Like all previous bids to salvage the Doha round of trade talks, organised by the World Trade Organisation (WTO), the mini-ministerial meeting in Geneva has also ended in failure. Barring a salvage bid by Pascal Lamy, WTO director-general, this could well mean the end of the round — the first since World War II to have failed to produce a trade-enhancing package of measures. The reason for failure is probably quite simple: none of the major negotiating countries saw enough benefit coming their way, and the concessions that they were being asked to make would go down badly in the midst of a global slowdown, given the mood of despondency in key domestic constituencies. It is of course worth trying to salvage the round; failure to do so would have consequences that no one can fully anticipate. In any case, the alternative to bilateral trade agreements is hardly a superior substitute. But as things stand, the concessions required of the US are unlikely to be forthcoming, and the mood in many developing countries is probably one of anger, on account of the lack of justice in the positions adopted by the rich countries.
There is no shortage of analysts who believe that Mr Lamy was ill-advised to force the issue by calling trade ministers to Geneva when the foundation had not been laid for the different countries to come together on an agreed platform. In the event, the differences in negotiating positions proved too great to be erased in six days of parleys — as indeed had been forecast. Perhaps Mr Lamy felt he should try and strong-arm an agreement because failure to do so would mean that a new president in the United States would have to come to grips with the issues. As it happens, Barack Obama has signalled that he would like to include issues such as labour and environmental standards in the negotiations, which would mean new roadblocks. But Mr Lamy’s gambit had only a slim chance of success because the US position on farm trade issues was more or less frozen after Congress passed the farm bill. For more than a month, therefore, the unstated game by each country in Geneva has been to try and avoid taking the blame for the failure of the Doha round, and to do so by pointing fingers at someone else. The finger-pointing has now begun in earnest. The United States’ chosen fall-guy is India, and to a lesser extent other “emerging” countries, including China.
The fact is of course that India has played hardball on agricultural issues because these involve the livelihood security of millions of its subsistence farmers (all those who accuse the government of giving up an independent foreign policy, please note that President Bush’s call to Manmohan Singh has not made India give up its national interest). India was of course willing to be flexible on market access for non-agricultural goods, where the effective tariff rates are much lower than the rates negotiated in previous trade talks (called the bound rates), and therefore provided room for deep cuts, provided once again that some flexibility was written into the arrangement — which proved to be a contentious issue. There was also the problem that the developing countries were being asked to make deeper cuts than the rich countries when it came to industrial tariffs. But since the latter had already reduced their tariff levels to very low levels in most (not all) cases, this is to some degree understandable. All that the developing countries wanted was some tweaking of the formula on relative cuts.
It is worth noting how the Doha round started, and where it has ended up. A fundamental basis for a new round seven years ago was that it would be a “development” round, and the initial assumptions were that the developing countries (who felt rightly that they had been short-changed in the previous Uruguay round) needed to get something this time. There was also recognition that if the millennium development goals were to be achieved, the poor countries of the world would need much greater access to rich country markets, especially for their agricultural produce. Flowing from this, a second basis for the new round was that the developed countries would open up trade in agriculture, by lowering duties and/or reducing trade-distorting subsidies. But concessions are most easily made when economies are doing well, whereas the Doha round has reached its final stages when the world economy faces a slowdown — which tends to make everyone tightfisted — and at a time when the emergence of countries like China and India makes the developed world feel under threat. The negotiations have therefore turned out to be as hardnosed as any, with pressure being focused on China and India to make more concessions. The difference between the Doha round and the previous (Kennedy, Tokyo and Uruguay) rounds is that on all those occasions the US, Europe and Japan would agree on a deal and shove it down the throats of the rest; this time, the rest too have a say in what happens.
Mr Lamy has argued that roughly two-thirds of the $130 billion worth of reductions in trade barriers that have been negotiated would accrue to the developing countries and therefore that they are the biggest losers if the Doha round fails to deliver an agreement. He has also said that agreement on 18 of the 20 key issues has been reached, so that the gap still needing to be bridged is small. This is the reason for his desperate attempt to make one final bid to avoid closure.
Indeed, the gap between 140 per cent and 115 per cent that marked the US and Indian positions as the extent of import surge that would justify deterrent tariffs in selected agricultural goods is not an unbridgeable chasm. That suggests there were other problems which have not got proper attention. It is unusual that the talks got bogged down on the single issue of safeguards for farm goods, undermining equally important issues concerning subsidies on cotton (where the US is the offending party) and other products, non-agricultural market access (Nama), and services. Mr Lamy made a last-ditch effort at compromise by mooting another mechanism for agricultural safeguards which did away with the triggers and remedies altogether. India was inclined to accept this as the basis for negotiations, but did not meet with any success. This would have required members to inform the WTO after the imposition of safeguards, after which a special panel would study the merits of the move. This is on the lines of a similar safeguards mechanism now available to the industrialised countries.
If Mr Lamy’s post-midnight salvage attempt does not deliver results (don’t forget that trade talks are known for their last-minute drama), the big danger is that the multilateral trading system that has underpinned the spread of global prosperity for six decades will come under stress. The mood among the major negotiating countries is that a bad deal is worse than no deal at all. That is true enough. But nothing is lost in making one more attempt at an acceptable package.
