TWN Info Service on WTO and Trade Issues (Oct07/03)

10 October 2007

Trade: Conflicting signals from US about Doha?

Apparently conflicting news is coming out from the United States the past two days on the prospects for the WTO's Doha Round.

On one hand is the optimism emanating from a New York meeting between the Presidents of the United States and Brazil. On the other hand is the pessimistic view arising from how Congress leaders view the Doha Round. 

Below is an article that was published in the South North development Monitor (SUNS) on 26 September 2007.   It is republished here with permission of the SUNS.  Any re-publication or re-circulation requires the prior permission of the SUNS (sunstwn@bluewin.ch). 

With best wishes
Martin Khor
TWN

Conflicting signals from US about Doha?
Published in SUNS #6331 dated 26 September 2007 
By Martin Khor (TWN), Geneva, 25 Sept 2007 

Apparently conflicting news is coming out from the United States the past two days on the prospects for the WTO's Doha Round.

On one hand is the optimism emanating from a New York meeting between the Presidents of the United States and Brazil. On the other hand is the pessimistic view arising from how Congress leaders view the Doha Round.

At the margins of the United Nations General Assembly meetings in New York, Brazil's President Luiz Inacio Lula da Silva and United States' President George W. Bush met on Monday to discuss the WTO, climate change and biofuels, and emerged in good spirits.

According to a Reuters report, Bush said: "We had a good discussion on Doha, a shared commitment to a successful round of trade talks. I assured the (Brazilian) president that the United States would show flexibility, particularly on our agricultural differences, in order to help achieve a breakthrough."

At the same press conference, Lula said that positive news on the world trade talks could be announced in the next few days. "On the Doha round, Brazil is willing to do whatever is necessary so that we reach agreement," he said.

And Brazil's Foreign Minister Celso Amorim told the press that during the meeting, Bush confirmed that the US was ready to cut its maximum trade-distorting agricultural subsidies to between $13 billion and $16.5 billion a year, a range proposed in the paper by the Chair of the WTO's agriculture negotiations, Ambassador Crawford Falconer of New Zealand.

Amorim said that this is enough to encourage us to deeply engage in negotiations, but added that an agreement would require subsidies to be cut to closer to $13 billion.

In an earlier Reuters report, Amorim was quoted as saying that the US offer "is improving" but added that a margin of $13 billion to $16 billion is still very large. "We need to know if that is closer to $13 billion or $16 billion. The closer it gets to $13 billion, I think other countries can move a little."

The Reuters report however also indicates part of the high price that the US wants for its offer. "The US is asking the G20 group of developing countries also to agree to cut import tariffs on manufactured goods to the levels proposed in July," it said.

Reaffirming the payment that the US wants in non-agricultural market access (NAMA), another article, in the Financial Times on 24 September, quotes US Trade Representative Susan Schwab as stressing that any further reduction in US farm subsidies was contingent on big cuts in industrial goods tariffs by developing nations.

Referring to the NAMA draft by Ambassador Don Stephenson of Canada, which has been severely criticized by developing countries, Schwab said: "The countries that were signaling that they were going to be obstructionist in terms of the [industrial goods] text: what is their stance? Ask Brazil. Ask India. Ask Argentina. Ask South Africa. Ask China."

This is the same aggressive "blame game" tone that the USTR has been adopting in the past few weeks, since the APEC Summit in Sydney.

It has prompted developing-country diplomats to expect that the US will "come out swinging" when the NAMA negotiations start in the first week of October, and demand that the developing countries agree to be subjected to industrial tariff cuts in the range of coefficients of 18 to 23 in the "Swiss formula", while developed countries undertake a range of 8 to 9.

And if the developing countries continue to view these ranges as unfair, the USTR would then unleash a strong attack on them for blocking the Round's conclusion.

This preparation for the blame game is especially rational, from the USTR position, because of the weak position that the Administration is in vis-a-vis the US Congress on trade issues.

Whatever it is that President Bush or Susan Schwab promise, they will find it very difficult to deliver, because at the end, it is Congress that adopts trade deals.

The President's position has weakened significantly because he has lost his fast-track trade authority, and the Democrat-controlled House and Senate are not in a mood to approve trade deals, neither do they want to provide Bush with a Presidential success over Doha.

This negative attitude of Congress leaders in charge of trade was revealed in an article in the Financial Times. In his article of 24 September, "Doha success needs new US president", Alan Beattie reports that there is skepticism in Washington about a near-term breakthrough in the Doha talks, even as WTO officials report some progress.

Success in global trade negotiations will most likely have to wait until a new president is in the White House, according to senior Congress members interviewed by the FT.

Charles Rangel, the chair of the House ways and means committee, which regulates foreign trade, said: "At this point in time I don't think we have to deal with Doha, unfortunately... I think President Clinton is going to have to deal with it." (He was referring to the Democrat presidential hopeful, Hillary Clinton).

The article added: "A senior aide to Max Baucus, Mr Rangel's counterpart on the Senate finance committee, said the lack of progress in Doha had pushed the subject well down the senator's agenda. Collin Peterson, chairman of the House agricultural committee, told the FT he had more or less discounted any chance of near-term progress in Doha."

Underscoring the difficulties that the US Congress will pose for the Doha negotiations is a 20 September letter that ten Senators (seven Republicans and three Democrats) have sent to USTR Schwab asking her to oppose the text on cotton in Falconer's draft modalities paper on agriculture, and threatening to vote against a Doha agreement if the text does not change significantly.

Calling it "a matter of importance and sensitivity", the Senators said that Falconer's language regarding cotton is opposed by the United States, and that the treatment of cotton assumes a consensus opinion where there is none.

Said the letter: "Simply stated, the cotton language in the Falconer text is beyond the limit by which we can support an eventual Doha Agreement in the Senate. While the benefits of a comprehensive and multilateral agreement are great, we cannot abandon a group of farmers who have operated within the parameters of a program written to comply with the Uruguay Round Agreement on Agriculture and the status of which continues to be adjudicated in the WTO's Dispute Settlement Body.

"Treating cotton differently than all other agriculture products in the Doha Negotiations will further erode support in the US Congress for the WTO and the Administration's trade agenda.

"If the cotton text in the Falconer paper does not change significantly, we will have no other choice but to vote against the Doha Agreement should it come before us for debate. Furthermore, if the Administration fails to address our concerns, support for trade promotion authority in the future will be severely compromised."

The Republican Senators who signed were Saxby Chambliss, Johnny Isakson, Lindsey Graham, Thad Cochran, Richard Burr, Elizabeth Dole, David Vitter, and the Democrat Senators were Blanche Lincoln, Mark Pryor, and Mary Landrieu.

Cotton is a highly emotional issue of high priority, especially with African delegations which have also generally supported the Falconer language on cotton. Thus, a move to change it significantly can be expected to cause a lot of dissatisfaction.