Bridges Trade BioRes • Volume 7 • Number 14 • 20th July 2007
WTO: DOHA ROUND GOING INTO HIBERNATION?
WTO: DOHA ROUND GOING INTO HIBERNATION?
Key diplomats at the WTO have proposed new compromise texts as a last-ditch effort to salvage the flagging Doha Round. These texts, written in the personal capacity of the chairs of the negotiating groups on agriculture and industrial tariffs, were put forth after Members failed to bridge the gaps in these key areas themselves.
The Doha Round, which was launched in Qatar in 2001, has missed numerous deadlines, and member governments are now expected to mull over the new texts during August, a month when activities in Geneva traditionally shut down for a summer break.
Progress on environment-related areas of the round — negotiations on liberalisation of environmental goods and services, on the WTO’s relationship with multilateral environmental agreements (MEAs) and on information exchange between MEA secretariats and WTO committees, as well as on curtailing destructive fishery subsidies — are all held hostage to the core issues of the round, namely agriculture and industrial market access.
Agriculture targeted in rich countries, industrial tariffs to go in poorer economies
The chairs of the agriculture and industrial goods negotiations — Ambassador Crawford Falconer (New Zealand) and Ambassador Don Stephenson (Canada) — issued texts on 17 July that identified specific figures for the cuts that could form the basis for an acceptable agreement, enabling a comparison between, say, potential constraints on US farm spending and India’s future industrial tariff rates.
Overall, the pressure is on the US to cut agricultural subsidies, the EU to cut agricultural tariffs, and developing countries to offer new market openings with regard to industrial goods. Divisions on industrial market access came to the fore last month, when the US and the EU blamed India and Brazil’s refusal to cut industrial tariffs for the breakdown of a high-level trade summit in Potsdam (see Bridges Weekly, 27 June 2007, www.ictsd.org/weekly/07-06-27/story1.htm). India and Brazil countered that the farm subsidy reform they were being offered was too paltry to merit deeper tariff reduction.
The numbers now tabled, the chairs suggested, indicate that divisions have narrowed and a commercially substantial compromise is within reach — but not without political courage. The texts push the limits of all parties, seeking to find compromise between the various proposals on the table.
Several trade analysts have said that a clear presentation of potential Doha Round compromises would help governments and interest groups assess what was at stake. Falconer said he hoped to galvanise shifts in countries’ bargaining positions by describing a "compromise that no Member can quite bring themselves to articulate."
"You will have to change your positions to reach an agreement," Stephenson wrote, reminding Members that he had only been asked to propose a deal because they had failed to strike one on their own. In a similar vein, Falconer wrote that "pain will be required to get agreement," stressing that he had done his best to spread it "in a reasonably balanced way."
Pascal Lamy, WTO Director-General, for his part said that "Members will not be fully satisfied with the texts. But what separates members today is smaller than what unites them. There is already an impressive package on the table. In the weeks to come it is essential that members focus efforts into overcoming those differences and reach agreement in the two sectors that hold the key to success in the Doha round."
For details on specific figures for the cuts, see Bridges Weekly, 18 July 2007, www.ictsd.org/weekly/07-07-18/story1.htm)
The way forward
The US and the EU gave the papers a cautious welcome. Gretchen Hamel, a spokesperson for the US trade representative’s office, said that both texts would "demand close analysis as we develop a comprehensive US reaction." She stressed that Washington would "participate actively and constructively in the upcoming consultations and negotiations" to revise the two documents.
EU trade and agriculture spokespersons said that the draft negotiating texts "represent a useful step forward." "Our first reaction is that the texts provide a basis for further work in the Doha round," they said in a statement, "though there are points on which we have important concerns and other significant issues in the negotiations that are not included in these texts." The most critical initial reaction from a major player in the negotiations came from Brazilian Foreign Minister Celso Amorim, who told journalists in Brussels on 18 July that the "papers have problems," according to Associated Press.
Oxfam International, a development group, said that "the overall cost to developing countries of opening their agricultural and industrial markets remains far too high in return for the modest reforms in agriculture in rich countries."
Members are set to provide preliminary reactions to the papers during committee meetings during the last week of July, with in-depth negotiations to start at the beginning of September, after the WTO’s annual holiday. Based on Members’ reactions, Falconer and Stephenson will then revise their texts. If there are signs that countries may be able to salvage a deal, delegates say that ministers would be brought to Geneva to finalise an agreement. Without an accord by early 2008, the Doha Round is expected to go into hibernation for years, if not indefinitely, as election campaigns get underway in the US and then in India.
Litigation to follow?
The WTO is known for its strong dispute settlement system, and if chances of a Doha Round deal seem to be diminishing, countries might resort to using this system instead in order to achieve some of their trade liberalisation objectives.
Brazil has already won two major cases targeting US cotton subsidies and EU sugar subsidies. Both targeted trade powers have already been forced to start making changes to their pay-out schemes, and the US is trying to "dispute-proof" spending in its new farm bill. The farm bill is currently under negotiation, scheduled for completion later this year.
Meanwhile, Canada has launched a new challenge against US farm spending, timed to coincide with farm bill renewal. Brazil recently also signalled its intention to initiate a dispute against US farm subsidies, covering commodities such as wheat, corn, sorghum, cotton, rice, and livestock. It is also targeting some tax breaks and export credit guarantees, arguing that they are tantamount to prohibited subsidies (see Bridges Weekly, 18 July 2007, www.ictsd.org/weekly/07-07-18/story2.htm).
Development campaign group Oxfam has identified several US and EU farm subsidy programmes that would be vulnerable to WTO challenge, either for adversely affecting farmers in developing countries or illegally encouraging the use of domestic inputs in processed goods. US subsidies to corn, rice, and sorghum were pushing down global prices for the commodities, Oxfam said in a November 2005 paper, affecting farmers in developing countries as diverse as Argentina, Ghana, Guyana, Haiti, Kenya, South Africa, and Zambia. However, current high commodity prices for corn in particular — and the resulting drop in subsidy disbursements — may make the case more difficult to prove.
The same report contended that Brussels’ largesse to tomatoes, peaches, and citrus fruits was denying commercial opportunities in the EU or elsewhere to producers in countries including Brazil, Chile, and China.
However, some trade analysts warn that a spate of controversial new dispute rulings would put a serious strain on the WTO system, and could boost support in the US Congress for pulling out of the multilateral institution altogether.
ICTSD reporting; "Brazil Files Broadest Attack on U.S. Farm Aid at WTO," BLOOMBERG, 12 June 2007; "India says too early to comment on WTO texts," REUTERS, 17 July 2007; "Rich nations get off easy in WTO draft - aid groups," REUTERS, 18 July 2007; "Brazil says WTO proposals have ‘problems’," ASSOCIATED PRESS, 18 July, 2007.