As the Doha trade negotiations enter a make-or-break phase, it is not a pleasant thought to evoke memories of Goebbels of the Nazi period, credited with having perfected the art of repeating a lie several times until it became a truth. When 30 trade ministers began a week-long meeting at the World Trade Organization, you could see the industrialised countries resorting to the same techniques. Not surprisingly, Brazil’s veteran foreign minister, Celso Amorim said this was a disturbing state of play after so many years of negotiations.
All of a sudden, emerging developing countries — China, India, Brazil, South Africa among others — are being repeatedly portrayed as villains of the piece because they are refusing to open their markets for industrial goods. Their counterparts in the rich world — the European Union, United States, Japan, Norway and Switzerland among others — are repeatedly claiming that they have delivered on what they were asked to pay in the most difficult area of the Doha agriculture package. It is a lie that is perpetrated ad infinitum to turn the tables against developing countries, Amorim lamented.
Underlying this lie is what is called an exchange rate to determine who should pay and who should receive in the final commitments of Doha agriculture and market-access for industrial goods packages. The Doha agenda was launched to bring a developmental dimension to global trade. It covers several other areas — services, rules to improve anti-dumping provisions, subsidies, environment, trade facilitation, special and different flexibilities as well as improvements in many existing rules (like TRIPS) addressing the disclosure provisions for genetic material, and so on — in addition to agriculture and industrials. But, for the time being, an outcome in many of these other areas is being deferred until the modalities (parameters) to cut farm subsidies and import tariffs and import duties on industrial goods are established.
The Doha mandate — which was launched in 2001— clearly spelt out that members must first resolve all the developmental issues and then tackle agriculture and industrial modalities. But thanks to the efforts of a tenacious director general called Pascal Lamy, those issues have been given the short shrift.
Small wonder then that the so-called modalities took precedence over everything else in the Doha agenda. If concluded successfully this week, they will indicate the exchange rate between those who pay and those who receive from cutting farm subsidies and tariffs and import duties on industrial goods. It is a different story that the Doha trade negotiations would not have been necessitated at all if the global farm subsidisers had gone by what was established in the Final Agreement after the Uruguay Round.
Coming back to the modalities agreement or what is on the table in both agriculture and industrial goods, there is ample evidence to suggest that the exchange rate was badly altered by adopting different methodologies and concepts. In agriculture, for example, import tariffs are to be reduced through a tiered formula from their bound levels with numerous exceptions for the treatment of what are called sensitive farm tariff lines, which run into over 400. Besides, countries like Japan, Norway, and Switzerland have the dubious distinction of having farm tariffs well over 300 to 400 per cent for many products. Of course, they are being offered a special cushion to retain those tariffs without capping them if they choose to offer a small cut.
When it comes to industrials, the terms of the exchange rate are cruelly tilted. The tariff cutting formula — which is referred to as the Swiss formula — uses a different technique that dramatically brings down the tariffs from the current bound levels of over 30 per cent in many developing countries to well below the applied levels, a huge drop of over 55 per cent. But import tariffs in industrial countries will drop by just about 40 per cent. Besides, the exceptions provided to developing countries are few and far between in comparison to the flexibilities accorded to the rich countries in agriculture. Consequently, while the United States can retain nearly double the applied farm subsidies at this juncture, the developing countries like India will have to lower industrial duties below their applied levels for many items.
So, former film director and now the champion of the global reform in agriculture — the venerable Amorim — is absolutely right when he denounces the lie repeated by the industrialised countries. In agriculture, the underlying attempt is to provide comprehensive flexibilities to rich countries. And in industrial goods, the aim is to find the maximum market access in developing countries.
This the same man who said, at Cancun, that a no deal is better than a bad deal. But now he reckons that while what is on the table falls well short of full justice, it does provide some basis to negotiate. Some of his counterparts in the developing country coalition find it difficult to swallow this argument advanced by the guru of global trade negotiations!