WTO in peril

The main goal of the round is to phase out all forms of agricultural export subsidies, make cuts on tariffs placed on agricultural products, reduce trade distorting domestic support, and make industrial products more accessible. With this impasse, the WTO's five-year search for establishing a fairer global market, especially in agriculture, has toppled towards total failure.

This situation of total deadlock has arisen largely because of disputes over farm payments. Talks ended in a stalemate after the US refused to make substantial cuts in farm subsidies, drawing strong reaction from the promising new-comers in the global agricultural export market, like Brazil and India, and even the best local agricultural market protector, the European Union.

Tap here to add The Daily Star as a trusted source

There is little hope for resumption of the suspended talks soon. Some of the partners of the 149-member WTO observed that the stalemate could put them on the merry-go-round for five years before they get something from the Doha round. Global trade experts understand that the round may not pick up again until, at least, 2009, largely because of the complex political calendar in the US.

The US is in a race against the clock because the White House's Congressional mandate to negotiate expires July 1, 2007. Any trade agreement must be submitted to the US Congress 90 days before the expiration of the trade promotion authority. If the agreement is finalized by the end of 2006, only then will it be possible to use the present trade promotion authority to finalize the deal. Once the authority expires, the US Congress will regain the right to amend trade agreements, leaving any Doha agreement hostage to US vested interests.

The total divergence of opinion on the issues at the 4th ministerial meeting held November-December1999 in Seattle compelled the authorities to abandon the meeting, but the members agreed to start talks on agriculture and services in the beginning of 2000.

It was also mandated at the WTO agreement that the agriculture talks would be started in 2000, and a new agreement would come into force in 2003. With this compulsion, the WTO General Council, after about two years hectic consultations, prepared a draft proposal covering all contentious issues to please all members. Based on this draft, the ministers at the Doha meeting decided to hold the Doha round.

Besides the goal of slashing trade barriers in agriculture, industry and services sectors, the Doha round includes: 1) Protection of geographical indications and implementation procedure of the Agreement of Trade-Related Aspects of Intellectual Property Rights; 2) Relationship between trade and investment; 3) Interaction between trade and competition; 4) Transparency in government procurement; 5) Trade facilitation measures; 6) Implementation of WTO rules; 7) Clarifications of the dispute settlement understanding; 8) Relationship between trade and environment ; 9) Aid for trade; and 10) Technical cooperation and capacity building initiatives.

Due to the sudden collapse of the round, the WTO, as an organization, will be the worst loser, as it is committed to strengthening the world economy leading to more trade, investment, employment and income growth throughout the world by integrating the world economies into a global economy, and establishing a more balanced and integrated global trade partnership. Progress toward the goal has been halted as the liberalization process was denied by the key WTO players.

The LDCs, and weaker developing economies fighting with poverty escalation, will also suffer severely from the breakdown of the Doha round. In the name of integrating their economies with the global economy, they have been opening up their markets across the board, leaving their weak industrial base fragile. As the developed, and stronger developing, countries have been maintaining huge production and export subsidies in the agriculture sector, their cheap agricultural produces have also been flooding the markets of weaker economies, including Bangladesh.

This will pose a serious threat to the important agriculture sector of the LDCs that are struggling to survive without subsidy due to local resource constraints. In return, the LDCs, and weaker developing economies, have got nothing so far except commitments.

According to the WTO agreement, the members are committed to 1) Expeditious implementation of all special, and differential measures, taken in favour of LDCs; 2) Most favoured nation concession on tariff, and non-tariff, measures on products of export interest to the LDCs; 3) Special consideration shall be given to the export interests of the LDCs; 4) The LDCs shall be accorded substantially increased technical assistance in the development, strengthening and diversification of their production and export bases, including those of services, as well as in trade promotion, to enable them to maximize the benefits from liberalized access to markets; and 5) The WTO will keep under review the specific needs of the LDCs and take positive measures to facilitate the expansion of trading opportunities in favour of these countries. These decade-long commitments are still, largely, on paper.

Without bothering about keeping their existing pledges, the WTO members in the 6th WTO ministerial meeting held in Hong Kong in December 2005 extended the list of commitments in addition to reaffirming the outstanding pledges.

The new commitments include: 1) All forms of export subsidies for cotton will be eliminated by developed countries in 2006. This could help the West African cotton-producing LDCs to find some space in the global cotton market which has been dominated by the US produced subsidised cotton; 2) Developed, and stronger developing, countries shall provide duty-free, and quota-free, market access for at least 97 per cent of the products originating from the LDCs by 2008; and 3) The members shall provide additional financial, and technical, assistance to meet the implementation obligations of the LDCs.

Since the 1st WTO ministerial meeting in Singapore in December 1996, the LDCs have been trying to realize the commitments made by the WTO members. This has yielded some results in some areas including relaxation of local value addition requirements for enjoying special market access, and extension of time to comply with some WTO agreements. No other organization has the responsibility to act on LDCs' demands.

With the collapse of the round, the LDCs lost the forum to press their demands. The situation will seriously jeopardize the LDCs' poverty reduction initiatives. It will reduce the purchasing ability of some 700 million people of 50 LDCs resulting in a fall in global market demand. This will impact negatively on the market growth of developed economies. Investment across the world will be curtailed. Economic dynamism will also be halted. Unemployment will increase, resulting in social anarchy, even in developed countries.

So, not only the WTO and the LDCs, but all parties having a stake in the WTO will be the losers with the collapse of the Doha round. All conflicting groups should, therefore, be flexible, and stay flexible, to achieve a meaningful end to the present impasse and achieve subsidy-free liberalized agriculture market and offer a space to the WTO members to implements their commitments to the LDCs and enhance global trade.

The writer is a trade analyst.