Global Trends by Martin Khor

Monday 14 November 2005

WTO lowers its sights for Hong Kong meeting

After the failure of two meetings last week, the WTO members were forced to lower their expectations on what is achievable at the WTO’s Hong Kong Ministerial conference in mid-December.   But this is no reason to relax as talks will intensify to put important decisions into the draft Declaration to be brought to Hong Kong.

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Continuing disputes on key issues have forced the World Trade Organisation to lower its sights for the WTO’s Ministerial conference in Hong Kong in mid-December.

This in turn will make it more difficult to complete the negotiations known as the Doha Round by the end of 2006. 

And if that doesn’t happen, the talks may go into hibernation as it would be hard for the United States President to renew his “fast track” authority to negotiate trade treaties, which expires in mid-2007.

Two key Ministerial meetings held last week produced little result on the substance of the trade talks.  This prompted the WTO members to accept that an interim deal in Hong Kong (to cover trade liberalization in agricultural and industrial products and in services) would not be possible.

There is now talk of a second Ministerial conference to be held in March next year, which is a final deadline to conclude the “full modalities” of the negotiations – the formulae and numbers or percentages by which tariff reductions are to be made.

After that, several months are required for each country to prepare its schedules, or details of tariff cuts for each of the thousands of products that are imported.

Many other issues that are part of this Round have also to be settled, including commitments to open up services and undertake trade facilitation; special treatment for developing countries and their problems of implementing the WTO rules; intellectual property; new rules on anti-dumping and regional trade agreements; trade and environment.   

Last Monday, a meeting in London of Ministers of five key WTO members – the US, European Union (EU), India, Brazil and Japan – failed to agree.  The EU said it could not improve on its offers to liberalise its agriculture sector and wanted the talks to shift to other issues – how far the developing countries would go to open up their markets in industrial good and services.

The US, which previously criticised the EU for not doing enough, this time backed its move to shift the agenda from agriculture.  The new US stance, according to some trade analysts, could reflect that the US and EU have agreed to “forgive each other’s sins in agriculture” and join up to pressurize the developing countries to open their economies to EU and US goods and services.

However, most developing countries are not prepared to go along.  The Brazilian Minister, Celso Amorim, made a strong case that agriculture is the sector most distorted (having the most protection, in tariffs and subsidies) in world trade and the main goal of this Round is to eliminate and reduce these distortions.

Until there were clear signs that the developed countries would effectively cut their subsidies and tariffs, the developing countries could not make clear commitments on opening their markets.

Indian Commerce Minister Kamal Nath argued this was a Development Round, and not a “market access Round”.  The interests of developing countries’ small farmers must be protected.  He rejected the EU’s demands on industrial tariff cuts.

On Tuesday and Wednesday, the meeting shifted to Geneva, with 28 countries taking part.  More countries brought up their own concerns, thus making the situation more complicated.         

It was then decided by those present that there was insufficient time in the month before the Hong Kong meeting to find a solution.  Thus, there was need to “recalibrate” the expectations of what can be attained at Hong Kong.  Keeping the original goal of  reaching “full modalities” would risk a major collapse as happened at the last conference in Cancun in 2003.

However, negotiations will still go on at high speed in the next weeks, to prepare a Ministerial Declaration for Hong Kong that will “lock in” whatever has been agreed to in various areas.  The draft may also contain a work plan for next year, which may include one or two other Ministerial conferences.

Meanwhile, the “blame game” continued.  Most delegations, NGOs and the media continue to criticize the EU in particular and the developed countries in general for not offering enough to reduce their agricultural subsidies and tariffs.  

Farmers in developing countries will thus continue to be threatened by cheap subsidized imports, and they would also not be able to enter the rich world’s protected agricultural markets. 

The EU Trade Commissioner Peter Mandelson attempted to deflect this criticism by pointing to Brazil and other developing countries for not opening their own markets.

They in turn point to the unreasonableness of the EU’s demands. The most extreme of these is that developing countries bring their industrial tariffs to below 10%.  This compares with the EU’s proposal that developed countries’ agricultural tariffs can have a maximum level of 100%.

Another extreme EU demand is that developing counties must now commit to open up in 57% of all the services sub-sectors.  The present rules allow them to choose how many sectors to liberalise and to what extent.

Many think that the EU is deliberately making such extreme demands so that when they are rejected the EU can have an excuse for not doing more in agriculture.

“But perhaps it is not just a tactical ploy and the EU really believes in the demands it is making on developing countries,” remarked one senior trade diplomat.  “That’s even worse.”

There will, in any case, be no let up in the WTO negotiations in the next weeks.  The scaling down of expectations in Hong Kong is not a reason for developing countries to relax, for many important decisions will likely appear in the draft Ministerial Declaration to be put before the Trade Ministers in Hong Kong.