Global Trends by Martin Khor

Monday 12 May 2008

“June or bust” for WTO talks

Another attempt to rouse countries to finish the main elements of a deal at the World Trade Organisation may elicit cries of “déjà vu”.  But this time the deadlines of June for an interim deal and December for a final deal may be for real.

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There is a mistaken belief that the Doha negotiations at the World Trade Organisation are dead.

In fact, there is a great flurry of activity at the WTO.  Intense efforts are underway to try to finish the most difficult part of the talks – finalizing the “modalities” (the framework and figures for cutting tariffs and subsidies) in agriculture and industrial products.

Sometime in June, a meeting of some 30 Ministers is expected to be held to do the job.  Then in the next half year the tariff schedules based on the modalities will be drawn up, other issues (like services and intellectual property) will; be settled and the whole Doha deal will be sewn up by December.

This, at least, is the latest plan.  But don’t bet it will happen. The road from Doha (which in 2001 hosted the WTO meeting that launched the negotiations) has been paved with many broken deadlines.

The June and December deadlines are just the latest.  But this time there is a real urgency, because of the United States’ political situation.

The main pusher for the June deadline, the European Union’s Trade Commissioner Peter Mandelson, is convinced that the new US President and Congress will not simply accept the premises of the Doha Round’s mandate and the main framework to date.

Thus, to save the Round, he thinks President Bush must sign on to a final deal by December, and then pass it on to the next President, who may find it difficult to re-open the package because world opinion would be against that.

This view is not shared by all.  Some experts of the American trade scene are convinced that a new President and Congress will not be prepared to be mere “rubber stamps” to endorse what the Bush administration has initialed. 

This is especially if the Democrats (who are expected to more strongly control Congress, and probably the Presidency as well) are not happy with the content of the Doha deal.

Thus, many WTO delegations are uncomfortable with having to continue negotiating when there is great uncertainty whether the most important delegation, the United States, will be able to honour what it commits.

Many countries prefer to slow down the WTO talks and wait till a new Administration and Congress are installed before finalizing a deal.  But since there is such pressure to finish the Round as soon as possible, no one has officially proposed to suspend the talks till next year.

At least not yet.  If the talks go badly between now and June, the US factor may emerge from the shadows into the limelight.

Some people think that the real reason Mandelson (as well as Pascal Lamy, the WTO secretariat chief) want to wrap things up by June is because France (famous for its protectionist stance in agriculture) takes over the Presidency of the EU in July. 

The French may more effectively lead many EU member states to object to what Mandelson may want to offer in agriculture, once July comes, thus torpedoing the talks.  

Many developing countries have misgivings about what may be the content of the deal.  They don’t see any gain, since the developed countries are not going to really reduce their agricultural domestic subsidies (despite putting up the appearances of doing so).

But the developing countries themselves are asked to make major sacrifices, especially in drastically slashing their import duties on industrial goods.  Many are worried that the fall in import prices will threaten the viability of local industries, and will prevent the emergence of potential new industries.

Moreover, developing countries are asked to cut their agricultural tariffs by up to 36%, although the rich countries are able to maintain their high subsidies and to keep relatively high tariffs on key agricultural products.

On top of this, the developed countries are demanding that middle income developing countries like Asean members, China, India, Brazil, South Africa, open up their services markets to their multinationals.  But they are not willing themselves to open up their labour market for developing countries.

Overall, it will not be a fair deal for developing countries, based on the major proposals on the table. 

At present, the countries are still quite far apart on many issues, and it is difficult to see

how a deal on modalities can be struck in June.  On the other hand, if political pressure is plied on developing countries to complete the main elements of a deal in June, it is likely to be on terms that are detrimental to most of them.

Next week, new draft proposals on agriculture and industrial products are expected to be issued, which will then spark the new round of talks, leading to a June meeting of senior officials and possibly to the small Ministerial as well.

But if things don’t go well in June – or possibly in July at the very latest – then the WTO talks will likely take a break, until the next US President settles down and is ready to put his or her own stamp on trade talks.