TWN Info Service on WTO and Trade Issues (Aug08/01)
4 August 2008
Third World Network

Trade: Reflections begin on the WTO failure and the future work
Published in SUNS #6530 dated 4 August 2008
By Martin Khor, Geneva, 31 July 2008

Officials of the WTO members as well as the Secretariat are trying to find ways of picking up the pieces from the collapse of the WTO's Geneva talks of the past fortnight, so as to save the Doha negotiations or at least salvage some parts of it.

Delegates and secretariat staff alike are still recovering from the shock of the breakdown of the talks that took place on the evening of Tuesday (29 July). The collapse had come after a roller-coaster experience of nine days, first of a combination of open meetings (for all WTO members) and the "Green Room" (of 30-40 selected Ministers), and then of the vast majority of the Ministers and officials having to wait (in the last 7 days) for the results of the meeting of the G7.

The mini-Ministerial of 30-40 delegations had become a "micro-Ministerial" of 7 Ministers plus WTO Director General Pascal Lamy, as some diplomats put it.

Progress had been made on a number of issues, but on several of the key issues in agriculture and NAMA the talks had been stuck. A draft by Lamy last Friday to the G7 had a fragile status. While it was presented to the Green Room as having emerged from the G7, the ownership and authorship was always in doubt.

Indian Commerce Minister Kamal Nath told a G33 meeting on Saturday that he had objected to the language on special safeguard mechanism (SSM) and was walking out of the G7 meeting when he was persuaded to stay so as to avoid the impression the talks had failed.

It had always been understood that India had not agreed to the Lamy draft. Within a few days it was also clear that China was not in agreement. The "breakthrough" of that draft was that Brazil, perhaps the leading advocate of concluding the modalities this week and the Round this year, was clearly backing it. The talk in the corridors (and in the press) was that it had "broken ranks" with India (its old G4 partner), and also with its Mercosur partner Argentina (known to be a major critic of the NAMA text).

Meanwhile, frustration was building up among the 30 or more non-G7 Ministers who were specially invited by Lamy to the Green Room, only to find themselves waiting for days in the wayside, while the G7 kept meeting at odd hours of the day and night, and with hardly a trickle of news on what was happening.

When the end came, the major developed-country players, especially the US, pinpointed Special Safeguard Mechanism (SSM) as the sticking point of the entire negotiations. US Trade Representative Susan Schwab tried to take the high ground by proclaiming that it was preserving the past 5, 10, 30 years' gains of the trading system from the protectionists led by India and China which it accused of wanting to hike up agricultural tariffs above what they had already agreed to in the Uruguay Round.

It was part of a concerted attempt by the US to shift the blame of any collapse onto India and China, by portraying them as selfishly seeking new protectionist devices. Its unexpected and strong attack especially on China on Monday morning at the informal TNC meeting gave an inkling to some observers that the US did not want a deal, and was already preparing the ground to shift blame from itself.

Insiders from India and China at the G7 meeting were surprised at the tenacity of Schwab in insisting on an unreasonably high trigger of 150% and then later 140% (of the base import volume) before the SSM could be allowed to raise duties above the pre-Doha bound levels. The 140% proposed by Lamy was rejected by India, China and the G33 (and several other supporting groups of developing countries) as being far too high.  They argued that by the time the import volume surge reaches 40%, serious damage would have been done to the farmers.

Lamy tried to break the SSM deadlock by proposing a set of principles, which threw out the SSM model (which had been based on the existing SSG or special agricultural safeguard) and replaced it with what seemed similar to the normal safeguard (the existing WTO Agreement on Safeguards).

The Lamy text required "demonstrable harm" to food security, livelihoods and rural development before the SSM could be used, which undermined the rationale of a special safeguard (that action can be taken before serious harm occurs). Its fast-track binding dispute procedure of 60 days also makes the new SSM far less attractive than the usual dispute system (which would take much longer than 60 days to complete) under which the normal safeguard operates.

Despite these major negative elements, Kamal Nath told the media that he had accepted the Lamy text (at least as the basis for negotiations), but that the US had rejected it. The next morning (Tuesday), officials of the G7 laboured for three hours to produce an alternative SSM model, which they presented to the G7 Ministers.  According to Nath, Schwab rejected the new draft. That final rejection sank the talks.

Several Ministers, officials and diplomats have been speculating whether the SSM was the real issue that was irreconcilable. In one widespread view, the US really did not want to face the cotton issue, which was the next item on the G7 agenda once SSM was settled.

Since the US had agreed to cut is overall trade distorting support by 70%, it would have to agree to reduce cotton subsidies by more than that as the mandate is that these subsidies be cut more deeply and faster than the normal or the average rate.

The 2008 US Farm Bill having planned that cotton subsidies be maintained or increased in the next five years, it would have been difficult politically or diplomatically for Schwab to offer a plus-70% cotton subsidy cut.

The failure of the Geneva talks would then have been placed squarely on the United States, and it would really have been seen as a villain protecting the wealth of a few thousand cotton farms while millions of African cotton farmers would continue to languish in poverty under the continuing unfair rules of the trading system epitomized by the US Farm Bill.

This suspicion that the US wanted to avoid the cotton embarrassment is the backdrop to the comments made by several Ministers of developing countries in their press conferences that SSM could not have been the real cause of the talks breaking down, but rather the scapegoat picked on by a major player in an attempt to shift the blame on to another issue and on other countries.

After all, despite Schwab's portrayal of the protectionist potential of the SSM, the US itself is a frequent user of the SSG as well as the normal safeguard. It was a case of the pot calling the kettle (or rather the potential future kettle, since the SSM does not even exist yet) black, since most developing countries are not able to use the SSG.

As the Indonesian Trade Minister Mari Pangestu, coordinator of the G33, put it: "It is like accusing us of a crime that we did not commit."

As the dust settles, the diplomats and secretariat officials remaining in Geneva are pondering over the next steps.

The possibility of a "Lamy text" (to capture the positions of the various issues as he sees it) has gone. The next option, that the Chairs of the agriculture and NAMA negotiations would come up with revised texts updating their 10 July drafts with what they see as possible convergence from the past two weeks' talks, is also apparently too controversial to attempt, at least at this stage.

Instead, the two Chairs have been invited by Lamy to prepare status reports of the most recent negotiations, which they will issue in the next few days. Presumably these reports will not only provide a description of events and negotiations (most of them bilaterally or in small groups with the Chairs), but may also provide drafts of agreements or near-agreements with or among individual countries or groups. The reports will also presumably be under the responsibility of the Chairs.

What will happen when the WTO comes back from its August summer break? No one can tell at this moment. The speculation is that the already announced meetings, for example of the Rules group, or the trade facilitation group, will carry on. But whether meetings will start again of the agriculture and NAMA groups, and on what basis, is the core of the "reflection" that many have called for.

The August break will be the start of that reflection exercise. +