Bridges Weekly Trade News Digest • Volume 12 • Number 43 • 17th December 2008
With No Doha Conclusion in Sight, WTO Considers How to Proceed
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WTO Director-General Pascal Lamy announced on Friday that there will be no conclusion to the Doha Round of trade talks before the end of the year, making this the second major setback for the round in fewer than six months.
Although some had feared that the Round would soon go into hibernation as administrations change in several countries and the economic crisis continues around the globe, Lamy told a meeting of the Trade Negotiations Committee on Wednesday afternoon that their work would continue in the New Year, albeit with perhaps a slightly different tone. “Concluding the Round should remain our focus in 2009,” he said, “but this endeavour takes place within a more global portfolio of WTO activities.”
Sectorals and SSM Proved Too Controversial
Continued disagreement over sectoral agreements - sector-specific liberalisation initiatives in manufactured goods that were strongly supported by the US - and an agricultural safeguard mechanism proved too much for negotiators to overcome. Addressing the WTO membership on Friday, Lamy said the bottom line was that “I have not detected the political drive, from my interlocutors, to make the moves which would give the final push to the establishment of modalities on these two issues. My sense is that there was no readiness to spend the political capital needed to get to modalities now.”
Although the negotiating mandate for non-agricultural market access explicitly states that participation in sectoral initiatives - deep cuts or total elimination of tariffs on chemicals, automobiles, or any of the 12 other sectors proposed - is voluntary, the US recently made it clear that it wants at least China, Brazil and India to commit to participating in two such initiatives. Developing countries perceived this as an unacceptable raising of the bar at a very late stage in the negotiations.
Pascal Lamy likened the situation to some countries seeing sectorals as a “top-up, a non-mandatory addition to the main package. It would be the cherry on the pie. For others, this is an essential part of the agreement, which can only be finalised if there is a guarantee of commitments. It would be the pie on the cherry.” At this stage, he said, the two positions were “not reconcilable,” adding that it would be helpful “if we could get a better collective appreciation of the value of what is on the table, and how much of the difference sectorals would make.”
Lamy also noted that key differences remained on the special safeguard mechanism (SSM) that is to help developing countries shield their farmers from import surges and sudden price drops.
Nevertheless, he insisted it was the lack of political will rather than technical solutions that had prevented agreement on either the SSM or the sectoral initiatives. On the reduction of cotton subsidies, however, he said he had sensed that “both a technical solution, as well as the political will, were there.”
Mood in Geneva Soured Earlier This Week
Hopes for the conclusion of a deal had crashed with the failure of a marathon mini-ministerial meeting in July, but spirits lifted in October, sources said, as political will to conclude a deal intensified with the advent of the global economic crisis. Mandates last month from world leaders at the G-20 and APEC summits added further momentum to the deal.
But the mood at WTO headquarters in Geneva soured quickly this month as it became increasingly clear that the political calls for the conclusion of a deal had failed to translate into changes in position at the negotiating table.
There had been a “sudden and dramatic change in the mood at the WTO,” Ambassador Trevor Clarke of Barbados told attendees at a seminar in Geneva late last week. Clarke attributed the shift in attitude to recent letters from US lawmakers and industry groups warning President Bush not to go through with an agreement that would not provide sufficient market access gains for US agricultural or industrial goods. Others blamed the sudden shift in mood on the US decision to ‘raise the bar’ in negotiations on sectoral agreements.
What role for the G-20?
Some trade experts see the failure to strike a framework WTO deal as a serious blow to the credibility of the G-20, just as the group of rich and developing countries was seeking to take on a more prominent role in the governance of the global economy.
Richard Baldwin, a professor at the Graduate Institute in Geneva, and Simon Evenett, of the University of St. Gallen, called governments’ inability to deliver on their commitment to agree on Doha Round modalities by the year’s end “the first concrete demonstration of the G-20’s ineffectiveness.”
The G-20’s principal role has been to bolster confidence that governments can keep the current from spiralling out of control, they wrote on the voxeu.org website. “In this light, the Doha failure could not come at a worse time.”
A separate G-20 pledge on trade – to refrain from raising new barriers the movement of goods and services – has also fallen by the wayside. Since the group’s November summit, Russia has increased car tariffs, and India has increased import duties on a range of steel products.
To restore its credibility on trade, Baldwin and Evenett recommend that the G-20 pursue a ‘plan B’ of initiatives at the WTO “that would signal the seriousness of their support for the WTO system while Doha is on hold.” These initiatives could include a multilateral accord on trade facilitation, a constantly updated monitoring mechanism for all increases to trade and investment protection, or even a “temporary binding commitment” by the G-20 and Pacific Rim nations not to raise applied tariffs or farm subsidies beyond their November 2008 levels. “Since much of the crisis-induced protection will be WTO-legal, we must find a way to unwind the barriers after the crisis,” they said, reflecting the fact that many countries have significant room to raise tariffs and subsidies before running up against WTO limits.
The Next Steps
It is not clear how much support there would be for such a ‘plan B’. In the wake of past negotiating breakdowns, some governments expressed opposition to calls to take trade facilitation outside the Doha framework.
But Lamy left open the possibility of having some sort of an ‘early harvest’ in the meeting of the Trade Negotiations Committee, or TNC, on Wednesday afternoon.
“Some of you have… mentioned the idea of some sort of early outcomes and have mentioned areas such as Trade Facilitation, Duty-Free Quota-Free Market Access, cotton or the banana issue,” he said. “Trade facilitation is the one on which I have detected more consensus. My own sense is that whether we harvest it earlier or not, at the end of the day this pleads for accelerating the work on these areas in the coming months, starting with Trade Facilitation.”
First and foremost, though, Lamy urged negotiators to carry on with their work in January.
“Looking ahead, our aims should not change,” he said. “I do not believe that either the political will to preserve the achievements so far or even the necessity to do so will go away, even more so with the continuing deterioration of the economic situation.”
In his TNC address, Lamy outlined a dual-track framework for progress in 2009. On the negotiations front, talks in agriculture and NAMA will proceed on technical issues and on the basis of the most recent draft texts. Lamy also urged talks in all other areas, which are in various states of play, to proceed. Many of these negotiations had been stalled, awaiting agreement in agriculture and NAMA. Indeed, the chair of the negotiating group on Rules has stated his intent to move from a single draft encompassing anti-dumping, horizontal subsidies, and fisheries subsidies, to three seperate texts as early as this week.
On a second, wider WTO front, Lamy introduced three ideas. The first was to establish an “internal Task Force” to provide regular updates of the impact of the financial crisis on trade. And Lamy indicated he was ready as early as this week to submit such a report. Second, Lamy talked of the importance of reviewing developments and mobilising finance for trade financing. Finally, Lamy said that a clear roadmap for Aid for Trade was desirable.
Most delegations that spoke up at the TNC meeting expressed their disappointment that the Round had not been concluded but said that they supported using the 6 December draft texts on market-opening in the agriculture and industrial sectors as starting points for future talks.
Many delegations expressed support for the idea of an early harvest, in all the areas indicated by Lamy, and in particluar, the more development orientated area of cotton.
Support was also indicated for the creation of a ‘monitoring system’ – similar to the one proposed by Baldwin and Evenett – to track trade policy changes that Members make in response to the global economic crisis. Many fear that countries will resort to protectionism as they ride out the economic turmoil, but others say that those warnings are unjustified.
But no one expects any quick fixes, and many fear that political momentum may be irretrievably lost due to the recurring setbacks and worsening global economy. Another major question mark hovers over how high the conclusion of the Doha Round will be placed on the agendas of new governments in Washington, New Delhi and Brussels.
But Lamy stressed that negotiators must carry on with their work, despite the recent setback.
“While the year may end in disappointment, we should now gather ourselves and work in 2009 to demonstrate that the WTO remains as necessary and credible as ever,” Lamy said. “The world trading system needs the Doha Round to better respond to the needs and aspirations of its Members. Concluding the Round should remain our focus in 2009. But this endeavour takes place within a more global portfolio of WTO activities in which we need to keep investing. This task starts today.”
ICTSD reporting.
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