If US has its way, Doha Round is dead as a dodo

Prospects for concluding the Doha Round trade talks as a single undertaking are in jeopardy if the US refuses to reform its trade-distorting regime of agricultural subsidies.

by Chakravarthi Raghavan

GENEVA: Judging by reports on a day-long closed-door Swiss-hosted meeting of a select group of trade envoys at a so-called “retreat” in early June to formulate and agree on a post-Bali work programme for concluding negotiations on the Doha Development Round (DDR), it is apparent that the DDR single undertaking may be as dead as a dodo.

It is becoming more and more clear that the only leverage developing countries have to force the United States and the European Union to come to the table, and live up to their Marrakesh and Doha Round commitments on agriculture, will be for developing countries to block further progress on the draft trade facilitation accord.

Very little came out of the closed-door meeting outside of Geneva; a report in the Washington Trade Daily (WTD) provides a comprehensive yet concise account.

According to the report, those present were envoys from the US, the EU, China, Japan, Canada, Australia, Brazil, South Africa, India, Mexico, Colombia, Chile, Pakistan, Norway, New Zealand, Jamaica and Switzerland.

The WTO Director-General, Roberto Azevedo, was not at the meeting; his participation apparently was not acceptable to all participants.

(The meeting of envoys of key countries among themselves, without the Director-General, is a practice which began from around the time of the failed Cancun Ministerial Conference of the WTO in 2003, and had become more or less systematized until very recently. The recent “retreat” was thus a return to the practice.)

It is notable that except for South Africa, there was no other African envoy. Currently, Lesotho is African Group coordinator, Uganda is coordinator of the Least Developed Countries (LDCs) group, and Kenya is the coordinator of the African, Caribbean and Pacific (ACP) group, taking over this year from Jamaica (the coordinator till Bali) which was at the meeting.

According to the WTD report, the US made clear at the meeting that it would not take the 2008 agriculture modalities text as the basis for further negotiations, since its domestic constituencies would not accept what was on the table in agriculture at this juncture.

In what would put to shame a famous information minister of a European country before and during World War II, the US ambassador to the WTO, Michael Punke, blandly insisted that new realities must be taken into account, and asserted that the “new realities” were that China and India are the subsidizers distorting agricultural trade.

According to the French civil society activist Jacques Berthelot in a paper posted on 16 April on the Solidarite website (www.solidarite.asso.fr/Papers-2014), the US, from the inception of the WTO, has been consistently under-notifying or not  notifying its various agricultural subsidies and support programmes, and has placed (contrary to WTO rulings) some of its illegal subsidies into the new “Green Box”.

In his paper, Berthelot shows that the US’ actual annual total AMS (Aggregate Measurement of Support) subsidies exceeded the notified AMS by an average of $2.563 billion from 1995 to 2000, by $4.313 billion from 1995 to 2004 and by $12.574 billion from 2005 to 2011. Also, the actual total AMS even exceeded the bound allowed AMS of $19.103 billion in 2005, 2006, 2009 and 2011. The average margin of the allowed total AMS less the actual AMS shrank from $6.139 billion in 1995-2000 to $4.287 billion from 1995 to 2004, and has disappeared, at          -$76 million, from 2005 to 2011.

The US, having got what it wanted out of the Doha Round at Bali in the shape of the Trade Facilitation Agreement, subject only to the pending exercise of adoption of the legal text and a protocol for incorporating it into Annex 1A of the WTO Agreement, is refusing to consider any give on its part in agriculture, the most heavily subsidized and trade-distorting element despite the various box-shifting of the support programmes. The US envoy Punke has been reported as telling others that the US does not even want to talk about it till the US’ mid-term elections in 2014.

It is clear that the US and the EU, far from reversing course on agricultural support in return for the onerous price paid in advance at Marrakesh by developing countries, have just done some box-shifting to provide increased support under various heads to their dwindling minority employed on farms. They now want market access for their heavily supported agricultural products in China and India, whose farmers are still engaged in subsistence farming.

As far as the farmers in the developing countries who are asked to compete, it makes no difference to them from which source of governmental actions the US farmers (or rather the giant agribusiness corporations that benefit the most from these support programmes) get support – money in the final analysis is totally fungible.

According to the WTD report, the industrialized-country members at the retreat – especially the US – made it clear that the Doha Round is not doable as long as it is based on the existing draft modalities on agriculture, industrial goods and services.

The WTD said that “elaborate” discussions took place at the meeting on the three agriculture pillars – domestic support, market access and export competition – and on a formula versus a request/offer negotiating process on industrial goods trade.

The chair of the Doha agriculture negotiations, John Adank, reportedly offered his assessment on the continuing differences among members over core agriculture issues. He lamented the fact that there has been no change in members’ positions despite several attempts made during 2008 and 2011 and now. The ambassador remarked that some members want “creative” solutions – though what would be involved was not spelled out, the WTD said, citing participants familiar with the meeting.

According to the report, the US (supported by the EU and Canada) insisted that its domestic constituencies will not accept what is on the table in agriculture at this juncture. It complained that India and China, in particular, are not willing to provide real market access. Both countries’ insistence on “special products” and various flexibilities in agriculture will undermine market access by others. It also faulted India for increasing its subsidy payments.

The WTD said that in a sharp rebuttal, trade envoys from the Group of 20 coalition – including Brazil, South Africa and China – reminded the US that it is baseless to say that developing countries secured benefits for themselves in the 2008 draft modalities text while the industrialized countries bore the brunt of reduction commitments in domestic support.

Developing-country trade envoys at the meeting said upwards of 70% of the Doha agriculture negotiations was spent on arriving at specific flexibilities for the US in domestic support, particularly the carve-out of new “Blue Box” payments. A lot of negotiating time also was spent on market access issues pushed by the US, the EU, Japan, Norway, Switzerland and Canada. And Switzerland, Norway and Japan managed to secure flexibilities to shield some 12% of their tariffs on sensitive products, the developing-country envoys said.

Market access flexibilities for developing countries were only proportional to what the industrialized countries got, one developing-country envoy said.

The WTD said that during the discussion on domestic support, there were sharp exchanges on increases in “Amber Box” measures in both India and China and trade-distorting effects of expanding “Green Box” measures. Canada insisted that the negotiations should not open up the “Green Box” programme. However, another Cairns Group member reminded Canada that literature prepared by the group established that continued shifting of payments to the “Green Box” causes distortions in global farm trade.

Industrial goods and services

During the discussion on industrial goods, chair of the non-agricultural market access negotiations Remigi Winzap admitted to no convergence by members on how to bridge the gaps between bound and applied tariffs, and that several industrialized and some developing countries made it clear that there will be no real market access in major developing countries such as India, Brazil, South Africa and China if the current formula-flexibility approach is followed.

The EU, Japan, Australia, Mexico and Canada, among others, supported the US in calling for new approaches to remove the gap between bound and applied tariffs.

In sharp response, Brazil, South Africa, China and India said the level of ambition in agriculture was set by industrialized countries, followed by a “proportional” market access approach for industrial goods.

Developing countries at the retreat said they agreed in 2008 to make reforms in market access for industrial goods in a calibrated manner based on the revised draft modalities. The developing countries also maintained that they have suffered heavily due to the global financial crisis which caused massive unemployment in their countries.

On services, industrialized countries pressed for  new market access. Developing countries, including Brazil and South Africa, said they have no problems with the current negotiating modalities that allow for a request/offer approach, and that there has been adequate progress in the negotiations. Some developing countries signalled their willingness to do more in services, but only in line with parallel progress in agriculture.

There was also reported criticism at the meeting from some members on why the plurilateral Trade in Services Agreement (TISA) negotiations were being pursued even though the overall level of progress in the Doha services talks was acceptable to most members. The industrialized countries reportedly gave the assurance that the outcome of the TISA negotiations would not be imposed on WTO members. (SUNS7821)

Third World Economics, Issue No. 571, 16-30 Jun 2014, pp2-3, 16