WTO issues remain unresolved

The ministers tried to thrash out a crucial interim deal on important issues, but failed to achieve any real progress because the key players were not ready to make the required difficult concessions. The meeting had been convened after Pascal Lamy, the WTO Chief, accused diverse vested interests within the developed countries and certain developing countries of thwarting the Doha Round Agenda through differences on how to curb existing trade barriers. This warning from Lamy was issued after it became clear to the WTO Secretariat that WTO governments were likely to miss another host of deadlines through their lack of a clear road-map towards the finding of a suitable mathematical formula for cutting subsidies and tariffs.

It may be recalled that the Doha Round of trade talks was launched in 2001, with the specific purpose of tearing down trade barriers and helping developing economies accelerate growth.

Tap here to add The Daily Star as a trusted source

Some progress was achieved last year in the WTO Conference in Hong Kong. However many issues also remained unresolved. In that meeting, it was agreed that export subsidies, a thorn on the side of international fair trade should be eliminated by the end of 2013. This was a compromise between the 2010 date suggested by Brazil and the USA, and 2014, which fitted better with European Union plans.

In exchange, Brussels wanted an end to export credits and food aid by Washington that were seen as undermining poor farmers. They also demanded tougher rules for state export companies in Canada and Australia. The Hong Kong Conference also decided that export subsidies, particularly for cotton, should be scrapped in 2006. However, it did not immediately tackle domestic support, leaving many African nations, mostly LDCs, very disappointed.

Disagreement had also surfaced in Hong Kong between the EU on one side and the US and Brazil on the other, over the question of market access. US exporters sought a 60 per cent reduction in EU duties on farm produce and Brazil by 54 per cent. EU's proposal, in response fell short of expectations. The EU as a group was willing to go up to 46 per cent reduction, but this was obviously not enough.

This time round, in Geneva, as expected, French farmers once again resisted deeper cuts proposed by the G 20 Group. This will further complicate matters.

It was clear from reports coming out of the meeting in Geneva that although politicians claimed that they were fighting for the protection of European farmers, this was not really correct. Analysts are now accusing that the tariff cuts proposed by the European Commission appears to be directed towards protecting food processors rather than farmers.

Writing on this, Patrick Messerlin, has made some interesting observations. He has pointed out that 'only one-quarter of the 200 or so products that would remain the most protected after the Doha Round are farm products. Among them are surprising items, from cucumbers and gherkins to rice'. It would also appear that the food products that would remain the most protected after Doha, if the European Commission's proposals prevail, will be a hodge-podge of waste products (dog and cat food), products with little trade potential (yoghurt) and certain other goods that may require more of an adjustment from food producers rather than farmers. The intrinsic over-lap in products will also open the door for misclassifications and ultimately corruption.

This continuing debate, partially due to EU inflexibility, might possibly be resolved, according to some, including myself, by Europe replicating in agriculture the negotiating formula used in manufacturing. This will initiate deeper tariff cuts on the currently most protected products and smaller tariff cuts on the currently less protected products. Such rebalancing might boost the gains for European consumers -- especially among the poorest. Messerlin correctly observes that cutting low tariffs (mostly on farm products) by a lesser amount would ensure the support of a vast majority of European farmers, while still opening European agricultural markets. This formula should be particularly acceptable to French politicians and French farmers.

In Geneva, this time round, it is true that the European Union went further than before in signaling its willingness to make bigger cuts in farm tariffs, but the stand-off between developed and developing countries remained over the issue of cuts in agricultural subsidies.

Matters were also not helped by the fact that the Bush administration today, is under strong political pressure from the US Congress. A domestic deadline is hanging over the USA. On July 1, 2007, the White House is due to lose its special authority from lawmakers to fast-track trade deals. This may subsequently hamper the WTO negotiations if they overrun. The USA appears to have little flexibility to move on farm subsidies, and without this, other jigsaw pieces will not fall into place. This is important because without forceful US support no deal will be achievable.

The latest round of talks in Geneva has been billed as a way to revive the stalled Doha Round negotiations on harnessing freer trade and to boost growth in poorer countries. This step, at least for now, does not appear to have worked. It has also created greater frustrations among Australia and its Cairns Group partners. It has also become more complex with Lamy's proposals regarding sweeping cuts in industrial tariffs which have been opposed by China, India and Indonesia.

149 members of the WTO have been left with the tough task ahead, of trying to resolve bitter differences within a narrower time frame.

In the meantime, poorer countries like Bangladesh are facing a serious crisis. In Hong Kong, they received a flawed platter. The LDCs were assured that most of their exportable items would be exempt from duties or quotas by rich countries by 2008. However, the hurdle of 3 per cent was placed on LDC goods. I recall that in my earlier column on this subject, I had mentioned that this was bound to affect our key export earners -- textile and leather products.

These measures are already creating problems for us and having repercussions on our trade regime.

China is out-competing the poorest countries in Asia, making it harder for them to benefit from trade-opening moves. The United Nations Development Programme, in a report published towards the end of June, has commented that Chinese imports into Bangladesh, Cambodia and other least developed nations were displacing domestic industries such as leather and footwear, wood paper, glass, bicycles and motor-bikes.

The situation has become that much more difficult given the fact that these countries are selling little to China in return. In addition, China is competing directly with their textile exports in western markets.

Fortunately, in the recent past, we have seen gradual recognition of this problem by the Chinese authorities. They have started meaningful talks with Bangladesh trade bodies on identifying products that could be given non-tariff access. China will probably start undertaking such efforts with other poor countries.

Nevertheless, one way out would be to induce China to invest more in countries like Bangladesh. This would counter-balance the adverse balance of trade that is enjoyed by such countries with China.

It is true that the WTO works by consensus and no final deal will be possible unless all member states agree. However, in conclusion, I will not be pessimistic. I believe that all Groups and countries concerned have not failed. They have only gained more negotiating space and also a period for further reflection. Differences can be narrowed down and agreements will eventually emerge. What is required is greater political will.

Muhammad Zamir is a former Secretary and Ambassador.