Draw at Hong Kong

When elephants make love, there is a great deal of dust and the results are known after 18 months. With the just-concluded Hong Kong WTO ministerial, it will take even longer""around eight years, till 2013, for the world to know if the promised phasing out of agricultural subsidies by the developed countries is for real or still-born. The world trading regime has had a close shave at Hong Kong. Since an agreement on this was the acid test for whether or not the Doha Round of trade talks had achieved anything, it must be admitted, even by the sceptics, that there has been some progress. It will be tough going in the next few months, and the final result is as yet uncertain, but there is now greater reason for hope about the end result. By pinning the developed countries down to a specific date for ending farm subsidies, the developing countries have done better than was expected. The originally proposed cut-off date of 2010 would have been better, but the European Union's budgeting calendar (it starts a new budget from 2014) dictated the timing. Trade ministers from the different countries, including India, will claim credit for the outcome because success, never mind that it is partial, has many fathers. India, in particular, can draw comfort from the fact, that unlike in the past when the coalitions it built would fray and then come apart, this time that did not happen. To the extent that Kamal Nath, the minister for commerce and industry, led that effort, he deserves to be congratulated""though a lot of hard negotiation on very substantive issues still lies ahead.

That said, it would be navel-gazing to credit Third World solidarity beyond a modest point. The hard truth is that the outcome of this ministerial had boiled down to just one thing: French willingness to budge on the agricultural subsidies issue. And that was predicated on the just passed EU budget, on which the French had locked horns with the British. Tony Blair realised he had to make a concession and proposed one, and a trade-off was hammered out over the weekend in Brussels. Once that was worked out, the French agreed to a cut-off date for ending farm subsidies, and the Americans fell in line on the cotton subsidy, so that the rich countries could do what they had to in Hong Kong. The end result is not a victory for any particular group, because countries like India will be expected to make some concessions on non-agricultural market access before the Round is completed, but what Hong Kong has managed to do is keep the talks on track for an eventually successful conclusion.

Trade, the Hong Kong ministerial has once again demonstrated, is more about politics than economics. As long as everyone keeps this in mind, progress will always be possible because politics is more amenable to deal-making than economics. At a more basic level, the world will have to ask and answer the question whether the days of the present multilateral trading regime are numbered. The system today is yielding diminishing returns to the rich countries, which see a rising threat from countries like China and India, across a broadening swathe of activities in both services and manufacturing, and now in agriculture as well. Through history, countries have abandoned the free trade principle when they felt it no longer suited their interests. The question is whether the rich countries are now drawing closer to that point, or whether their commitment to free trade survives.