EU airs aggressive new trade agenda after sinking Doha talks

After playing a major part in undermining the Doha Round talks, the EU is now pursuing a fresh trade agenda at the WTO, one that could entrench developed-country dominance in the global trading system.

by D. Ravi Kanth

GENEVA: The European Union has come out in the open by unveiling an aggressive trade agenda to be pursued at the WTO, after collaborating with the United States in torpedoing the Doha Development Agenda trade negotiations at Nairobi last December, several trade envoys told the South-North Development Monitor (SUNS).

[In a comment, Chakravarthi Raghavan, Editor Emeritus of SUNS, notes that even at Marrakesh in 1994, in concluding the Uruguay Round negotiations and signing on to the WTO treaty and its annexed agreements, the EU (at that time the European Communities) had laid the groundwork for a new negotiating round to enable it to delay and avoid undertaking the commitments for reforms to its heavy subsidization and protection of its agriculture sector. The US, which initially opposed such a new round of negotiations, joined the EU in launching the negotiations on the Doha Work Programme in 2001.

[In retrospect at least, adds Raghavan, it is clear that the two dominant partners engaged in delaying tactics to make a mockery of the so-called rules-based WTO multilateral trading system and jettison their own treaty commitments, most recently under the dubious argument that many of the Doha Work Programme issues are now out of date.]

Brussels’ new trade agenda for the WTO includes several new issues such as investment, export restrictions on energy and raw materials, local content requirements, state-owned enterprises, and sectoral market access agreements for goods.

In a detailed policy statement made before the EU’s civil society representatives on 26 April, EU Trade Commissioner Cecilia Malmstrom sought to make out a strong case for leaving the Doha Work Programme behind even though it contains many issues that are “just as relevant today, as they were in 2001, if not more so.”

“We don’t need to get bogged down in the question of whether Doha is dead or alive,” the commissioner said.

Joining forces

The EU had joined forces with the US in running away with the Trade Facilitation Agreement at the WTO while wrecking the remaining issues of the Doha Work Programme’s single undertaking.

The EU, which hitherto had played a “countervailing” role to contain its trans-Atlantic trade partner, the US, at the GATT (General Agreement on Tariffs and Trade) forum and subsequently the WTO, has changed course since 2008 by being the principal ally for Washington to pursue an agenda that stands diametrically opposite to the demands made by developing and least-developed countries, according to several trade envoys.

Brussels joined Washington in pursuing an aggressive “differentiation-cum-graduation” approach by painting China and India as separate from the rest of the developing countries even though they still contain the largest number of people dependent on agriculture and living below the poverty line.

“[T]he economic rise of countries like China and India has not only changed the balance of power in the WTO, it has changed the interests of some key developing countries,” Malmstrom claimed, parroting Washington’s thesis on emerging economies which need to undertake higher commitments without special and differential treatment.

Although the EU’s priorities in agriculture, rules and even some developmental issues differ from the US positions, Brussels allowed itself to be treated as a handmaiden of the US for pursuing a diabolical new trade agenda, a South American trade envoy told SUNS.

Otherwise, it is difficult to explain how the EU, which had fought fiercely with the US over agriculture in the previous Uruguay Round and until the 2003 Cancun Ministerial Conference, allowed Washington at Nairobi to get the disciplines it wanted in the Doha agriculture export competition pillar, particularly in areas such as export credits and food aid, the envoy added.

The EU had vehemently opposed the US demands on export credits and food aid at the WTO’s sixth Ministerial Conference in Hong Kong in 2005 when then Trade Commissioner Peter Mandelson refused to budge on Washington’s demand for kid-glove treatment on food aid.

At Nairobi, however, the EU merely swallowed whatever was demanded by its trans-Atlantic trade partner on export credits and food aid.

Further, the EU gave up its own agenda on trade-distorting domestic support because the US was not interested.

It allowed the WTO Director-General Roberto Azevedo to pursue the US agenda on agriculture, said a developed-country trade envoy who asked not to be quoted.

Little wonder that Commissioner Malmstrom said there are many issues in the Doha Work Programme “that cannot be addressed in bilateral or regional trade agreements and can only be tackled in the WTO.” Among the three big issues to be tackled at the WTO, she mentioned “domestic support to agriculture.”

“This is one of the most important and challenging unresolved issues, which many members care about,” Malmstrom argued. “Therefore, advancing on domestic support will be crucial for progress to be achieved on other issues.”

The commissioner is fully aware that domestic support will now remain on the backburner forever because the EU’s trans-Atlantic trade partner will not allow it due to the farm bill that was passed by the US Congress in 2014. That US farm bill overshot domestic subsidy payments well beyond the levels that were nearly negotiated in the Doha Round and, in some cases, went beyond the previous Uruguay Round, according to the South American trade envoy.

Further, the EU knows that the US will refuse to move on domestic support unless China, India and other leading developing countries undertake commensurate commitments without provisions on special and differential treatment or “less than full reciprocity”.

New issues

Coming to the new issues, the EU and the US are almost on the same page on digital trade, which is being pursued in the plurilateral initiative on the Trade in Services Agreement (TiSA) and also the Transatlantic Trade and Investment Partnership (TTIP) negotiations.

Despite some difference on data privacy and sharing issues in e-commerce, the two trade elephants will try and push for launching negotiations on digital trade at the WTO, an Asian envoy said.

“[T]his [digital trade] is an area where we actually have a WTO work programme – on e-commerce – but where progress has been slow and economic reality has moved on,” said Commissioner Malmstrom.

“It’s also interesting because 23 WTO members are already in talks on the issue in the negotiations for a Trade in Services Agreement. Other countries appear interested too. For instance, China has raised the issue in the context of its G20 presidency,” she said.

The third main issue for the EU after domestic support and digital trade is the most controversial “investment” issue. “This was part of the Doha Round until members dropped it in 2003,” Malmstrom said.

She justified the need to start discussions on investment because of the “impact of the bilateral approaches on investment protection that countries have taken to the issue since.”

“It’s become one of the most sensitive issues in the public debate and different approaches are proliferating,” she added.

Significantly, “there does appear to be interest among some WTO members now to come back to it, including again from China,” Malmstrom argued.

But the US remains reluctant to pursue a multilateral investment agreement when it is extracting major concessions for itself through bilateral agreements, said an envoy familiar with the backroom discussions on investment.

The second group of some eight issues of importance for the EU includes five new issues such as “good regulatory practices and transparency for technical barriers to trade”; subsidies for manufactured goods; export restrictions on energy and raw materials; local content requirements; and state-owned enterprises. The three remaining issues Malmstrom mentioned – fisheries subsidies, food security and public stockholdings, and domestic regulation – are already on the agenda.

Malmstrom said “the final group” of two issues covers “only a plurilateral approach” for “sectoral market access agreements for goods” and “more” to be done in trade facilitation.

The EU argued that while sectoral market access agreements need to be pursued on the lines of the Information Technology Agreement, there is strong ground for other areas such as chemicals.

For expanding the Trade Facilitation Agreement, the EU commissioner said Brussels is working with a “subset” of WTO members.

In many ways, Malmstrom’s ideas for the WTO seem to replace the infamous “Millennium” trade agenda that was pursued by previous EU trade policy chief Sir Leon Brittan with another set of ambitious issues that would ensure the continued dominance of the developed countries in the global trading system.

It remains to be seen how the developing and poorest countries will respond to the EU’s ambitious agenda after suffering the loss of the Doha Development Agenda round of trade negotiations because of the EU’s role. (SUNS8232)     

Third World Economics, Issue No. 615, 16-30 April 2016, pp7-8