Global Trends by Martin Khor

Monday 5 April 2010

Long stalemate ahead for WTO talks

A recent “stocktaking exercise” at the World Trade Organisation ended in despondency with the prospect that the current stalemate in the Doha Round will continue indefinitely as the world waits for the United States to clarify its intentions.

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The World Trade Organisation’s Doha Round appears to be stuck in a strategic deadlock, with no end in sight, and little hope for completion in the forseeable future.

The latest bout of negotiations, a “stocktaking exercise” held in Geneva in the last week of March, ended with no direction and without plans for a further meetings of senior officials from capitals, or for Trade Ministers.  The target of finishing the Round by the end of this year was not even mentioned.  It has been given up.

The Doha Round started in November 2001 at the WTO’s Ministerial meeting.  At that time the developing countries were strongly against a new Round, arguing that they had not even begun to digest the Uruguay Round and its many problems.

So the new negotiations were officially termed the Doha Work Programme, and even informally called the Doha Development Agenda to make it more palatable.

In the nine years since, the development content of the talks has almost entirely disappeared, and the developed countries’ real intentions – to open up the markets of developing countries while protecting their own turf especially in agriculture and in labour services – have come to the fore.

The latest drafts texts on how agricultural and industrial imports are to be liberalized are imbalanced.  They call on developing countries (except the LDCs) to undertake more real commitments than developed countries.

In particular, the developed countries can still make use of their huge agricultural subsidies which enable the United States’ and Europe’s otherwise inefficient farms and companies to capture markets, including displacing the small farms of developing countries.

But developing countries are asked to cut tariffs of their manufactured goods drastically (for some countries by up to 60%) so that most of their new import duties will be below 13%.  Many economists worry that this will damage the countries’ industrial development prospects as the local firms cannot withstand the competition.

Despite the advantage given by the drafts, the United States is still asking for more.  They want some developing countries (China, India and Brazil in particular) to also agree to cut their tariffs on some industries (chemicals, industrial machinery and electronics) to zero.

A senior Chinese official said that China had already made major concessions in the draft texts, and these extra US demands are simply unacceptable, as they would damage or wipe out the most important industries in the countries, concerned.

US-based analysts meanwhile note that the US administration faces a Congress and a public that is hostile to the US agreeing to sticking to its own minimal commitments on reducing its maximum level of agricultural subsidies and industrial tariffs.  Thus the US is going beyond the draft texts and making even more demands to selected developing countries to open their markets.

The developing countries are calling “Foul” as this goes far beyond the agreed mandate. The US stubbornly sticks to its unreasonable demands, pointing to what its Congress wants.  The developing countries counter-argue that they too have their own public to think about, and they won’t accept the destruction of their farms and industries. 

So it is a stalemate. At the “stocktaking” held at the WTO, South Africa’s Ambassador Faisal Ismail was perhaps the most eloquent in diagnosing the stalemate.

“We find it disconcerting that the US remains the most significant major player in the Doha Round that is unwilling to work on the basis of these multilateral texts. Its major constituencies and business lobbies are demanding more market access commitments from its trading partners, particularly from the major emerging markets,” he said.  “This is the main reason for the current impasse in the Doha Round.”

Ambassador Faisal  quoted Albert Einstein, that doing the same thing over and over again and expecting different results was “madness”  and warned that continuing with “business as usual” will risk unraveling over 8 years of work.   He proposed that the major players stop their mercantilist approach, and adhere to the principles of fairness, sticking to the development mandate of the Round and to agreements already made, and recognise the value of a stable multilateral trade system.

Brazil, on behalf of the G20 of developing countries, said the drafts embody a delicate balance that must be respected, otherwise we will need readjustments of the entire package.  “Such readjustments cannot entail additional unilateral concessions from developing countries.”

India said:  “There is nothing to suggest that the political constraints that have impeded our progress over the last six months will suddenly disappear.”

It urged members to continue with the talks but warned that their purpose “cannot be to meet the unrealistic demands of one or more Members for new or additional market access, but to come to a balanced outcome in line with the development mandate” and added that “a few developing countries cannot be the bankers of the Round.”

The WTO Director General Pascal Lamy said the negotiations would continue with the Chairs leading the process at the WTO.  He would also hold meetings.  And countries would also hold their own meetings in small groups or bilaterally.

The stocktaking exercise ended with no more plans for senior officials from capitals to meet in Geneva, as they have been doing, nor for any small Ministerial meetings at the WTO.  The target set by the G20 Summits, to conclude the Round this year, is dead.

As has often been the case in the checkered history of the Doha talks, the rest of the world is still “waiting for the United States.”   Previously the wait was for the US to agree to make some commitments to liberalise its agriculture.  Now the wait is for the US to give up its unreasonable demands on others.

With the US mired in its own domestic problems, it will be a long wait.  So long that the Doha Work Programme, renamed the Doha Round, may unravel or diminish in the global agenda.