Globalaffairs

Issue 6/December-January 2008
By Lucía Valero

The World Trade Organisation decided on November 22nd to postpone negotiations for the Doha Development Round and to set out the deadline to 2008. WTO Director-General Pascal Lamy said that it was better not to pressure with short term deadlines due to the progresses achieved until now.

The impasse of negotiations is due to the lack of commitment of WTO members to make a deal on the toughest issue: agriculture. The US and the EU were, in principle, willing to remove most of distortions in international agricultural rules. If both reduce domestic support programs for distorted trade, developing countries could fight poverty by trading their products with equality.

The reality is that rich countries still play the game of protectionism with their products and poor countries cannot compete with them because they are unable to sell anything in a market protected by subsidies.

The talks about free trade have been pursued on and off over the past six years but reached a low point in July 2006, when WTO Director-General Pascal Lamy formally suspended negotiations after the 151 members failed to achieve any kind of convergence on reducing farm subsidies and cutting tariffs on industrial and agricultural products.

This was not the first time: the Uruguay Round, which began in 1986 and led to the replacement of the General Agreement on Tariffs and Trade (GATT) by the WTO in 1995, was frozen for over a year in 1990, due to antagonism between the EU and the US; although it was never formally suspended. Negotiations are very complicated as each member has a veto over the final deal.

The Doha Development Round was launched by Ministers of WTO member countries in November 2001 in the Qatari capital, Doha, and subsequent meetings were held in 2003 in Cancun, 2004 in Geneva, 2005 in Hong Kong, 2006 in Geneva and 2007 in Davos.

The problem of subsidies

The Doha Round could finish more or less successfully if the US and the EU make a deal on modalities, the formula for calculating tariff and subsidy cuts.

On the one hand the EU agreed to slash its overall trade-distorting subsidies (OTDS) by 75%, as the G20 group of developing countries were requesting. This would have seen the EU OTDS levels reduced from ¤58.1 billion in actual spending in 2004 to a future cap of around ¤28 billion.

On the other, the US proposal to reduce its OTDS by 53% would have cut its WTO-permitted spending limit from $48.2 billion to roughly $22.7 billion, but the EU and G20 complained that this could actually lead to an increase in the US farm subsidies as the latter actually only paid out $19.7 billion in such payments in 2005. The G20 demanded minimum cuts of 60% and 75% respectively, but the US refused to give in.

Delegates accuse the US of bringing the process to a standstill and affirm that there will be no agreement until the US actually reduces its OTDS.

In response, US Trade Representative Susan Schwab said that the US could shave off more subsidies, but only if advanced developing nations and the EU open their markets to more American farm products. The UE was willing to reduce subsidies if Washington was going to do the same. In conclusion, none of them were going to give a way in the first place and conversations could last forever.

The US-EU confrontation is not the only reason for the talks to be interrupted. Even in the EU there are discrepancies about what market liberalisation must be. This is the example of President Nicolas Sarkozy of France. On November 13th, the dignitary gave a speech to the European Parliament in Strasborug and issued a strong appeal for the principle of “community preference” for EU businesses to confront products coming from China, saying the word “protection” should not be taboo in Europe.

“The word ‘protection’ must not be forbidden in European democracy,” Sarkozy said. “If we do not want people exasperated with being victims of unfair competition and of dumping to demand a new protectionism, we must be able to debate what could be a true system of community preferences.” Noting Europe’s trading rivals reserved parts of their public tenders for home-grown small firms, and supported their farm sectors, he said: “We should be able to do as much to protect ourselves as others do.

Sarkozy’s point of view is against the WTO doctrine of cutting subsidies and opening the market. The French position could be an obstacle in the Doha Round negotiations as the country can veto any proposal.

A great failure

If US refuses to give in, if EU will do nothing until US takes the first step, if France is in favour of protectionism…The Doha Development Round will only conclude as a Declaration of Intentions.

“The Doha Round of international trade negotiations collapsed mainly because of a fight for advantage in agricultural markets by large and powerful countries, corporations and lobbies”, the Food and Agriculture Organization of the United Nations (FAO) said in 2006.

Rich countries still protect their agricultural and industrial products with subsidies (products like sugar, corn, rice, milk are the ones mainly produced in developing countries). With these tariffs, products made in poor countries are paradoxically more expensive than the ones made in the first world. Moreover, industrialized countries want the Third World to open their markets to sell there all the subsided products.

Farmers from poor countries are unable to export their products because these are expensive and cannot sell them in their own markets because they are invaded by products from multinationals. The International Food Policy Research Institute said in a report published in August that industrialized countries were preventing developing countries from exporting 40.000 million dollars in agricultural products due to protectionist practices.

The WTO could have focused energies on brokering a deal to stop dumping (the act of charging a lower price for a good in a foreign market than one charges for the same good in a domestic market) that the EU, the US and Japan practice in developing countries, one of the worst abuses of international trade.

Agriculture makes up only 8% of world trade and it represents the main income source for about 2.5 billion people, mainly in developing countries. Trade justice would be a realistic solution to fight poverty.

Unfortunately, the Doha round conversations have been mainly focused on market liberalisation. Poor countries would definitely lose out in an agreement focused on rich countries’ needs. Big multinationals compete to introduce their products in countries where their farmers do not have water supplies or basic rural infrastructures and that are unable to sell the products in rich and protectionist countries.

Even if future negotiations are discouraging, the FAO thinks that there is still hope “When negotiations restart, the Doha Round should truly be a Development Round approached in a broader and participatory way. On the one hand, it should address domestic subsidies and market access issues in order that they do not undermine development, on the other, it should deal seriously with questions related to supply-side capacity and related investment needs for the least developed countries to benefit from market opportunities resulting from a fair trade”

Most opponents of the WTO said, nevertheless, that market liberalisation benefits will not fall to those who most need them. Poorer countries would be the big losers, whether from the erosion of preferences they enjoy in third markets or from the direct impact on their own agricultural, industrial and services sectors.

According to WTO opponents, the collapse of the Doha round opens up a crucial new public space for debating what sort of rules we wish to put in place to govern the global economy in the 21st century. Instead of the WTO’s belief in free trade as the dominant model for the world economy, against neoliberal WTO policies, it would be possible to open a debate willing to implement trade justice and sustainable development.

Theoretically, market liberalisation is aimed at freeing the world of subsidies and tariff on agricultural and industrial products. But extending the benefits of free trade would be possible in a world of perfect markets without any kind of market distortions and where all the countries could be able to compete with equality.

The Doha Development Round was aimed at freeing global trade and at extending the benefits of globalisation to developing countries. Nevertheless, even if negotiations are not yet finished, the Round is already a great failure. Not only it has not complied with any development goal but also has unveiled the hypocrisy of the industrialized countries. Those who try to show a commitment to the fight against poverty are against the real solution: trade justice.

Lucía Valero
Journalist

Resources

FAO www.fao.org/newsroom/es/news/2006/1000375/index.html
ONG Sodepaz
http://www.sodepaz.net/modules.php?name=News&file=article&sid=1125
Euractiv
http://www.euractiv.com/en/trade/wto-doha-development-round/article-157082

Reuters November 30th 2007

El País November 13th 2007

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