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Ministers failed to reach agreement on liberalising trade in farm and manufactured goods in July, but never say die: negotiators are gearing up for yet another attempt in September.
Billed as the last chance to save the Doha Round, the Geneva ‘mini-ministerial’ veered from stalemate to near collapse, and then to a serious chance of breakthrough, before negotiators conceded failure on 29 July. Seven countries – Australia, Brazil, China, the EU, India, Japan and the US (dubbed the G-7) – led the effort, but the conditional almost-agreement reached among them was never approved by all WTO Members.
Exhausted negotiators expressed profound disappointment and even disbelief over the collapse, but most also stressed that a deal was still possible. WTO Director-General Pascal Lamy said no one was ready to give up on the package that had been ‘so painfully negotiated’ over the nine-day marathon. The EU and the US confirmed that their offers remained on the table if others wished to pick up where they had left off. And it seems they do: instead of the long hiatus predicted by many, senior officials are expected in Geneva as of mid-September to try and solve the obstacles that could not be overcome in July.
How Did It Happen?
The ministerial meeting was rescued from the verge of collapse when Pascal Lamy proposed a compromise on the key sticking points on 25 July (see pages 7 and 9).
The G-7 by and large accepted his ‘package’ as a basis for further negotiations, except for one crucial element: the special safeguard mechanism (SSM) aimed at protecting developing country farmers against import surges or significant price drops.
The main point of contention among the G-7 was under what circumstances and by how much
developing countries would be allowed to raise tariffs on agricultural goods under the mechanism. DG Lamy proposed that a country’s current bound tariff – i.e. the ceiling before Doha Round reductions – could be raised by a maximum of 15 percent (or 15 percentage points, if that was higher) when imports surged by 40 percent over a three-year average (see page 8).
This was as far as the US was prepared to go, but the G-33 coalition of developing countries put forward a counter-proposal that would have allowed SSM tariffs to exceed their current bound levels by 30 percent (or 30 percentage points). In some cases, this remedy could have been available as soon as imports increased 15 percent over the baseline. The group also said that developing countries should have the right to impose SSM duties on 7 percent of all agricultural tariff lines in a given year, while Lamy had suggested a limit of 2.5 percent.
Alternatives proposed by Director-General Lamy and the EU failed to bridge the differences between the US and G-33 member India.
Although few had expected the SSM to scuttle the talks, the impasse is not all that surprising. An effective safeguard mechanism is of the highest political importance to the G-33, but despite plenty of acrimonious rhetoric, virtually no real negotiations had taken place prior to the Geneva meeting. EU Trade Commissioner Peter Mandelson aptly likened the result to an irresistible force meeting an immovable object, which led to compromise flying out of the window.
At the time of writing, senior G-33 negotiators were meeting on the issue, and the SSM was expected to top the agenda when multilateral talks resume in Geneva.
SSM Not the Only Problem
The impasse on the special safeguard mechanism obscured the fact that fundamental differences remained in other areas. A number of countries complained that the G-7-centred negotiating method prevented their full participation in the process, and that their views often seemed to be brushed aside. This was particularly so with regard to non-agricultural market access (NAMA).
Many developing countries outside the G-7 expressed great concerns about the link, suggested by Lamy, between the depth of developing country general tariff cuts and their participation in initiatives aimed at very ambitious liberalisation of certain sectors of industrial activity. They argued that sectoral agreements were supposed to be purely voluntary, and that linking them to the general tariff cut formula would make participation quasi-mandatory in practice.
Argentina explicitly rejected the compromise figures on developing country industrial tariff cuts proposed by Pascal Lamy. They fell short of two key negotiating mandates, senior negotiator Nestor Stancanelli said. First, more ambitious market opening was required in NAMA than in agriculture and, second, the principle of ‘less than full reciprocity’ was not respected since developing countries would need to make greater percentage cuts to their industrial tariffs than developed WTO Members. South Africa also had serious concerns about the deal on the table (see page 9 for further details).
The Missing Guest: Cotton Subsidies
Some pundits have suggested that the US may not have been entirely unhappy that the talks were called off before they moved on to the politically sensitive subject of cotton subsidies.
Responding to the concerns of four least-developed African countries, WTO Members agreed in 2005 that domestic subsidies for cotton would be reduced faster and ‘more ambitiously’ than those for other agricultural commodities. The Cotton Four (C-4) subsequently proposed a formula that would have guaranteed a significant reduction in cotton support even if the general subsidy cut turned out to be small (Bridges Year 10 No.2 page 6).
The C-4 formula was all the latest agriculture negotiating text had to offer on cotton, but only because the US – the main target here – has so far refused to make a counter-proposal, arguing that cotton support cannot be discussed until the overall agricultural modalities are agreed. In addition, the US has stressed throughout that a substantial result on cotton would require a substantial result not only in domestic subsidies, but also in market access and export competition. For the C-4, the Geneva ministerial was an opportunity to finally engage the US in serious negotiations on cotton. To their intense disappointment, the talks collapsed before the subject was even addressed. For the US, however, it may have been a lucky escape.
In related news, Brazil has reactivated its request for WTO arbitration of trade sanctions in the cotton dispute (see page 13). It is also seriously considering the launch of a new dispute over US trade barriers on ethanol (see page 20).
The Casualty List
The July collapse means that nothing achieved during nine days of gruelling negotiations is official, although some it could be salvaged when the talks resume in September. Among the major potential casualties is a compromise on the EU’s banana tariff, which promised to end a long-standing stalemate on the liberalisation of trade in tropical products (see page 6).
Without a deal on agriculture and NAMA, other difficult issues waiting in wings will not be solved either. These include a controversial new agreement on fisheries subsidies (Bridges Year 12 No.3 page 8), reforms to anti-dumping and dispute settlement rules, and providing duty- and quota free market access to imports from least-developed countries. The chance to achieve long-sought changes to intellectual property rules, particularly to prevent biopiracy, would also diminish greatly (see page 12).
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Ought we to keep insisting on the principle of “nothing is agreed until all is agreed”?
We do not need an agreement in 2038, we do need it now. Is it not possible to negotiate in succesive layers? That is to say: first we agree on a basic umbrella regarding NAMA and Agriculture. Then we go one step further and negotiate SSM; and we can improve on what was negotiated under NAMA and Agriculture. If an agreement is then reached regarding Cotton, we can further improve on what was agreed on Agriculture. Each of the newly agreed layers increases the negotiating confidence of both the Countries and their negotiators. This is probably a way not so ambitious but POSSIBLE. Experience has shown that to agree on all issues simultaneously by all countries, is not practicable. The experience in the case of the Free Trade Area of the Americas is pointing in the same direction. There was a glimmer of hope in November 2003 when a smaller “package” was agreed upon at the Miami Summit.