Doha Round – Just Do It

January 18, 2007

The Doha round – the WTO trade liberalisation cycle started in 2001 under the motto of “development”, and which collapsed last summer due to a deadlock in agricultural negotiations – is still not about to be sent to the “crematorium”, to use the term forged by India’s trade negotiator Kamal Nath.

If you haven’t had time to read the papers on the many noises and new movements on the screens of the encephalograms observing the comatose Doha patient, please read the latest edition of the Bridges Weekly newsletter from the Geneva-based think tank ICTSD for a comprehensive synthesis of what seems to be going on at the moment. Fundamentally, it is about de-blocking the negotiations on agriculture. To any person with some common sense it would seem abnormal that a sector that only represents 8,4% of world trade (see 2006 WTO world trade statistics) shall bloc the advancement of other sectors that matter much more in global economic terms; and this to the benefit of a few spoilt farmers in rich countries! So, if international trade-diplomacy relations were soured last July – to fit into the climatic vocabulary of this blog – ICTSD speaks of “improved atmospherics”.

This week’s newsletter drew my attention to a paper written by Sandra Polaski from the Carnegie Endowmnent for International Peace. Eight pages proving that the conclusion of the Doha round is doable. It is a Nike-question of “just doing it”.

A few useful points made by Ms Polaski:

1) Although all the main negotiating heavyweights are responsible for the collapse, the ultimate culprit was the US last summer, due to what Ms Polaski calls the US’ “maximalist” negotiating stance, especially in the face of the demands for special treatment of “special products” made by a coalition of developing countries called the G33.

2) The paper argues that the US, as the world’s number one exporter of agricultural goods, has benefited from the spectacular growth of developing countries, namely in South and East Asia, despite continued levels of protection in many of these countries. Agricultural protectionism in developing countries is not the main problem for US exporters, but their overall poverty.

“For developing countries as a group, agriculture accounts for 55 percent of employment. In very low-income countries, the share rises to 68 percent of employment. Contrasting that huge share of livelihoods dependent on agriculture with the United States, where less than 2 percent of employment is in agriculture, illustrates the critical importance of this sector to the overall economic health of these countries

3) Consequently, so goes the argument in the paper, the US should let loose on its hard-line stance on special products as bargaining chip for the reduction of agricultural subsidies such as demanded from developing and other countries pushing for more agricultural liberalisation:

“The current U.S. trade proposal, in effect, holds hostage the trade interests of the overwhelming majority of U.S. exporters—and the workers and suppliers who depend on them—to the trade interests of a very small group of agricultural exporters. The agricultural constituency is even smaller than it appears based on the export figures. The domestic farm subsidies that the United States has insisted on protecting go to only half of U.S. farms. Within that group, the overwhelming share goes to very large farms and agricultural corporations. It is hard to defend a bargaining stance that caters to the interests of such a small segment of U.S. firms and households while blocking negotiations on manufacturing and service sectors that offer much wider benefits.”

This week too, the ICTSD reports on a paper circulating among a group of mid-sized countries with many interests in agricultural liberalization and who are not members of the group of big countries whose disagreement ultimately led to the July 2006 collapse. It outlines three possible scenarios for a final way out of the current deadlock. The least ambitious one goes thus, so ICTSD:

“Under the least ambitious ‘scenario A’, the document foresees a 65 percent cut in US overall trade distorting support, to USD 17 billion. The current US proposal would cut its own ceiling level for these subsidies by 53 percent, to roughly USD 22.5 billion – still higher than the USD 19.7 billion spent in 2005. EU subsidies would be cut by 70 percent, which corresponds to what it has tabled in the negotiations.

In return, the EU (and other developed countries) would have to cut tariffs by an average of 52-54 percent. This is close to the 54 percent average tariff reduction sought by the G-20 group of developing countries. It is also higher than Brussels’ original proposal of 39 percent, as well as slightly above an informal offer of about 51 percent which it made immediately before the talks collapsed in July 2006. Countries would be allowed to shield 5 to 8 percent of their tariff lines as ‘sensitive products’, and would have to expand tariff rate quotas for these products by 2-3 percent of domestic consumption – closer to the EU’s aims than to those of the US.”

There are more ambitious scenarios – but does anybody believe in them with current time-lines and French elections looming ahead? This one can surely be done (if France does not block Mandelson and George Bush means it with his injunction to “get it done”). Yes, why not “just do it”?

In my opinion the Doha round needs to be concluded soon to maintain a basic credibility for the WTO (and not least in the interest of agricultural liberalisation). It seems that the current state of proposals, even as modest as they are, would still bring substantial economic benefits. The WTO institutionality and the method by which trade liberalisation will be negotiated in future will need a comprehensive overhaul. Because, with Vietnam’s accession as the WTO’s 150th member this month, it is too big to make future rounds à la GATT doable. But if it fails completely on Doha, I doubt there will be a true reform momentum, but rather a complete concentration on regional and bilateral agreements with a concurrent sinking of the WTO into oblivion.

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