Hong Kong talks must better Cancun

EXIM MATTERS

In a bid to revive the stalled trade talks at the World Trade Organisation (WTO), the European Union (EU) has offered better market access to agricultural produce by proposing average tariff cut of 46% (ranging from 35% to 60% for lower tariffs) i.e. from the present average of 22.8% to about 12.2%.

The EU has also offered total elimination of export subsidies (without saying, by when), cap of 100% tariff on agriculture products, reduction in the number of "sensitive" farm products (without saying how many or which ones) protected from tariff cuts, wider 'tariff quotas' for "sensitive" products, 70 per cent reduction in farm subsidies that distort world commodity prices and differential treatment for developing countries i.e. higher tariff bands, lower tariff cuts and a maximum tariff of 150% and no tariff cuts for the 50 Least Developed Countries.

The new proposal comes in the wake of a veiled threat from Pascal Lamy, the Director General of the WTO and former EU Trade Commissioner, to call off or downgrade the Hong Kong Ministerial, if the EU does not come up with reasonable proposals before this month end.

The EU proposal has been described as "disappointing", "not encouraging'"and "not enough" by countries like United States, Canada and Australia. It is unlikely that developing countries like Brazil and India will find the proposal sufficient to take forward the stalled trade talks at the WTO.

On the other hand, there are enough indications that France, which has insisted that EU should not deviate from its Common Agriculture Policy (CAP), will be far from happy with the latest offers from EU.

France receives almost Euro 10 billion in agricultural subsidies from EU every year, by far the largest share of the Euro 53 billion programme. France had alleged that Peter Mandelson, EU Trade Commissioner, had exceeded his brief.

On his part, Peter Mandelson, claimed that he had won full support from the Union's executive Commission to make "a further sacrifice."

To retain its credibility, the WTO has to show better results at the Hong Kong meet scheduled from December 13 to 16.

The last ministerial meet at Cancun, two years back, failed Last year, in a package known as the 'July Package', the WTO General Council agreed to agree on critical issues and conclude the Doha Round by end 2006.

Yet, nothing moved till the United States Trade Representative, Robert Portman, put up an interesting proposal for tariff cuts and cuts in domestic subsidies three weeks back. Yet, two later meetings between EU, US, India, Brazil and Australia failed, as the EU had not come up with a worthwhile proposal to cut farm subsidies or tariffs.

The Hong Kong Ministerial is significant because it would be almost impossible to conclude the Doha Development Round by end 2006, if the talks fail again. The 'Fast Track Authority' (FTA) that the US President Bush has won from US Congress expires in 2007.

Under the FTA, the US Congress can either accept or reject the US commitments at WTO as a whole, but will have no right to accept or reject only part of any trade deal. Without the FTA, the US negotiators will not be taken seriously by the others.

Key WTO members will have to find breakthrough proposals that will result in a workable trade deal at Hong Kong.

tncr@sify.com