D Ravi Kanth: Has Lamy got it wrong?

TRADING THOUGHTS

In mid-December, the General Council, the decision-making body of the WTO, closed the year on an optimistic note. Its tenacious director-general, Pascal Lamy, who is also chairman of the Doha trade negotiating committee, even declared, "Today, I believe that we are closer to achieving the major goal we all share "" establishing modalities in Agriculture and NAMA which, in turn, would pave the way to the conclusion of the Round." A confident Lamy went on to say the beleaguered Doha Round would conclude by the end of 2008.

Lamy's track record of failing to meet earlier deadlines needs to be kept in mind while evaluating this deadline and the record of what was achieved in the year just gone by. Promises made by Lamy since he took charge at the WTO in September, 2005 (after six years as the EU's trade commissioner), range from building a decent car-parking centre to a new office to replace the moribund Centre William Rappard that currently houses the WTO; and from concluding the Doha Round by the end of 2006 to even adding a new dimension to global trade.

While there is merit in the argument that Lamy can't possible be held responsible in a member-driven organisation like the WTO, it is important for him to assess whether there is something wrong with his approach to the challenges posed by the Doha project.

One of his early ideas to solve the Doha Round impasse, for instance, was the 20-20-20 formula. Under this formula, the US was to reduce its domestic farm subsidies to below $20 bn, the EU would accept the G-20 market access proposal for farm products, and Brazil and India would agree to cut their industrial tariffs by using a coefficient of 20 in the 'Swiss' formula.

Almost immediately after Lamy floated his proposal, trade ministers (especially the Brazilian foreign minister Celso Amorim) dismissed his approach as inconsistent since, they argued, the US would just have to tinker with its farm subsidies. India, too, dismissed Lamy's ideas as 'irrational'.

After 20-20-20, Lamy floated the 'triangle' approach. This involved the US making substantial cuts in its farm subsidies, the EU on providing enhanced market access for farm products, and Brazil and India agreeing to reduce import tariffs on industrial products (with some tariffs going below current applied levels). If all four players resolved the equation, Lamy argued, it would represent a leap forward in the Doha deal. Several countries, especially South Africa, argued that Lamy's approach was not the right one to break the Doha deadlock.

Notwithstanding the criticism, Lamy goaded the four major countries to intensify their efforts to resolve the three issues. Innumerable meetings between the countries, however, failed to make much headway since the US was unwilling to cut its domestic farm subsidies to a level close to the $11 billion that it spent in 2006.

Besides, the EU was unwilling to provide substantial access for farm products; Brazil and India maintained they would not cut their industrial tariff levels unless they got what they wanted from the two trans-Atlantic partners in terms of both market access and domestic support for farm produce. The final anti-climax came at Potsdam, Germany, in 2007, when the G-4 talks broke down due to unbridgeable differences.

All these experiments have left the Doha negotiations in a quandary. Besides, Lamy's decision to suspend the Doha talks in 2006 proved to be very costly since this created a big void in the negotiating climate. Thanks to the unremitting efforts of some chairs of different negotiating dossiers, however, a semblance of multilateral negotiations started again in 2007.

That process, however, is yet to yield concrete results, and there are already doubts as to whether it will result in a balanced result. The draft texts on opening markets for industrial products and the rules relating to anti-dumping provisions, subsidies and countervailing measures, and fishery subsidies have already resulted in considerable commotion because of their alleged bias.

In fact, the two chairs "" Ambassador Don Stephenson of Canada who heads the non-agriculture market access group and Ambassador Guillermo Valles of Uruguay who tabled the draft text on Rules "" have come under considerable criticism from both developing and industrialised countries for their allegedly 'partisan' texts.

Against this backdrop, Lamy will have to be circumspect and cautious in what he pronounces from time to time. Unless he wants to be proved wrong for the umpteenth time!