The
Doha 'Development' Round of world trade negotiations
that began in 2001 collapsed this July in Geneva.
After the Hong Kong Ministerial in December, 2005
it was decided that the ministers would again meet
to sketch out the "modalities" for agriculture
and NAMA (Non-Agricultural Market Access). An unofficial
target of end 2006 was set to bring out the full package
of agreement (based on the modalities)[1].
As a result the ministers met in end June for a series
of informal meetings of the Trade Negotiating Committee
(TNC) and a set of "Green Room" meetings
(28th- 30th), followed by a formal meeting of TNC
on July 1.
The issues taken up for discussion were related to
the "three pillars" of market access, export
subsidies and domestic support. While these issues
had been the main discussion points at the WTO from
the start, what was new was that discussions on other
fronts were made conditional on the outcome on these
issues. Though Pascal Lamy, Director General, WTO,
argued that this structure was adopted for suitable
'sequencing' of discussions and did not in anyway,
reflect 'prioritisation' or 'ranking' of the issues[2],
delegates of many developing countries were sceptical.
An African delegate said,
"
more emphasis is placed on market access,
and there is nothing on development. The special products
(SP) and special safeguard mechanism (SSM)[3] issues
are seen as 'by the way issues'.
..If we hold up
on SP and SSM, we are in trouble.
If we agree on
partial modalities focusing on market access and leaving
development issues behind, we will be kissing these
development issues goodbye."
These concerns of the developing countries and the
LDCs were not pushed since Mr Lamy held that SP and
SSM in agriculture were not listed at the time only
because, there were other issues to be sorted out
before members could consider whether extra flexibility
was needed for these countries.
In NAMA too the attitude was the same,
"
.focus will first be on: the formula and coefficients
;
the treatment of tariffs that are not currently committed
(or "bound")
.; and flexibilities for developing
countries subject to the formula.
Next would come: duty-free and quota-free market access
for exports from least-developed countries; flexibilities
for developing countries with a low proportion of
products bound in the WTO; small and vulnerable economies;
recent new members; non-reciprocal preferences and
the implementation period.[4]"
So it was clear from the beginning that discussion
on the issues of concern to developing countries perspective
had been made conditional and secondary, violating
the basic principle of the Doha round, which was supposed
to be a development round. To agree to this sequencing
meant that developed countries would get the advantage
of being late movers. Yet it was accepted by the developing
countries.
The June mini ministerial conference was based on
the results of negotiations between the WTO members
over six weeks prior to the conference. The results
of the negotiations were submitted by the Chairs of
agriculture and NAMA negotiating committees on 22nd
June, 2006, to Pascal Lamy, Chair of the TNC. The
texts revealed the differences between countries and
the degree of divergence. For example, the agriculture
text showed that for Special Products the U.S. wanted
to restrict its number to five tariff lines whereas
the G33 (now a group of 46 developing countries),
wanted to be able to designate at least 20 percent
of tariff lines as Special Products (amounting to
roughly 400 tariff lines). There were 760 brackets
(i.e. issues where no consensus is reached, as yet)
in the draft text on agriculture; in other words,
there was almost no agreement on any of the issues.
Similarly, in the draft of the NAMA text, the Chair,
reported almost no convergence on a range of issues.
After two days of negotiations starting on 28th June,
Pascal Lamy was doubtful about any meaningful conclusions
emerging from the mini ministerial. This was revealed
in an informal meeting of the TNC, on 30th June where
he said, "
failure to agree very soon on Agriculture
and NAMA modalities means that we are putting at risk
the future of the Round itself and, as a consequence
of that, the WTO and the multilateral system. To reach
agreement, we need numbers.[5]"
Mr. Lamy tried to break impasse, on 1st July, urging
Members to converge on the magic "20" number.
That is, converging on the G20 proposal of 54% tariff
cuts; $20 billion for US "trade distorting"
domestic support; and a maximum tariff of 20 on industrial
products for the developing world. The inequity even
here was obvious. US "trade distorting"
support in 2005 amounted to only $19.7 billion[6].
The European Union even after agreeing to phase out
its export subsidies would still be left with 55 billion
euros in other forms of export support[7]. Yet the
developing countries were expected to significantly
reduce their industrial tariffs, in some cases, even
to their applied rates[8].
In fact, the developed countries wanted both radically
reduced agricultural tariffs from developing countries
and also maximum access to southern markets for their
industrial and other non-agricultural goods. In the
NAMA negotiations, they demanded that developing countries
should cut their non-agricultural tariffs by 60-70
per cent while offering to cut their own by only 20-30
per cent[9]. The developed countries (Canada, Hong
Kong, New Zealand, Switzerland and the US) proposed
a room document entitled "NAMA: Formula",
based on which there were discussions on 8 9th June,
2006. The proposal called for the coefficient of developing
countries' to be only 5 points above that of developed
countries: a coefficient of 15 for the developing
countries, as opposed to 10 for the developed. Moreover
there was further pressure on the developing countries
to reduce unbound tariffs across a range of product
lines. Annex B of the July Framework asked the 'paragraph
6' countries (those that currently have less than
35 per cent of their tariffs bound) to bind 100 per
cent of their tariff lines (although this figure was
in brackets), while the 'paragraph 6' countries proposed
in the TNC meeting of 24th July, 2006 that 70 per
cent of their tariff lines should be bound. Even for
paragraph 6 countries an agreement was reached, that
these countries would bind their tariffs at the average
of 28.5 per cent (the average of developing countries'
bound tariff after Uruguay Round commitments).
In order to see the implications of such steep tariffs
cuts for developing countries, one can cite a World
Bank study of 2005, which observed, as result of the
"likely Doha scenario" of reforms the developing
countries would gain a mere $16 billion in ten years[10].
A recent United Nations Conference on Trade and Development
(UNCTAD) study calculated that the losses in tariff
income for developing countries under Doha could range
between $32 billion and $63 billion annually. This
would lead to a loss in government revenues to the
tune of $30.4 billion annually at the least.
Moreover the developed countries tried to change the
definition of "less than full-reciprocity"
in the "NAMA: Formula" draft where it now
meant merely higher coefficients for developing countries;
application of 'paragraph 8' flexibilities that give
developing countries an exemption or less cuts for
a certain percentage of tariff lines and trade; Special
treatment for small, vulnerable economies; non application
of formula for paragraph 6; exemption of formula for
LDCs. However, originally "less than full-reciprocity"
meant smaller percentage cuts in tariff for developing
countries than the developed countries. Therefore
it was pretty clear that the mini ministerial in July
was working to the detriment of the developing countries.
In sum the collapse of the Doha Round as it was occurring
was not a setback from the point of view of the developing
countries. What is of significance was the Round collapsed
despite the efforts of the developed countries. When
the formal TNC meeting on 1 July 2006 came to an end
without results, members agreed that Mr Lamy should
consult with all to facilitate the establishment of
"modalities". Mr. Lamy agreed that members
will remain the main actors, and the principles will
continue to be "bottom-up" (and not"
top-down") and transparent.
Curiously enough this position was suddenly revised
when Mr. Lamy arranged a summit in St. Petersburg
on 17th July, where only G-8 members (Canada, France,
Germany, Italy, Japan, Russia, the UK and the US)
were called upon to formally participate. At the summit
he declared that the chief responsibility was with
them to decide upon the future of the negotiations.
To quote:
(T)he chief political responsibility lies here (G-8),
with 85 per cent of the world's GNP and 75 per cent
of world trade, and that whether we like it or not,
the remaining topics of negotiation now depend on
solving the agricultural and industrial conundrum[11].
The hierarchical structure of the WTO can not be
brought out more clearly than in this statement, which
indicates that the developmental approach was plain
rhetoric in order to sell the project to developing
countries.
This was followed by a meeting in Geneva, on 23rd
July, among the G-6 (Australia, Brazil, the European
Union, India, Japan and the United States) to follow
up on instructions from the St Petersburg Summit on
17th July. The Geneva meeting too did not produce
any result. Pascal Lamy decided to suspend the negotiations
after talks broke down on Sunday 23rd July. And on
24th July he said in an informal meeting that he would
recommend a "time out" to the General Council
on 27th July.
To assess why the negotiations broke down it is necessary
to note the date when suspension was declared by Lamy,
his own perception about the breakdown and the official
statements of various officials. The suspension was
not declared after the summit in St. Petersburg, but
immediately after the meeting of the G-6 nations (at
which Brazil and India were participants) on 23rd
July. Notice that in St. Petersburg only G-8 countries
were called and since suspension was not announced
after that, it can be surmised that some degree of
consensus was reached at among the developed countries.
However the suspension immediately after 23rd July
indicates that absolutely uncompromising positions
were taken by the participants in the meeting.
According to Lamy the main blockage was on Agriculture.
"Despite some improvement on numbers which were
informally floated and in particular on market access
for developed countries, the gap in level of ambition
between market access and domestic support remained
too wide to bridge"[12]. It is recognised that
some improvement was seen in the numbers proposed
on market access.
On examination of the comments of members on the suspension
of talks some apparent tendencies emerge. Mr. Kamal
Nath, Minister of Commerce and Industries, India,
said on 24th July that at first negotiations started
on market access (MA) for agricultural products. Developed
nations failed to realise that limited MA was to protect
millions of subsistence farmers and ensure food security.
The developed countries remained fixed to their initial
position; to correct the structural imbalances only
when significant MA is provided to them. He felt that
the concept of the round had been subverted. He confessed
that every country had put something on the table
except one country without naming it.
The Brazilian representative said that no concessions
were extended on the domestic support front. He criticized
the European Union (EU) for making little concessions,
needed for successful negotiations. EU and Japan openly
said that all the G-6 countries showed flexibility
except the US. USA stood still and wanted to discontinue
the negotiations, even though G-20 responded with
100 per cent elimination of export subsidies, 75 per
cent reduction in trade distorting domestic support,
50 per cent average tariff cuts and was open to decide
the number of Special Products. The fundamental reason
identified by EU for the suspension of the mini ministerial
was US's uncompromising position.
The USA argued that the LDCs and developing countries
were less ambitious in offering MA. Spokespersons
confessed that the US remains committed to the DDA
only if MA is enhanced and they could not promise
any numbers (regarding subsidy reduction), since there
was nothing they could have recommended to the Congress
or the President. They reaffirmed their belief that
real gains are to come from MA. Regarding the suspension
of talks they were confident of resumption, citing
the example of the Uruguay Round where negotiations
came to postponement many a times.
Thus it is clear that the negotiations could not be
carried out successfully due to the intransigence
of the US alone (though EU was also partially responsible).
One proximate reason for US intransigence could be
that faced with increases in inequality due to corporate-driven
policies, a rising current account deficit, worsening
competitiveness in the world export market, the mess
in Iraq, and mid-term elections round the corner in
November this year, the Bush administration did not
want to convey the impression that it was letting
down its farmers by complying with demands to reduce
domestic support.
This is a classic example of exercising unilateral
power in a multilateral institution, to disrupt the
negotiations. However this does not mean that the
position taken by the developing countries in the
G-6 meeting was insignificant. They were bold enough
not to succumb to the pressure exerted by USA. But
they cannot be complacent since negotiations are bound
to resume some time in the future. This is clear from
the report of the Chairman of Committee on Agriculture,
to the General Council on 27th July, which said,
Although it is clear from this document that there
were considerable differences between Members on many
issues, it should also be clear that many issues are
at an advanced stage, draft texts on many specific
modalities and rules related issues are well developed.
There were a lot of square brackets numerically
in that draft text, but it is clear to participants
that those square brackets travel in groups, as it
were, and movement on one pair would quickly mean
movement in many others.
There are clear indications that an agreement may
be reached in the future and that developing countries
should bargain as a block, because once a single developing
country is made to conform, the rest will follow suit.
September 7, 2006.
[1] However the Chair of the TNC, Mr. Pascal Lamy,
also the current Director General of WTO in an informal
meeting in 28th June, 2006, reported under the WTO
news section, "Lamy outlines schedule for 'moment-of-truth'
meetings" that, "the modalities now under discussion
are by no means the end of the agriculture and non-agricultural
market access negotiations
..
.. These modalities
will be the tools for producing "schedules", lists
of cuts in tariffs on thousands of products and in
agricultural subsidies for each of the WTO's 149 members,
a process that will take months". Schedules are offerings
made by individual countries; however they are based
on the basic premise of the modalities. Thus decision
upon modalities are absolutely crucial since once
they are decided upon the basic structure would be
given as an exogenous factor within which a country
will have to decide.
[2] The term 'sequencing' has been used for a definite
reason. It is tactically adopted to mute dissenting
voices and has emerged from the 'Green Room' meetings
of the mini ministerial meetings in April. In April
this year, many members were vehemently opposed to Lamy's suggestion of partial modalities for an April
mini ministerial. This led to the cancellation of
the mini ministerial. This time around, there is careful
wording to justify this "sequencing" - that
these are not priority issues, but is a sequence of
issues to be discussed. Some issues, it is reasoned,
unlock others. The question obviously remains, what
explains this particular form of sequencing.
[3] Note: "Special Products" and "Special
Safeguard Mechanisms" are mechanisms to allow
governments to slow down the erosion of local agriculture
by exempting some products from tariff cuts and raising
tariffs on subsidized imports.
[4] 28th June, 2006, reported under the WTO news section,
Summary, "Lamy outlines schedule for 'moment-of-truth'
meetings", www.wto.org.in
[5] Chairman's statement at the informal TNC meeting
of 30 June 2006, JOB(06)/216, www.wto.org.in
[6] "WTO Talks Collapse: Good News for the Developing
World", 01 July 2006, www.focusweb.org Note: Other
than this there are other forms of subsidies which
are present so as to promote development and are non-trade
distorting, under various boxes.
[7] Ibid.
[8] This has led to the coinage of the terms like,
"real new trade flows", "real cuts in tariff" and
"real market access".
[9] "WTO Talks Collapse : Good News for the Developing
World", 01 July 2006, www.focusweb.org
[10] "Why Monday's Collapse of the Doha Round Negotiations
is the Best Outcome for Developing Countries", Walden
Bello, 25 July 2006, www.focusweb.org
[11] "The chief responsibility lies here,' Lamy tells
G-8", 17 July 2006, St. Petersburg summit, www.wto.org.in
[12] "DG Lamy: Ttime out needed to review options
and positions", Trade Negotiations Committee, 24July
2006, www.wto.org.in
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