Global Trends by Martin Khor

Monday 28 July 2008

Next few days will decide WTO Round

After a week of wild mood swings at the World Trade Organisation, the next few days will finally decide whether a deal is possible, or if the Doha Round is put ion cold storage  


It was a roller coaster week at the World Trade Organisation, with the spirits of various parties going up and down, or rather down and up, as the negotiations went from rumours of a breakdown to news of a possible breakthrough.

The WTO talks in Geneva are said to be the last chance to strike a deal.  If no agreement is reached in the next two days, the Doha Round (as it is now commonly termed) will probably be put in “cold storage”.

The reason widely rumoured for this is that the last lap of the United States’ presidential election campaign will soon be under way, and the US administration will not be able to negotiate effectively.

So this has to be the final week to get the “modalities” (framework and parameters) of tariff and subsidy cuts and flexibilities or safeguards from such cuts) settled for the various member states of the WTO.

In fact, last week was to be the “final week”, but this has now stretched to this week.  On the first two days, a “Green Room” meeting of about 30 Ministers (including Trade and Industry Minister Tan Sri Muhyiddin Yassin) went through the outstanding issues. It was evident there were many points of deep disagreement.

Then on Wednesday a new grouping of only seven WTO members (the United States, European Union, Brazil, India, Japan, Australia and China) was convened by the WTO Director-General Mr Pascal Lamy.

He thought that what a bigger group could not do a smaller group perhaps might  But on Thursday he was facing a near-revolt of many Ministers who had been called to Geneva for the “Green Room” but now found themselves “waiting in the dark room”, as the Indonesian Trade Minister, Mari Pangestu put it. Even the Minister of Switzerland, which hosts the WTO, complained bitterly at being left out.

Friday was then the “make or break day”.  The new G7 had to produce results or the talks would close, as the other Ministers were not willing to continue “waiting in the dark.”

On Friday night the Green Room of 30-40 Ministers met again, and Lamy gave them a one-page list of figures which he said had to be taken altogether as a package, as changing one item would disrupt the balance of the whole.

It was not clear whether this was a G7 text or a Lamy text, and it was not stated that this was a “take it or leave it” text, but it was a document to be treated in the manner of “take it as a whole or it will unravel, so don’t change anything”

At Friday’s Green Rom meeting, it appears there was a sigh of relief that the G7 talks had not collapsed, and the Round could live a few more days.  Though the efforts and the text was welcomed as s step forward, some Ministers found things in it that they did not like.

On Saturday, a larger group known as the informal Trade Negotiations Committee (made up of all WTO members) met.  It was the chance for all countries to have their say.

The text was seen as acceptable by some countries (especially the developed countries like the US and EU and some developing countries like Brazil) but it was also criticized by others.

Many developing countries, including Indonesia and India (leaders of the G33 group of 45 countries defending food security and small farmers’ livelihoods) criticized the text on “special safeguard mechanism”, which allows a developing country to put extra import duties when prices of agricultural products fall (or volumes rise) above a certain level.

They find the conditions for use (the trigger points of price fall or volume increase) too stringent and the remedy (the extra duties allowed) too small to have any meaningful effect, and they want the text to change.

While these countries want a strong safeguard to prevent sudden dislocation caused by import surges to their local farm products, other countries that significantly export farm products do not want their exports to be affected.

Another point attracting dissatisfaction is the extent to which developing countries have to cut their bound tariffs on industrial products. 

At Saturday’s meeting, Argentina, South Africa and Venezuela were among countries that criticized the text for having coefficients in a formula that would result in developing countries having to slash their tariffs too steeply, which they say would affect their local industries and industrial jobs. 

They also argue that the developed countries would have to cut their industrial tariffs by less than many developing countries, a reversal of special treatment.

Some delegations find the maximum ceiling for agricultural trade distorting domestic subsidies of the United States to be too high at US$14.5 billion, since its present level is reported to be US$7 billion.  In effect the US would not have to cut its farm subsidies, but in return it was asking the developing countries to open their markets for goods and services.

This was a favourite talking point in the corridors, and a few countries raised it in the big meeting.

These were initial comments, and this weekend the countries and groupings are expected to study and plan their responses in more detail.

Detailed texts are now expected to be produced this Monday or Tuesday, and if there is agreement the meeting will close formally on Wednesday.

But given that below the surface calm there is still dissatisfaction on some critical issues, it is still unclear how the next days will unfold.