TWN Info Service on WTO and Trade Issues (July 07/05)

12 July 2007

Raghavan's analysis:  Disconnects At All Levels

Below please find a commentary by Chakravathi Raghavan, who is a renowned analyst of the trade system and of WTO negotiations, on the current state of trade negotiations.

It was published in the SUNS on 9 July 2007.

With best wishes
Martin Khor


By Chakravarthi Raghavan*:  Geneva 6 July 2007

[Published in South North Development Monitor 9 July 2007]

Geneva, 21 (Chakravarthi Raghavan*) - If even a more than average reader of political, economic and business news and news about the Doha multilateral trade talks at the World Trade Organization feels confused these days, he or she has every reason to be.

There are disconnects all around, with too many spins by too many of the leading participants, who are trying to repeat history.

Take the simplest 'disconnect': the time-span or duration set for the negotiations.

In 2001, when the negotiations were launched at Qatar, one of the principal movers was Mr. Pascal Lamy, in his capacity then as European Community Trade Commissioner. In fact the Doha meeting itself was brought about by Lamy and the then USTR Robert Zoellick (a original neo-con and Enron adviser), who both, within days of the 11 September 2001 terrorist attacks on New York Twin Towers and the Pentagon at Washington DC, joined forces to promote the WTO ministerial meeting at Doha as a response to terrorism.

After the 1999 collapse of the Seattle Ministerial meeting (and efforts to launch a new trade round), the WTO General Council meeting in Geneva had agreed on confidence building measures. After the election of George W.Bush, Zoellick who became USTR, sought to launch a new market access round, but was unsuccessful in getting Congressional backing and authority to negotiate (bilaterally, plurilaterally or multilaterally) any reductions of tariff and non-tariff barriers.

At the EC, Lamy (as his predecessors did before him) had been looking for ways for the EC not to have to take any measures on the path of further liberalisation of agriculture and ending agri-subsidies. At Seattle itself he tried to bring in the four socalled 'Singapore issues', and pushed them at Doha too, but had to give them up at Cancun (when the Ministerial was collapsing).

Within days of the 11 September terrorist attacks, Lamy and Zoellick joined hands to launch a new trade round at the WTO ministerial to be held at Doha, in the Qatari capital.

The Ministerial declaration was drafted in long 'green room' meetings and adopted at Doha in November 2001, setting out what was titled the 'Doha Work Programme'. It said (in para 45) that the negotiations shall be concluded no later than 1, January 2005. Lamy (with WTO head, Mike Moore) played a leading role in drafting the declaration and the work programme.

The same Lamy, now in his avatar as WTO Director-General, at a 'breakfast meeting' with journalists on 13 June 2007, said that the negotiations which started more than five years ago has been a very long process, but that it should not be surprising that the negotiations are lengthy and complex, and pointed out that the Uruguay Round of negotiations - with fewer members and fewer topics - had lasted eight years. He went on to add: "We are now at the stage when the conclusion of the round could be envisaged sometime end of this year/beginning of next year provided a few headline issues are settled. All these years have created a situation where we now have a very clear political vision of what these few headline gateway issues are.." (SUNS #6271 of 14 June).

When Lamy spoke to the media, the ability of the US administration to sign a Doha trade accord and get it through Congress under the fast track authority (a yes or no vote, without any amendments) had ended. Though technically, the administration's fast track authority expired only on 30 June, in fact the congressional law, the Trade Promotion authority, had laid out a procedure under which for any agreement to be signed before 30 June and submitted to Congress for action under fast track procedures, a detailed draft agreeement ought to have been notified by 1 April, for a 90-day consultation period between Congress and the administration, before the administration could sign an agreement on 30 June to use that fast track authority.

Yet Lamy, other trade officials, chairs of negotiating bodies, and trade negotiators, have been travelling around the world, holding mini-meetings and "negotiations" to agree on a Doha deal and conclude the negotiations - pointing to the 30 June deadline (end of the administration authority under the TPA).

After the collapse of the G4 efforts at Potsdam, and statements about the negotiations returning to the multilateral forum, trade officials suggested that Lamy had not favoured the G4 process, and he and the negotiating chairs would now take an active role.

However, last year, after the St. Petersburg G8 summit, where he asked the G8 and heads of the outreach countries, for impetus to the Doha negotiations, and subsequently when the trade ministers of the G6 (the G4 and Japan and Australia) met, with Lamy participating, neither Lamy nor his trade officials had raised any objections. When the G6 Ministers failed to reach accord (with the US unwilling or unable to move on domestic subsidies), Lamy announced that he would be suspending the Doha talks, summoned an informal TNC, recommended suspension and got it okayed!

[Until Lamy took over as DG, the practice at the WTO was for informal HODs to be called by the Chair of the General Council, and consultations held with the GC chair and the DG sitting together. But when Lamy took over, after one such meeting with the then General Council chair, Kenya's Ambassador Amina Chawahir Mohamed, subsequent meetings were called by Lamy and conducted by him. Initially described as informal HODs, later when there were some queries from media, the trade officials began describing these meetings as informal TNCs.]

And even after the formal end of US fast track authority on 30 June, Lamy, and the chairs of the agriculture and non-agricultural market access (NAMA) negotiating bodies, have announced plans to prepare and put forward by mid-July draft modalities texts in agriculture and NAMA, and for them to be reflected upon in capitals, for further intensive talks and tentative accords by September/October. There is also talk at and around the WTO of some mini-ministerial, and Lamy putting forward a take-it-or-leave-it draft package text to enable the Doha negotiations to be concluded by October-November 2007.

After the collapse of the recent G-4 (Brazil, India, EC and US) talks at Potsdam in Germany, the USTR, Susan Schwab, came to Geneva and met Lamy, and indicated at a media briefing that she would encourage Lamy tabling a text.

Even before taking over as the Director-General in August 2005, Lamy is known to have had a lengthy conversation with former GATT Director-General Arthur Dunkel about the Dunkel text (the Draft Final Act, that he had tabled during the Uruguay Round) and explored the possibilities for a similar Lamy text to conclude the Doha negotiations. These reports surfaced at the time of the 2005 Hong Kong ministerial meeting -- with some equivocal statements and remarks from Lamy and the WTO spokesperson about prospects for such a text.

Over the past few weeks, with talk of the Doha negotiations having come back to Geneva and the multilateral process, while the US fast track authority has expired and the Congressional Democratic leadership has announced that new Trade Promotion authority is not a priority, trade officials and several leading WTO protagonists have been privately saying that the talks here and idea of a text being put on the table by Lamy (with ground prepared by Agricultural chair Falconer and NAMA chair Stephenson) is to put on the table an attractive enough market opening package for the United States administration to be able to sell to Congress and get new fast track authority to conclude the Doha negotiations -- which like the Bush 'war on terror' has run aground and proving to be an embarassment.

All the talk at the WTO, or of Schwab and others in their trips around the world, on the trade issue appear to be addressed to the US Congress, and the Democratic leadership, to persuade Congress to provide fresh fast track authority (with out which the administration cannot negotiate or conclude any bilateral, plurilateral or multilateral trade accords).

So much so that what was initially described and sought to be sold by the WTO leaders and major protagonists to the developing countries, and their policy-makers and public as well as to civil society as the Development Round, has now become what the Economic and Political Weekly of India recently (after a Lamy visit and seminar or meeting in India) had called the Trade Promotion Authority Round.

Official pronouncements in Washington, Geneva and in key capitals, as well several statements and remarks of civil society groups in the United States have created quite a bit of confusion, about the fast track authority as well as US administrations negotiating bilateral or multilateral trade accords - involving reduction of tariff and non-tariff barriers and changes to the US law.

A briefing paper by the US Congressional Research Service (updated as of 18 October 2006), provides the background to these matters.

In terms of the US scheme of things, the authority for trade, both tariff and non-tariff issues, vest with Congress. After the events leading to and the era of Great Depression beginning 1930, under the Reciprocal Trade Agreements Act of 1934, the US Congress established a policy under which Congress annually delegated renewable authority to the President to negotiate reciprocal reduction of tariff barriers.

After the Havana Charter, and the post-war efforts to create an international trade organisation (as part of the Bretton Woods scheme) collapsed, because of the US Senate refusal to ratify, and the entry into force of the provisional protocol of application for the GATT 1947, as an Executive arrangement, various US tariff reduction accords, including the initial tariff rounds under the GATT were in terms of this annual authority.

Until the Kennedy Round, the trade agreements only covered tariff reduction issues. The Kennedy Round had a small involvement in the non-tariff issues, in regard to the anti-dumping issue.

Two or three erroneous rulings in the early years of the GATT, involving agricultural processed products (the wheat flour case involving France, and the Italian pasta case, about use of domestic subsidised wheat for making pasta) had the practical effect of taking agriculture out of the GATT trade disciplines. Even earlier, the US (during the Eisenhower era) had obtained a permanent waiver for its domestic agricultural supply-management programmes.

[At Marrakesh, all this was agreed to be reversed, with the US, EC and other developed countries committed to an agricultural trade reform process, but over a long period, with developing countries paying an advance price in the shape of TRIPS, new GATT disciplines and the GATS. Now for continuing the agriculture reform process, developing countries are being asked to pay a price repeatedly.]

It was only in 1973, when the Tokyo Round was launched, and some of the non-tariff issues (safeguards, subsidies, and anti-dumping) came on the agenda, that the US administration had to get authority from Congress before it could negotiate these questions, or for its trading partners being willing to negotiate with the US and reach accord - since they did not want to get into a subsequent process of further negotiations to satisfy Congress or situation of later having to agree to changes sought by Congress.

This led to the 1974 Trade Act in the United States (when Richard Nixon was the President). The earlier Congressional authority to the administration to negotiate reciprocal reduction of tariffs, was expanded to include an authority to negotiate reduction of tariff and non-tariff barriers, but required more extensive reporting and consultations between Congress and the President during negotiations. It was this Trade Act that also laid out a procedure or mechanism for expediting consideration by Congress of trade agreements - with an yes or no vote (the fast track as it came to be known) to the agreement as a whole, and the implementing legislation to be submitted to Congress along with the agreement, by the President.

This fast track authority continued till 1994. The Tokyo Round implementation legislation of Congress in 1979 extended fast track till 1988. After the Uruguay Round was launched in 1986, the President (Ronald Reagan) was given comprehensive authority through the Omnibus Trade and Competitiveness Act of 1988, and the fast track authority under it was continued until 1994.

President Clinton, elected to the White House in November 1992 (and who entered office in 1993), used that authority to first get NAFTA approved by Congress, and then the Marrakesh agreement of the Uruguay Round in 1994. But thereafter, Congress refused to grant him such authority.

Even when George W Bush was elected and entered White House in 2001 (by a majority decision of the Supreme Court), Zoellick as the USTR could not get the Republican controlled Congress to give him fast track authority. But after 11 September 2001, Zoellick and Lamy joined hands to launch the Doha negotiations, and only thereafter in 2002, Congress granted Bush fast track authority. But even this became possible only after the United States' agricultural support was raised, and ironically this increased support came after the launch of the Doha talks to reduce agricultural subsidies of all kinds - a case of bad faith negotiations so to say.

Now, with the US domestic agenda and public concerns rising over the Iraq war, and the 2006 elections which brought several new Democrats to both Houses of Congress, mostly reflecting US concerns over the Iraq war, 'globalization' and 'free trade', any idea that fast track would be extended even to conclude a Doha round seems to be illusory.

While lobbyists, and their funding of Congressional elections, give them great influence over Congressional agenda, some of the studies of voting patterns over time by public interest groups show that such lobbying influences figure considerably at the committee stage in both the House and the Senate, but not so much when issues come to the floor for a vote.

But that apart, it is difficult to envisage Congress now giving the Bush administration any new fast track authority.

The mid-term Congressional elections ended on 7 November 2006. And on the next day, all those Presidential candidates, Democrats and Republicans alike, aiming for the White House in 2008, lost no time in starting one kind of a campaign or other - making the 2008 Presidential election period the longest so far.

With the Iraq war imbroglio, defeat of the US immigration bill, and now the Libby affair, George W. Bush has become a lame-duck President with little influence over Congress. This is not an atmosphere where international trade agreements, requiring the US to change domestic law, and cut all kinds of direct or hidden subsidies, would get Congressional nods.

And there are domestic problems in other major countries too.

Negotiations at the WTO have been focussing mainly on agriculture (subsidies and tariff cuts) and NAMA cutting tariffs by use of coefficients (a concept difficult to understand for even traders and enterprises). Neverthless, unlike in the past, with internet, civil society activists are more well-informed than many government officials in countries.

At the High Level segment meeting of the United Nations ECOSOC this week, Lamy said that currently a number of substantive rules of the WTO do perpetuate some bias against developing countries, and that while political decolonisation took place more than 50 years ago, "we have not yet completed economic decolonisation. A fundamental aspect of the Doha Development Agenda is therefore to address the remaining imbalances in the multilateral trading system."

Yet in the meetings at the WTO (and especially at the small meetings by the chairs of the main negotiating groups) it would be difficult to locate and identify the proposals and discussions and negotiations to "address the remaining imbalances" in the multilateral trading system.

At the ECOSOC, Lamy spoke of the multilateral negotiations entering a crucial stage in Geneva, that what remained to be done was small, that reaching agreement on (agricultural) subsidies depends on additional concessions from the US equivalent to less than a week's worth of transatlantic trade, on an additional handful of percentage reduction in the highest agricultural tariffs by the EU and Japan, and on an additional handful of percentage reduction in the highest industrial tariffs by emerging economies such as Brazil and India.

In comments and questions to Lamy, Amb. Munir Akram of Pakistan, had raised the question whether, if the Round is unable to be concluded, it would be possible as a moral or economic right to have a separate fast track agenda to achieve the development objectives of the Round. Why should the rest of the developing countries be hostage to major powers that cannot agree?

Lamy replied that he doubted there was room for a Development Package if the Round failed. If the Round failed geopolitical consequences will go beyond trade, he said.

"I doubt the negotiations are about morals, it is about trade offs," said Lamy. If it was about morals, the subsidies and tariffs would have been reduced already. In the negotiations, the developed countries have to pay, developing countries have to pay less, and there is no need for the LDCs to pay. Lamy said that he doubted this could be substituted by morals.

The idea that in such a situation, Lamy could repeat a Dunkel act is bizarre.

It is difficult to say what would happen at the WTO if Lamy attempts to repeat history.

At the moment, the WTO seems to be staging a sort of Wagnerian opera - the four part Ring Cycle of Wagner. Wagner took 26 years to compose that libretto and the music, and it is a 14-hour opera (18 hours if intermissions are taken into account), normally played in four parts over four successive nights. The Ring Cycle, a story based on German and Nordic myths and gods, was about possessing the magic ring that assured dominion over the entire world, and ends in the last part, the 'Twilight of the Gods', in a final cataclysm with Wotan and other gods being destroyed!

In 2006, when the G6 talks collapsed, and Lamy suspended the talks, Crawford Falconer (chair of the agriculture talks), in an interview to Washington Trade Daily, recalled some English history and said, he did not believe as a general proposition that it is a good idea to suspend the Parliament. "Charles I made a bit of a mistake when he had suspended the Parliament, because he suspended it before he had raised any money. He paid a historical price for that and things had gone sour in the meantime."

In the rebellion where Oliver Cromwell triumphed to become the Protector of the Realm, Charles I was beheaded.

Hegel in Germany, the first philospher of modern times to use dialectics, wrote about history repeating itself. Karl Marx, who in fact carried forward the dialectical approach, in his Eighteenth Brumaire of Louse Napolean said that Hegel forgot to add that history repeats itself, first as a tragedy and the second time as a farce.

It remains to be seen whether this whole exercise at the WTO will end up as a tragedy or a farce.

(*Chakravarthi Raghavan, Editor Emeritus of the South-North Development Monitor, contributed this commentary.)