by Martin Khor
Monday 3 July 2006
WTO talks fail
The World Trade
Organisation was plunged into a new crisis as a meeting of some 60 Ministers
closed early after failing to come up with any results. The United States
was blamed for not improving on its offer to cut domestic farm subsidies,
and it blamed others for not agreeing to cut their tariffs further.
Global trade talks
reached crisis point when a Ministerial-level meeting of the World Trade
Organisation in Geneva fell apart after major countries could not agree
on how to cut subsidies and tariffs in agriculture.
The meeting ended
a day earlier last Saturday after it became clear that no progress could
be made on the agriculture issue. Also on hold was the issue of liberalization
of industrial products.
“There has been
no progress, so we are in a crisis, we have to admit it,” said WTO Director
General Pascal Lamy.
About 60 Ministers
of trade and agriculture had gathered on Friday in an effort to agree
on the “modalities” (formulae and numbers) for cutting agricultural
tariffs and subsidies and industrial tariffs, as well as for exceptions,
or reduced rates of liberalization, for certain goods and for some countries.
The meeting was
planned for at least three days. But it became clear on the first evening
that the positions were too far apart, and a decision was made to call
off the talks without any progress made.
have been held under the WTO’s Doha programme which was launched in
November 2001. The talks have been plagued with problems. They were
to have ended in 2004 but went through many failed deadlines.
The Hong Kong Ministerial
conference last December gave it new life and directions, but the new
deadlines of April and now June have passed without a basic agreement
on how much to cut tariffs and subsidies, and what exceptions (or “flexibilities”,
in WTO jargon) to give.
The urgency for
completing the Round is due to the expiry next July of the “fast track
authority” of the United States President. Without this authority it
would be difficult to have a trade agreement passed by the US Congress.
The WTO needs to
agree on the “modalities” by the end of June if the talks are to be
wrapped up in December, in time for the US to prepare for the passage
of its bill before the fast track authority expires.
Lamy has been asked
by the WTO members to “facilitate and catalyse” more talks to see whether
a new deadline of the end of July can be met. If that passes without
success, the WTO talks may hibernate for years until a new fast track
authority is renewed.
The immediate cause
of the meeting’s collapse was the inability of the United States to
improve on its offer to reduce its domestic farm subsidies, which distorts
world trade and puts developing countries at a disadvantage.
It had already agreed
to bring the ceiling (the level that is allowed) of overall trade-distorting
subsidies to US$23 billion. But as its actual subsidies were slightly
below $20 billion last year, other countries considered the US offer
to be inadequate, as it allowed the US to expand (rather than decrease)
its actual subsidies.
The Group of 20
developing countries asked that the allowed subsidies be brought down
to $12 billion, with others suggesting $15-17 billion.
The US was expected
to make a renewed offer, even if to go down by a few billions. But
due to pressures from its farm lobby and from the US Congress, it was
unable to make even a small gesture, and stuck to its position.
Instead it blamed
other countries for not going far enough in opening their markets on
both agricultural and industrial goods, saying that this was a pre-requisite
for it to retain (let alone increase) its existing offer on subsidies.
This blame shifting
did not work because the European Union had agreed to lower its farm
tariffs by 51%, an improvement from the 39% it had earlier suggested.
Some countries thought that was not good enough (the G20 wanted 54%,
the US wanted 66%), but almost everyone (except the US) said it was
a good start.
The ball then went
to the US court for it to match the EU move by telling by how much it
would improve its subsidies offer. A whole day was spent waiting for
the US to move. When it did not, the Ministers present agreed to call
off the talks early.
Meanwhile, an overwhelming
number of developing countries expressed their frustration not only
at the inadequate US offer but at how the developed countries are now
putting pressure on them to steeply cut their tariffs.
The pressure is
greatest in industrial goods. The developed countries have proposed
a formula by which they themselves reduce their industrial tariffs by
about 20-30%, whereas the developing countries must cut their tariffs
At a press briefing
to show the solidarity of developing countries, ten Ministers representing
various groupings of the South (including the G20, the Group of 33,
Africa, the Caribbean and the least developed countries) urged the developed
countries to do more, and asked for fairness in their demands on what
the South can do.
“After all this
is a Development Round,” said Indian Minister Kamal Nath. “The mandate
is for developed countries to cut their farm subsidies and open their
markets to developing countries.
“But if the developed
countries come to Geneva and hope to put the shoe in the other foot,
asking developing countries to provide market access to them while they
retain their subsidies, then there is no negotiating space possible.”
Speaking on industrial
tariffs, the South African Minister Rob Davies said: “What is being
demanded of us is that we cut our tariffs to such an extent that our
industries are dislocated. We are asked to make a commitment in cutting
tariffs in industry that the developed countries will not do in agriculture.
We have to reclaim the development essence of this Round.”
Lamy is now given
the mandate to facilitate further talks. Few believe that the new deadline
of end of July can be met.
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