On July 29, a meeting
of ministerial representatives of a large group of members of the World
Trade Organisation ended without result. The meeting itself should not
have been held in the first place. It was unscheduled, and was convened
to clinch a deal on the modalities that should govern the Doha Round of
trade negotiations, even though there was no evidence that members were
anywhere near agreement in a number of areas that mattered. Ministerials
work when countries are near agreement. However, with the terms of the
Bush administration and of the WTO Director General Pascal Lamy nearing
their end, it was widely believed that the Doha Round, which would have
to wait for new leaders with different priorities, would be delayed significantly.
Powerful forces were therefore at work to push through a quick deal. What
is surprising is that for a little while it appeared that Pascal Lamy,
acting on their behalf, may actually succeed.
All that said, the collapse of the talks is no big deal for those working
towards an agreement. For years now, an ever increasing number of WTO
member countries have at all times being negotiating one or other round
of a multilateral trade agreement. These talks move in peculiar stop-go
fashion with gradually increasing areas of agreement. When some critical
quantum of advance relative to the previous round is realised, a formal
agreement is signed and talks on the remaining issues postponed for the
future. Along this traverse, periodic failure of negotiations involving
representatives at various levels of government is inevitable. However,
each time, the effort to avoid failure results in some compromise so that
even if the talks fail at that stage, the round itself has "progressed".
This is true of this episode of failure as well, with some progress on
issues such as the trade in bananas and duty-free exports to industrial
markets for the poorest countries.
The collapse is not a disaster for advocates of trade liberalisation also
because the postponement of a "final" agreement in this round
of talks does not mean that the actual degree of liberalisation of global
trade would be far less than would have been the case if the deal had
been clinched. This is because the deal is not all about reducing the
actual extent of protection in global trade, but more about legally fixing
the maximum degree and the form of protection that a country can resort
to in different areas. The actual degree of protection in most cases is
way below this "binding" level, because while multilateral trade
talks are underway, countries either unilaterally or through bilateral
and regional agreements have been liberalising their trade regime far
more than required by the maximum protection they are legally committed
to or are committing themselves to at the WTO.
The point to note is that the so-called progress in trade liberalisation
notwithstanding, the fundamental asymmetry of the world trading system
remains. It is reflected, on the one hand, in the protection afforded
by the huge subsidies paid out by the US and the EU to their agricultural
sectors and the non-tariff barriers periodically resorted to by them in
other sectors where their competitiveness is under challenge. On
the other, it is seen in the pressure on the developing countries to open
up their markets for manufacturing by relaxing regulations relating to
Non-Agricultural Market Access (NAMA) and subjecting their farming sector
to competition from imports, even though agriculture is a far more important
source of livelihood in these countries than is the protected agricultural
sector for the developed economies.
This feature of the system makes it difficult to keep developing countries
at the table in the ever on-going negotiations. Many strategies have been
adopted for the purpose. The asymmetry has been sought to be concealed.
Inequality in power relations between the developed and the developing
has been used to "cajole" the developing countries into being
part of the process. Differences between developing countries with varying
levels of development and differing economic characteristics are used
to force them to negotiate, by pitting one group of developing countries
against another. Finally, in a move to sidestep the demand that arose
in the wake of the Uruguay Round that issues arising from the implementation
of that agreement, including the non-realisation of benefits promised
to the developing countries, should be considered first before launching
on a new round, the developed countries agreed to declare the round that
was indeed launched at Doha a Development Round.
The duplicity implicit in all this is visible in recent developments as
well. To lend credibility to his decision to call for an unscheduled ministerial
meet to push through an agreement, Pascal Lamy released drafts of agreements,
with significant sections left bracketed or incomplete, in two contentious
areas—agriculture and non-agricultural market access. These drafts
had all elements that reproduce the asymmetry in trade relations.
Consider agriculture for example. There are two means through which support
for agriculture in the developed countries is sustained through the ongoing
process of make-believe liberalisation. The first is to maintain the focus
on Overall Trade-Distorting Domestic Support (OTDS), with reductions in
maximum possible support always kept above the actual level of support
provided. The second is to shift the structure of support in favour of
the so-called "Green Box" provisions that constitute permissible
support.
In the many "concessions" offered by the US and Europe in the
run up to the July ministerial, they promised to reduce the permissible
OTDS by 70 and 80 per cent respectively. In the case of the US, this would
have meant that the currently permitted OTDS of $48 billion would be reduced
to $14.5 billion. What needs to be noted however is that at the prevailing
agricultural prices, which influence the levels of support provided to
farmers, the actual or applied OTDS level in the US stood at $ 7 billion
in 1996-97, rose to $19 billion in 2005 and fell to $11 billion in 2006
and $8 billion in 2007. Rarely has the US had to give its heavily subsidised
farmers even the $14. 5 billion it can provide if its current offer is
included in an agreement.
In the case of the EU, the currently permitted OTDS of Euro 110 billion
was slated to fall to Euro 22 billion. This compares with an estimated
actual support of Euro 28 billion in 2008 and Euro 12 billion by the time
the ongoing reform of the Common Agricultural Policy is completed in 2014.
Here too, what is on offer is a ceiling on OTDS that is way above what
the EU intends to actually provide its farmers in the coming years. In
any case, all this relates to what is considered "trade-distorting"
support. Over time the developed countries have shifted their support
to farmers away from what are considered trade-distorting measures in
favour of payments ostensibly "decoupled" from production and
therefore considered non-trade distorting. The demand that these payments
should be investigated and the huge support provided in the form of Green
Box payments made more transparent and trimmed has not been accepted.
The real intent of the US at least comes through from the Farm Bill voted
into law by the US Congress on May 22, a few weeks before the July ministerial.
The bill authorizes spending of up to $307 billion over five fiscal years
starting October 1, 2008, a significant part of which is available as
to support farmers. As an analysis of the Bill by the Institute for Agricultural
Trade and Policy put it: "Nothing in the 2008 legislation changes
the basic structure of U.S. support, which will rise and fall in reaction
to world prices. And the WTO rules are also fundamentally unchanged by
the Doha proposals. These latest developments are yet another reminder
of the urgent need to re-think agriculture trade policy, both in the U.S.
and around the world."
Meanwhile, the developing countries which expected significant concessions
for their agricultural sectors in the form of "special products"
and "special safeguard mechanisms" (SSMs) are being pressured
into reducing their right to protect their farming sector when circumstances
require. In the agriculture draft, tariffs above 130 per cent are required
to be cut by between 44 and 49 per cent and those below 30 per cent by
33 per cent, with cuts within that range for duties that currently rule
at between 30 and 130 per cent. This takes the average tariff cut for
developing country agriculture to 36 per cent, which is much higher than
what was required under the Uruguay Round.
Further, special concessions have been limited significantly. Special
products are those which are important from the point of view of food
security and farmers' livelihoods, and developing countries originally
wanted the right to self-designate up to 20 per cent of tariff lines under
this category. These commodities would receive higher protection, with
no tariff reduction commitments required in at least half of them and
the rest requiring at most minimal tariff cuts.
The Lamy draft has substantially trimmed the concession that would be
available under this head. It specifies that only 12 per cent of tariff
lines can be special products, with 5 per cent permitted zero tariff reduction,
subject to the requirement that group as a whole will be subject to an
average tariff reduction of 11per cent. This implies that if a country
chooses 5 per cent of tariff lines where the duty reduction is zero, duty
rates in the other 7 per cent of tariff lines have to be cut by 19 per
cent, so as to realise the average cut of 11per cent for the 12 per cent
of tariff lines designated as SPs.
The issue which is supposed to have broken this round of talks was reportedly
the SSMs, or safeguards against a sudden surge in imports. If imports
of a product exceeds some 10 per cent or more of the average imports over
the previous three years, the mechanism allows developing countries to
raise tariffs by differing degrees depending on the size of the surge.
The difficulty would be that this may require the country to impose a
tariff in excess of the maximum (bound) rate of tariff permitted under
its commitments under the Uruguay Round. Negotiations around the Lamy
draft led to the demand that developing countries should do this only
if imports equal or exceed 40 per cent of average imports during the three
preceding years. Developing countries including India and China objected
to this on the ground that a 40 per cent import surge would be adequate
to destroy the livelihoods of a large number of farmers. Acting then would
not serve the purpose the SSM is to be set up for. The US and other developed
countries claim that the refusal of China and India to climb down on this
issue broke the talks.
There are many who think this was too small an issue to explain the collapse
and there were many other issues, including the subsidies provided by
the US to its cotton growers with adverse consequences for African exports,
which were far more contentious. In their view, the US chose to use this
issue to sabotage the talks before it was forced to declare its position
in areas like cotton that had been kept for a later stage in the talks.
That is, SSMs were chosen as the deal breaker because they involved disagreement
with countries like China and India which are seen as not deserving too
much by way of special concessions given their high growth in recent years.
On the other hand, the US was saved the embarrassment of not offering
adequate concessions to the much poorer African developing countries.
The fact of the matter is that there were a large number of developing
countries who were behind China and India on this issue.
But India and China are themselves partly responsible for being the target
of attack. They were susceptible to an attack of this kind because they,
along with Brazil, decided to negotiate separately with the US and EU,
acting ostensibly on behalf of other developing countries. According to
reports, although some 40 ministers were invited to the talks, most of
the negotiations were conducted by only seven ministers (from the United
States, European Commission, India, Brazil, China, Australia and Japan),
besides Pascal Lamy himself. In practice the other developing countries
had no idea of how and where the talks were heading. This desire to cut
a deal with the developed by distancing themselves from the other developing
countries, besides contributing to the undemocratic nature of trade negotiations,
makes these countries culpable when it comes to accounting for the inequality
of the multilateral trading system..