If the rules don’t suit you, change them. That’s an age-old tactic used by super-powers and, strangely enough, the 100-day-old Obama administration in the US is preparing the grounds for exactly this kind of rule-changing solution to global trade negotiations. At a time when the core of Obama’s foreign policy is multilateralism, this is hardly likely to enhance Washington’s credibility.
In his maiden trip to Geneva that began today, new US Trade Representative Ambassador Kirk is likely to explore support for skipping what are called ‘modalities’ in the Doha rounds for agriculture and market-opening for industrial goods. The ‘modalities’ essentially deal with the level of tariff and subsidy cuts both developing and developed countries will have to accept as part of their Doha Round commitments. Instead of finalising these ‘modalities’, which members have to implement on an MFN-basis (a Most-Favoured-Nation framework means that the same concessions have to be offered to all countries), Washington now wants members to proceed to start scheduling of commitments in both agriculture and market-opening for industrial goods. It is not clear on what basis members will schedule their tariff and subsidy reductions since these were never agreed to by the US, either in July 2008 or December 2008.
Besides, neither China nor India had agreed to what the triggers would be which would allow them to start imposing the Special Safeguard Mechanisms to curb unforeseen surges in imports of agriculture items. Nor was there any agreement on the mandatory sectoral tariff elimination proposals that stipulate zero-for-zero tariffs in chemicals, industrial engineering and electrical and electronic products — this was demanded by the US.
Even if members schedule commitments based on the unresolved drafts, it still leaves huge loopholes as major trading members like the European Union, Japan, China, India, South Africa, Argentina, and Brazil, among others, are bound to face a situation where fresh demands will be made on them. More disturbingly, these bilateral concessions are not supposed to be extended to all the WTO members based on the cardinal MFN principle. In short, multilateral negotiations could degenerate into a unilateral power exercise in one go, if the US move — it was initially pushed by Canada — gathers momentum.
Even WTO Chief Pascal Lamy, who is also the chair for the Doha trade negotiations, has adopted an ambivalent stance on this issue. When a south-east Asian trade envoy asked him about the proposal to scrap modalities, Lamy said it was worth exploring.
The danger with such a proposal is that the bilateral request-and-offer framework would enable the most powerful to pry open their targeted markets in areas where they are extremely competitive. And in sectors where the powerful members are uncompetitive, they will either shelter their markets completely or get away with offering just a few concessions since they are powerful.
The US, however, is prepared to justify such a unilateral approach on the grounds that it is not gaining much from the Doha trade negotiations anyway. So the US needs to justify why it still remains engaged in the Doha process — the powerful domestic constituencies that need to be pacified include the Democrat-controlled Congress. This justification can be provided only if it is able to get some secured access in big emerging markets like China, India, Brazil, and South Africa, among others, in industrial/service areas in which it has a comparative advantage.
But the moot issue is whether the US is prepared to do the same in other areas of the Doha trade talks where it continues to adopt rules that are inconsistent with multilateralism. So, for instance, is Washington ready to reduce its egregious farm subsidies if countries accept its demand to lower tariffs? Is the US willing to do away with controversial zeroing methodology when it comes to imposing anti-dumping duties — this was even condemned by the WTO’s highest legal court, the Appellate Body? Is it willing to provide enhanced Mode-4 market access for short-term services providers from China and India?
If there is one member at the WTO that has lost the maximum number of trade disputes in areas such as farm subsidies, safeguards, services, anti-dumping and intellectual property rights, among others, since 1995, it is the US. Indeed, there is some consistency between the discredited Bush administration and democratically-hailed Obama regime in advancing crowbar-trade-priorities. Indeed, the more things change, the more they remain the same!
