Global Trends by Martin
Monday 20 November
“Soft re-opening” in WTO talks
After a dramatic suspension
of the World Trade Organisation’s negotiations, a decision was made
last week to have a soft re-opening of the trade talks, in the hope
that the United States, after its mid-term elections, will now be able
to make a fresh offer for cutting its farm subsidies. But there are
also increasing signs that the new Democrat-controlled Congress will
be more protectionist and make trade deals more difficult.
Negotiations at the World
Trade Organisation are set to start again after almost four months
of "suspension", and a new flurry of activities can be expected
in the next few weeks.
A WTO meeting in Geneva last
week decided on something like a “soft re-opening” of the trade talks,
after a long break since the end of July when the talks broke down.
The summit meeting of APEC
in Vietnam could add to the impetus, as political leaders call for a
swift resumption and conclusion of the WTO’s Doha Round.
The new action is prompted
by the conclusion of the mid-term elections in the United States. Before
that, the talks were “frozen” because the US trade diplomats were unable
to give a better offer to reduce the ceilings of the massive American
The Bush administration did
not want to alienate voters in states where agriculture is significant,
and thus the US could not participate seriously at the WTO.
With the elections out of
the way, the US can now show its hand. Some press reports say the US
has a plan that offers to cut its allowed trade-distorting subsidies
to US$18 billion, compared to the US$23 billion it offered last October.
But the US Trade Representative
Susan Schwab strenuously denied that it was making this offer. She
reiterated the old US line that others have to do much more (in opening
their agricultural and industrial markets) before the US moves an inch.
While there have been optimistic
smoke signals now that the US elections are over, there have also been
pessimistic signals, perhaps even more.
The Democrats have captured
both houses in Congress, and many of the new members of Congress ran
on a ticket of anti trade liberalization.
The Democrats correctly perceive
that the public mood in the United States is swinging against liberalization,
as the trade deficit climbs to new heights and as millions of manufacturing
jobs are lost to imports and companies shifting abroad.
Rightly or wrongly (and mostly
wrongly) the public increasingly blames trade for taking away American
jobs. The Democrats, looking towards the 2008 Presidential elections,
is moving with this tide of public opinion.
A sign of protectionist times
ahead was last week’s refusal by the US Congress to approve of a bilateral
trade deal between the US and Vietnam.
Thus, most analysts are of
the view that it will be even more difficult for the US to make better
offers in the WTO, or to
have bilateral free trade agreements (such as the ones being negotiated
with Malaysia and Korea) until after the 2008 Presidential elections.
Most analysts believe the
Democrats are not in a mood to give President Bush a new fast track
authority after the present one expires at the end of June. Without
that, other countries will not have confidence that what his administration
agrees to in negotiations will be passed by Congress, and this will
effectively put a stop to trade talks.
Referring indirectly to this,
President Bush, in Singapore en route to the APEC Summit in Vietnam,
pledged that the United States would reject protectionist calls. But
more people are wondering if he has the power to stem the expected moves
by the Democrats to put the pressure against any free-trade initiatives
Bush may come up with.
While this pessimism swirls
around the trade arena, the WTO members are planning to put the theories
about American politics to the test have a last go at revitalizing the
There is a sense of urgency
to finish off at least key elements of a WTO deal by around March next
year, in an attempt to persuade the US Congress to approve a deal by
June, or to give Bush a new short-period fast-track authority.
At a WTO meeting last Thursday,
WTO Director General Pascal Lamy said “we are somewhere between the
quiet diplomacy of the last months and the fully-fledged negotiations
which will only come when members are ready to put numbers to the flexibilities
they have already expressed.”
The negotiating groups on
various topics (including agriculture, market access for industrial
products, services, intellectual property) are now expected to hold
Many developing countries
stressed however that the resumed talks must remain faithful to development
India said that the resumption
can only be successful if it is unconditionally faithful to the development
mandate of the Doha Round.
For India, the key issues
are two-fold: "Firstly, how can we address the inequities of the
past and the distortions of the past and present in a meaningful manner.
Secondly, how can we provide the necessary space in the various negotiations
to developing countries to enable them to pursue their development strategies
as mandated by their people."
Bangladesh on behalf of the
least developed countries said the renewed talks must be “inclusive”,
a code for saying that small and poor countries should not be excluded
from key meetings. It warned against a 'false start', saying that this
will destroy the credibility of the multilateral trading system.
The United States said its
recent elections do not change its strong commitment to a successful
Doha Round. It agreed that members are now somewhere between intensified
quiet diplomacy and fully-fledged negotiations. It is important to get
back to work.
Indonesia said that it supported
the relaunch of negotiations and a “transparent and inclusive approach”
(again a code for not conducting talks among only a few while keeping
out most countries).
It added a strong warning
that “There is also need to assure developing countries that the negotiations
are not being designed to subvert their development interests.”
Thus, the WTO talks will
resume in Geneva amidst caution and concerns of the developing countries,
and continuing doubts on whether the United States can deliver anything
better, especially on reducing its agricultural subsidies.
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