to protect farmers in developing countries from surging imports -- China and India demanded a "safeguard" clause that would allow them to raise tariffs on key crops such as cotton, sugar and rice if there were a sudden surge in imports. The two sides could not agree, however, on where to set the threshold for any import surge that would trigger the clause.

WTO Director-General Pascal Lamy said he would "wait for the dust to settle" before deciding how to proceed. He also said that ministers agreed that the advances made during the nine days of talks should be "preserved or captured" in some form. "That suggests they haven't thrown in the towel" on the Doha talks, he argued.

But a more realistic viewpoint came from European Trade Commissioner Peter Mandelson, who noted little hope of bringing the Doha talks back to life anytime soon. "In all honesty, I don't think there's any realistic chance of modalities being agreed this year or in the foreseeable future," Mandelson said, referring to the term for the “breakthrough agreements” in agriculture and non-agricultural market access (NAMA) which ministers tried in vain to conclude at their Geneva-based gabfest.

Brazil waited too long in the process to play the leadership role, but its foreign minister, Celso Amorim, said he believed success was still possible, although he acknowledged it would take "quite a while to get back into the game."

Amorim added, “It is unbelievable that these complex talks failed over one issue. I remember the Italian writer [Italo Svevo] who wrote 'I remember everything, but understand nothing.' That is how I feel as I leave here today."

Importantly, Brazil would have accepted a 56 percent cut in its industrial tariffs.

U.S. Trade Representative Susan Schwab said, "On Friday night we were so close to getting this done. We remain committed to the Doha Round; this is not the time to talk about a round collapsing.”

India's new clout in trade talks. Indian trade and commerce minister Kamal Nath said, "It's unfortunate that in a development round, we couldn't agree to an issue of livelihood and security.”

Nath added, "This is a round where we're supposed to be getting, not giving.

The EU's trade chief said another casualty was the ability of WTO members to rein in U.S. spending on farm subsidies, which was recently boosted by the adoption of the nearly $290 billion, five-year Farm Bill.

The U.S. made an offer to cap its overall trade-distorting support at $14.5 billion a year -- down from its current WTO-permitted cap of $48 billion a year -- but made it conditional on an acceptable outcome on reducing agricultural and industrial tariffs.

But in a new version of a food fight, the talks eventually foundered over the issue of the special safeguard for developing countries, and in particular the conditions for imposing tariff hikes.

Schwab said, "It's ironic that while there's a global food crisis, these talks came down to how much and how fast countries should have a right to raise their tariffs.”

The killing issue was the inability of the U.S. and India to agree on the point at which developing countries could temporarily raise duties on farm imports above their existing "bound" (i.e. maximum WTO-permitted) rates during the 1986-1993 Uruguay Round of trade talks.

China broke its usual silence in global trade talks when it argued it should be allowed to raise tariffs on sugar, cotton and rice if imports should increase.

"Having protected its own interests, the United States is asking a price as high as heaven," Chinese Commerce Minister Chen Deming retorted Monday, according to Xinhua news agency.

USDA Undersecretary Mark Keenum defended the U.S. stand, saying that U.S. flexibility on farm subsidies was not matched by flexibility from India on reducing tariff barriers to its agricultural market.

"Unfortunately, we were not able to get the market access we came for in return for what we put on the table on domestic support," Keenum said. "We made a very good faith effort."

Just not good enough.

Comments: Trade negotiations surely will not end, but the focus now will be on bilateral and regional trade agreements.

As for the failed Doha Round, one thing is clear: the emergence of China, India and Brazil as trade powerhouses, with far different goals and issues than the prior trade chieftains – the U.S. and the EU – are used to dealing with. New players in some of those countries are needed to reach new trade accords.

U.S. farmers and their lawmakers had mostly opposed Doha, even though President George Bush wanted a successful outcome as one of his presidential legacy items. The sugar, dairy and cotton lobbies feared losing subsidies and tariff protection, while corn and ethanol proponents fought reductions in tariffs on imported biofuels that clearly would have accompanied a final accord. Among those pushing the agreement were U.S. manufacturers with a big caveat of a must-have boost in market access overseas.

Farmers in other countries also rejoiced regarding the Doha breakdown. ``We're breathing a sigh of relief for now,'' said Hiroyuki Kominami, a spokesman for the local farmers' association on Japan's northern island of Hokkaido. “Ever since the liberalization talks began in 2001, we've felt like we were being slowly choked to death.'' The president of a leading French farmers' union, meanwhile, hailed the outcome of the talks. "It's reason that won out," Jean-Michel Lemetayer of the FNSEA union said.

As for Doha's future, Schwab predicted that "In the future, we could have a global trade round, but we'd probably have a building block process, agreeing on issues one by one, instead of waiting until you've agreed on everything.”

As for the Doha Round negotiators, they simply failed. It's that simple regarding a not-so-simple matter.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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