Time to scale down ambitions at the
WTO By Indrajit Basu
Trade ministers from 60 of the 149 World
Trade Organization member states talked in Geneva
for three days last week but failed to agree on a
blueprint. The conference collapsed two days ahead
of its scheduled close, preceded by a walkout by
Indian Commerce Minister Kamal Nath in protest
against the talks' futility.
The breakdown
was hardly unexpected, as it was clear that few
members were ready to relax the rigid position
they had held for the past two years. While WTO
opponents used the collapse to endorse the view
that globalization was in crisis again, others
said any hopes for an agreement at this
"mini-ministerial" conference,
on
reducing farm subsidies and import tariffs for
agriculture and industrial products as a part of
the Doha round on multilateral trade, were overly
optimistic anyway.
Not only have the WTO
talks entered the most complex phase of
negotiations, where unanimous agreements are
difficult to arrive at, but the time may have come
to scale down the ambitions of the member
countries.
"It is ridiculous to assume
that the Doha round can be concluded so easily and
within just a few years,” says Biswajit Dhar, head
of the Center for WTO Studies at the Indian
Institute of Foreign Trade. "The last two rounds
of negotiations, the Tokyo round that began in the
1973 and the Uruguay round that began in 1986,
carried on for six years and seven years
respectively, when developing countries were not
involved. But the Doha round that started in 2001
has all contentious issues thrown in and now
involves the developing countries. It is would be
unduly optimistic then to expect that a round as
complex as the Doha round could be concluded in
barely three or five years.”
The meeting
started in Geneva last week, with WTO members
including the European Union, the United States,
India and Brazil, to craft a blueprint for a
global treaty by the end of 2006 that would cut
trade barriers across various sectors, from
agriculture to services, wrapping up the so-called
Doha round of talks. But sharp differences between
developed countries - especially the US - and the
developing countries, led by India and Brazil, led
to failure as members refused to show flexibility
and clung to their original positions.
While the US refused to reduce farm
subsidies to the levels demanded by the developing
countries like India, Brazil and China (members of
the so-called G20), the EU stance also was an
obstacle: it offered just a 50% cut in its
agriculture tariffs instead of 64% suggested by
the US.
On other hand, India and Brazil,
which represented the developing countries in the
negotiations, were upset because the US, instead
of talking about reducing subsidies, actually
wanted to increase them while at the same time
insisting that developing countries open their
markets to industrial products.
“They were
willing to offer $19.5 billion on farm subsidies
and even demanded the flexibility to go up to
$22.5 billion,” said Kamal Nath, “so the US was
going in the reverse direction.” According to him,
the G20 had proposed that the US should bring down
its farm subsidy levels to $12-13 billion. The
developing countries were thus forced “to take a
tough stand and quit”.
However, according
to Biswajit Dhar, more important than the fact
that almost all members of the WTO refused to
budge is to recognize that talks have now entered
a complex phase and “each country has to accept
that it has its own political and economic
compulsions, and therefore they should have the
patience to sort them out”.
To understand
this it is necessary to go back in history. The
multilateral trade talks started way back in 1948
as "GATT" - General Agreement on Tariffs and Trade
- primarily to thrash out trade treaties between
the developed countries. Developing countries were
not involved because, among other reasons, it was
recognized that it was important for them to
conserve their foreign exchange reserves for their
internal economic development instead of spending
them on imports.
Not until after the Tokyo
round of talks did multilateral trade negotiations
involve parties other than developed countries or
members of the Organization for Economic
Cooperation and Development (OECD). The items
under negotiation were also comparatively simple
as they mainly dealt with industrial products
rather than sensitive items like farm products,
textiles and clothing, and intellectual property
(IP).
These items were however brought
into the Uruguay round of talks, but even as that
round became more complex, it was still simpler
than the Doha round because farm products,
textiles and IP were only included as items for
discussion and not as items for negotiation.
Moreover, Uruguay did not have the effective
participation of all developing countries although
they were included as members.
The Doha
round on the other hand started with a completely
different structure: it included the developing
countries. These countries were told to work
towards facilitation of freer global trade by
reducing their tariff levels on sensitive items
such as farm products. They were expected to
reduce tariff levels too according to the wishes
of the developed countries. For instance, India is
under pressure to reduce import duties on
industrial products to 15%, while India wants to
reduce them to 40%.
“This is why
negotiation has become far more complex and
therefore there is now a need to lower ambitions
or expectations,” says Dhar. According to him the
developed countries should accept that despite
their intentions, developing countries cannot
conform to the terms of the WTO at the pace
desired by the developed countries, while
developing countries should also pay heed to the
fact that developed countries too have their
political and economic concerns.
“That’s
the only way to salvage the ground lost at the
Geneva meet,” says Dhar.
The salvage
exercise may already have started. Undeterred by
the Geneva collapse, trade ministers of India and
five other key players - the US, EU, Brazil,
Australia and Japan - are again talking about
making another attempt at the end of this month to
reach an agreement for completion of the Doha
round before December 2006.
WTO Director
General Pascal Lamy has been asked to step in and
work out a compromise between members. In fact,
according to EU Commission President Jose Manuel
Barroso, the Geneva failure comes with a positive
side effect in the sense that the key members are
now under “additional pressure to put in some more
effort".
And some of that effort has
started emerging already. For instance, India
reportedly made its first major compromise on
Tuesday by agreeing to the tariff reduction
formula for industrial products proposed by the
developed countries.
Still, many say that
the onus of getting the Doha round through
eventually lies mainly with the US. And if it does
not budge, then the Doha round will most likely
remain on hold until after the US presidential
election in 2008, because President George W
Bush's fast-track authority to strike trade deals
expires next July, and after that the US Congress
can either say yes or no to a deal, but it cannot
make changes.
Indrajit Basu is a
Kolkata-based writer.
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