Global Trends by Martin Khor

Monday 28 February 2011

Little progress in WTO’s Doha talks

World leaders pledge to finish the WTO’s Doha talks this year, but this goal is difficult to meet because of the unfair and extreme demands being made on developing countries.

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Few really wanted it started, and now no one knows how to end it.  In between there’s been almost a decade of roller-coaster of the Doha negotiations at the World Trade Organisation.

Many political leaders have now proclaimed that the “Doha Round” must really be completed this year.  Otherwise it may have to be abandoned altogether, some have predicted.

But there is not a lot of chance the deal will be done now.  Although the main proposals on the table are already so imbalanced against the developing countries, the developed countries want even more from them.

It is not likely that the big developing countries will give in to these unfair demands.  However in the blame game that has been a significant part of the Doha talks, the rich countries have prepared the ground to pin the blame of a possible collapse on the developing countries.

The latest set of talks were held in Geneva in the last fortnight, among 11 WTO members called the G11 -- United States, European Union, Japan, Canada, Australia, China, India, Brazil, Argentina, South Africa and Mauritius.

In fact, much of the negotiations took place not among the 11, but in bilateral talks between the United States on one hand, and China, India and Brazil.

As is well known among those in the negotiations, the major block to Doha’s completion is the United States.  The President and his trade team has limited real negotiating authority because Congress has to approve any trade deal, and the Congress is not in the mood to cooperate with the Obama administration.

In order to avoid a fight with Congress even on a draft WTO deal, the US officials have to show that they haven’t given up anything.

Otherwise there would be opposition from the influential farm, union and business lobbies, afraid they would lose ground to imports.  This is especially problematic during the economic slowdown and with high unemployment.

They also have to show that US companies and farms are going to get new business through increased exports.  Since there are limited gains from other rich countries, the US is insisting on the bigger developing countries to open their markets in both goods and services.

But the developing countries have their own story.  The draft deal (put forward in texts in December 2008) do not require developed countries to make any significant concessions.

In particular, they will be able to maintain their high agricultural subsidies because of the peculiar WTO system requiring some subsidies (known as the red box) to be reduced while allowing others (green) to continue without limits.

The US and EU have shifted boxes from red to green, while maintaining or even increasing total subsidies.  The OECD countries’ total support to agriculture in 2009 was US$384 billion in 2009 compared to US$326 billion in 2007.

Real cuts in agricultural subsidies in rich countries were supposed to be the priority aim of the Doha talks, when they started in 2001.  It’s quite clear that is not going to happen, given their entrenched farm interests.

The rich countries are also unwilling or unable to open up in labour services, to allow more skilled personnel from developing countries to enter and work.  This was one of the key demands of developing countries, but has become almost a hopeless cause.

Meanwhile, the 2008 drafts require developing countries to drastically cut their industrial tariffs on industrial goods, in some countries by an average of 50-60 per cent. They also have to cut their agricultural tariffs by up to 36%.

Least developed countries are exempted, but most of them are asked to cut 80% of all their tariffs in free trade agreements outside the WTO.

These tariff cuts mean cheaper imports, damaging the markets and even survival of local firms and farms of developing countries.

Thus the developing countries will potentially suffer losses in production and jobs, while gaining little in new exports to the rich countries.

But that’s only part of the story. The US is demanding that the major developing countries do even more, by cutting tariffs to zero in three large industrial sectors (chemicals, industrial machinery and electrical goods), or at least in two of them. And that they also open up their service sectors even more that already offered to foreign ownership and competition.

This is where Brazil, China and India have objected.  The December 2008 texts are already imbalanced, but these new demands (which not only the US but also EU, Japan and others are making) are really too much.  Especially since the rich countries are not offering anything extra either.

So the talks have been stuck so far.  But the countries are still trying. By April, new drafts of all the issues are expected to be ready, for a meeting of some Ministers to add the finishing touches in July. Schedules of commitments will then be worked on, for a final deal in December.

Of course these are all timelines, and as of now no one is willing to bet they will be fulfilled, since there have been so many broken deadlines before.