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.