Global Trends by Martin Khor

Monday 25 April 2011

Crunch time arrives for WTO talks

Last week the WTO issued a mega-document with reports on the Doha negotiations which have reached an impasse with unbridgeable differences. This week a meeting will decide on whether to continue with, suspend or end the talks.

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The differences among key countries in the World Trade Organisation’s Doha trade talks are so wide as to be unbridgeable in at least one major area, and the time has come to decide on what to do about the talks – to continue trying to get a deal this year, to admit failure and close the talks, or something in between.

This seems to be the message coming out of the 600-plus pages of a document issued by the WTO on 22 April, that contain reports on the state of play of the negotiations in nine issues, plus assessments by the Director General Pascal Lamy.

On 29 April, the WTO will meet to hear what delegations have to say about the reports and the latest crisis-like situation.

The failures in recent weeks to make progress have deepened the impasse.  The inescapable conclusion is that these talks will not complete in 2011, the deadline set by political leaders.

There have been many missed deadlines since the talks began in 2001. But there is now a serious feeling that if they do not complete this year, they may never complete at all, because political events (especially the United States elections) in 2012 and beyond will make it impossible for a deal to be struck.

The Brazilian ambassador Roberto Azevedo, expressing frustration at the pressures put on big developing countries by some developed countries, had put it this way:  “If this view (that developing countries have to make even more concessions) prevails then we have not reached the end-game, we have reached the end of the game.”

In his 21 April report, Lamy had focused on the impasse in tariff reductions in industrial tariffs (known as the NAMA issue) and found the gaps between developed countries and major developing countries (China, India, Brazil) to be “not bridgeable today.”

The specific problem is that the US in particular is demanding that these three developing countries cut their tariffs to zero (or near zero) for three sectors (with the stress on chemicals, electronics and industrial machinery).

The super-liberalisation in these “sectorals” is supposed to be voluntary, but the US wants it to be mandatory for the big developing countries.

The latter in turn think they are unfairly picked upon to carry the whole burden of the Doha talks. They already have to slash their industrial tariffs significantly; with the extra load of the sectorals, the local industries would be seriously damaged.

However it is misleading to point to the differences on sectorals as the cause of the crisis.  On one hand, the US has clarified that it also wants more out of the developing countries in other sectors too (agriculture and services).

On the other hand, the major developing countries resent being picked on as the ones blocking the deal.

To them, the demands on sectorals is the last straw on the camel’s back, epitomising the gross inequalities that characterise all the issues in the Doha package.

Although Doha started as a “Development Agenda” with a pledge that developing countries’ interests would be at the centre, ironically there is hardly any development content left in the Doha elements.  This is evident from a review of the 600-plus pages of the 21 April texts and reports.

The agriculture report mainly reaffirms the 2008 text, under which the developed countries will be allowed to continue their high domestic subsidies (though the nature may change). They can also shelter their “sensitive products” from steep tariff cuts through an agreed formula.

In contrast, developing countries have to cut their farm tariffs more steeply and widely than they did in the previous 1996 Round.  And the new special safeguard mechanism for these countries to use to prevent import surges (that damage local farm production) is so weak it is practically of no use.

The report on NAMA reaffirms the December 2008 text.   Under this, some major developing countries have to cut their industrial tariffs by 50-70%, while developed countries’ cuts are only around 25%.

On average, developing countries affected by the agreed formula will have average applied tariffs of 11-12 per cent after the cuts, which will be damaging to their domestic industries.

But on top of these already onerous obligations, the US backed by other rich countries are now demanding that China, India, Brazil and others agree to super-liberalisation in the “sectorals”.

The 21 April report shows that in services, the developing countries are also under pressure to open up to foreign competition in many sectors such as finance, telecoms and retail trade.

But the developed countries are unwilling to open up in labour services. Many are in fact tightening their quota of visas for foreign workers and professionals from developing countries.

At the 29 April WTO meeting, it is unlikely that countries will stop the Doha talks altogether, though they may accept the 2011 deadline cannot be met. A suspension of talks at least in some areas is an option, though the question is when are they to resume.  

The meeting may also decide on the status of the 600-plus page document.  Will future negotiations be based on this, or are other relevant documents just as valid, such as existing proposals that are not adequately reflected in the reports, and new proposals?