Global Trends by Martin Khor

Monday 31 July 2006

Lebanon and WTO breakdown hog the news

Last week’s two major events were the continuing bombing and destruction of Lebanon while the world watched and waited for action to stop this (that never came), and the breakdown of talks at the World Trade Organisation, which called into question the future of the whole Doha Round.

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Two momentous sets of events took place last week.  First, the Israeli bombardment of Lebanon continued for a full week, with world public opinion becoming more outraged at the large scale destruction of the country’s buildings, the loss of lives and massive displacement of close to a million civilians.

What was equally unacceptable is that big powers such as the United States and Britain refused to call for a ceasefire and gave open approval to Israel to continue its actions.  This seems to have paralysed others, such as the European Union, from taking their own measures to stop the bombings and killings.

Even more astonishing was the refusal of the United Nations Security Council to condemn the bombing of a UN observation post in Lebanon which killed four UN personnel.  Due mainly to the insistence of the US, the Council merely expressed “shock” at the event!

It was left to the UN’s chief emergency relief official, Jan Egeland, to call the Israeli actions a violation of international humanitarian law and to call for a three-day ceasefire to allow for food supplies and medical treatment.  That call fell on deaf ears.

Seldom has such a spectacle of the destruction of a country and the displacement of a million people in a few days been seen across the world’s TV screens, accompanied by the deliberate withholding of criticism and indeed with the encouragement of the leaders of the grossly misplaced term, the “international community.”

Demonstrations across the world, including in Kuala Lumpur, showed the increasingly passionate feelings of the public, to this tragic turn of events.

The US and UK leaders last Friday announced they would come up with a plan.  Many analysts believe the plan is aimed at destroying Hezbollah and at pleasing Israel, and it remains to be seen if it is acceptable, including to the Lebanese.

Meanwhile, many around the world wait for the bombings to stop and wonder who will compensate the Lebanese for their losses and who will pay for the cost of emergency aid and reconstruction.

The second major event was the collapse of efforts to reach an interim agreement at the World Trade Organisation on a package of issues in the Doha negotiations, named after the Qatari capital which hosted the meeting that launched the Round in 2001.

The failure of the “big six” members (US, European Union, Brazil, India, Japan, Australia) to make progress on trade liberalization of agricultural and industrial goods let to the suspension of all negotiations across the board.

The talks had been facing many obstacles for some time.  Still, the decision to suspend all talks indefinitely came as a big shock.

Although much of the world media proclaimed the death of the Doha Round, in fact the negotiations have only been “suspended” and could revive at any time when the time is ripe.

The WTO and its predecessor, the General Agreement on Tariffs and Trade, have had many “collapses” before, with dire predictions of doom, but in each case the trade negotiations revived.

The immediate cause of last week’s breakdown was the refusal of the US to improve its current offer to cut its allowable amount of trade-distorting agricultural domestic susbsidies.

The US proposed that this level be a maximum of US$22.7 billion.  But other WTO members argued it had to go down much further since the US spent slightly below US$20 billion on these subsidies last year.  The G20 developing countries want the US to reduce it to $12 billion.

It was expected that the US would agree to cut the $22.7 billion level by at least a few billion dollars, as a gesture if nothing else. 

But it did not offer to cut by any amount, and this angered the other five WTO members which decided to call not only the meeting off but to suspend talks on the entire spectrum of issues.

The blame game then began, with most countries blaming the US, while the US blamed the European Union and the developing countries for not agreeing to open their markets enough to make it worthwhile for the US to do more on subsidies.

Meanwhile the Indian Commerce Minister Kamal Nath said the breakdown showed a gap not only of numbers (of how much to cut subsidies and tariffs) but more importantly a gap in mindset between developed and developing countries on what the Round means for development.

While there are the predictions of doom for the WTO, in fact the talks could revive at any time, especially if the US can announce an intention to make a new subsidies offer. This could happen after the US Congressional elections on 7 November, or even earlier.

Thus while the WTO talks have ceased being in the “active” mode, it is on “standby”.  A few more months of inaction could change the mode to “hibernation”, and that could last many months or even years. 

It is unlikely there will be a switch to a  “shut down” mode.  In any case, the regular work of the WTO (including its trade review process and the dispute cases) will continue.