WTO faces tough choices after latest Doha setback

World Trade Organisation members have little time left to rescue the 10-year old Doha trade talks and end a fight over manufacturing trade between the United States and major emerging economies like China, India and Brazil before they meet next week in Geneva.

Background

The Doha Development Agenda, launched in November 2001 in Qatar's capital Doha, aimed to free up global trade by cutting industrial and agricultural tariffs and by reducing farm subsidies, with a special focus on achieving concrete benefits for developing countries.

The initial target was to finalise the negotiations by the end of 2005, so that the agreement could be approved by the US under the fast-track procedure of the 'Trade Promotion Act' (TPA), which allows the president to adopt international trade agreements without Congress altering them.

But successive deadlines have been missed and the US TPA expired on 1 July 2007. The talks in Geneva, convened by World Trade Organisation Director-General Pascal Lamy, began in July 2008 but quickly ran into trouble and have since been deadlocked.

With trade up 10% in 2010 and leaders praising the World Trade Organisation (WTO) for its success in containing protectionism, cautious optimism is emerging that the time may be ripe for a breakthrough.

After weeks of consultations with the WTO's 153 member states, the organisation's director-general, Pascal Lamy, said yesterday (21 April) in a note accompanying new negotiating documents that differences between countries over how much to cut manufactured goods tariffs were "unbridgeable". That posed a "serious risk" to the rest of wide-ranging negotiations that also cover agriculture, services and a number of regulatory issues such as fish subsidies, anti-dumping rules and non-tariff barriers, Lamy said. Members, including the United States, now face the tough choice of whether to cling to long-held positions or to modify their demands in the hope of striking a deal. But US President Barack Obama's administration knows that Congress may reject any agreement that does not create big new export opportunities for US farmers, manufacturers and service companies.

The Doha round was launched in 2001 in the capital of Qatar with the goal of helping poor countries prosper through greater access to markets in rich countries.
Lamy's grim warning that the talks were on the brink of failure came one day after a former top US trade official said the Doha round was "doomed".

"For years, the threat of being blamed for the Doha Round's collapse has made it too risky for governments to suggest that the talks are dead," former US Trade Representative Susan Schwab wrote in the latest issue of Foreign Affairs.

"But the pretense that the deal will somehow come together at long last is now a greater threat to the multilateral trading system than acknowledging the truth."

Rescue operation

Countries are expected to start thrashing over the question of what to do next when the WTO's main negotiating forum gathers next Friday (29 April) in Geneva.
Schwab argued that countries should try to salvage what they can from the Doha round to bring the talks to a close in 2011, and then move onto new initiatives focused on reducing barriers to trade in areas like health care, pharmaceuticals and medical equipment or standardising rules for e-commerce.

She suggested harvesting a "trade facilitation" agreement from the Doha talks which the Washington-based Peterson Institute for International Economics has estimated could boost global gross domestic product by more than $100 billion by reducing the costs of moving goods across borders.

Portions of the agricultural negotiations covering proposed agreements on export credits, food aid, state-trading firms, and the elimination of export subsidies could also possibly be saved, Schwab said.

Certain environmental agreements might also be within reach, such as "cutting subsidies to industrial fishing fleets guilty of overfishing the world's oceans and [...] ending tariff and non-tariff barriers to 'green' technologies in major producing and consuming countries," she said.
That would require giving up hope for a broader agreement covering all of those elements as well as new market-openings in agriculture, manufactured goods and services.
But repeated effort has shown the differences in the market access talks are too difficult to overcome, Schwab said.

'Fundamentally different views'

Lamy said he had concluded that talks on manufactured goods were unbridgeable after consulting with seven WTO members: Australia, Brazil, China, the European Union, India, Japan and the United States.

Countries have already agreed most manufactured goods tariffs would be cut by two formulas: one for developing countries like China, India and Brazil, and another for developed countries such as the United States, EU members and Japan.

Washington complains its formula would require it to further cut its already low tariffs on most goods and dramatically reduce "peak" tariffs on sensitive items like textiles and trucks, while the developing country formula would allow China, India and Brazil to keep much higher duties.
To level the playing field, the United States wants those countries to sign up for additional "sectoral" pacts covering goods like chemicals, industrial machinery and electronics, where participants would reduce tariffs more aggressively.

But China, India and Brazil are resisting the US terms, creating an impasse. Members simply have "fundamentally different views" in the manufactured goods talks, Lamy said.
(EurActiv with Reuters.)

Positions

EU Trade Commissioner Karel De Gucht signalled that the world should prepare for the possible collapse of the round.
"There is no reason to be optimistic at this moment in time," De Gucht told European lawmakers earlier this month, adding that if Doha talks fail there should be a "Plan B".
Brazil’s ambassador to the WTO, Roberto Azevedo, said one option might be to split the Doha Round into more manageable parts.
"If we can't break the impasse the next question is, is there anything we can salvage?" he said. "This conversation has not started."
In an interview with IPS, Abdoulaye Sanoko, counsellor at Mali’s mission to the World Trade Organisation (WTO) in Geneva, said a Doha round collapse would be a betrayal of poor countries.

"It would be bad news for poor countries in Africa if the Doha Round of trade talks fails. This round was meant to rebalance the rules of world trade in favour of developing countries. We have put a lot of resources and hopes into this process and a collapse would be a big betrayal for us."

Source: EuroActiv with Reuters