3 August 2008
For Personal Use Only
- Source: Sunday Business Post
The WTO outcome does not augur well for areas where other global decisions need to be taken, such as migration, climate change and nuclear proliferation, writes Alan Matthews.
The immediate cause of the breakdown of the WTO Doha Round trade talks in Geneva last week may have been the failure by the United States, India and China to agree on a mechanism to protect developing country farmers from a sudden surge in food imports.
But the fact is that ultimately it failed because no one outside the Geneva meeting rooms really needed it to succeed, and was thus not prepared to stand up to the sectors that stood to lose.
Certainly not the US, even if it is going too far to give it the sole blame for the breakdown of the talks. The US offer to lower the cap on its domestic farm support payments came late in the day. It was unwilling to negotiate seriously about reducing the subsidies it pays to a handful of cotton growers in its southern states and which undermine the livelihoods of millions of cotton farmers in West Africa.
The Farm Bill increasing farm subsidies passed by Congress in May this year, despite an earlier veto by President Bush, ran totally counter to the spirit of what the US was negotiating in Geneva.
The expiry of the Trade Promotion Authority, which gives the US president authority to sign a trade deal following a simple yes-no vote in the Congress, and the very narrow majorities for bilateral trade pacts in Congress in recent years, cast doubt on the US to deliver on any commitments made by its negotiators in Geneva.
The EU, with Pascal Lamy (now head of the WTO) then in his role as Trade Commissioner, was the main proponent of the Doha Round and of making it a development round. The EU knew that if the round were to succeed it had to provide much greater access to its agricultural markets. The 2003 reform of its Common Agricultural Policy was largely designed to give it the negotiating room to make these concessions.
Lamy’s successor as Trade Commissioner, Peter Mandelson, pushed this mandate to its limit in the negotiations, although the EU’s last offer in Geneva last week would still have retained a large amount of protection for Europe’s farm sector. But Mandelson’s position was undermined by a coalition of the fainthearted led by France, despite regular endorsements by the EU Council of Ministers.
The Doha Round negotiations were the first to reflect the new global order of the twenty-first century in that they brought the new emerging economies of China, India and Brazil into the limelight. The contrast with the previous Uruguay Round negotiations - largely a US and EU affair - could not be sharper.
The outline of the proposed final package would have made few demands on the G-20 countries - the grouping of emerging developing economies - although there were tortuous negotiations on the issue of preference erosion, which was an important concern for many of these countries.
It was clear from the outset that the EU and the US would seek additional market access opportunities from the G-20 countries for their manufacturing and service sector exports in return for concessions on agricultural protectionism.
The G-20 countries, with some justification, argued that they should not be asked to pay to get the rich countries to reform their trade-distorting agricultural subsidies.
But the G-20 countries have been the big gainers from the more open global trade regime since the Uruguay Round, and it is a moot point whether they should not have been more pro-active in trying to secure an agreement in the final hours.
But when it came down to it, it was a collective failure. There simply was not the push from a sufficient number of exporting interests in each of these blocs to overcome the inevitable resistance of protected sectors to a deal.
There was a noticeable absence of business leaders on the fringes of the Geneva meetings last week, in contrast to the voluble presence of farm leaders from many countries. The Irish debate reflected this imbalance, if in an even more extreme form.
The Irish Exporters Association estimated that there would be a direct and immediate gain of €475 million to Irish firms arising from lower tariffs and the implementation of technical standards and customs measures in non-EU countries.
In addition, it estimated that Irish exports would increase by $15 billion (€9.6 billion) as Ireland’s share of the overall increase in trade likely to be generated by a Doha Round agreement.
But these figures were lost in the arguments about beef and the alleged catastrophe facing Irish agriculture put forward by the well-oiled farm lobby machine. The farfetched claims by the IFA that a deal would lead to the loss of 100,000 jobs in the agri-food economy and an overall loss of €4 billion to the national economy were never seriously challenged in the political debate.
Instead, the statements issued by the two main opposition parties berated the government for its unwillingness to use a veto to prevent a successful conclusion to the talks.
There seems to be little understanding of the economic basis for Irish jobs and prosperity in the post-Celtic Tiger era. The benefits of more open trade in leading to lower prices and thus more spending power for Irish consumers is totally overlooked.
While the EU and British markets remain the most important destinations for Irish exports, around one-third of both merchandise trade and services exports go to non-EU countries, about half to the US and half to the rest of the world.
On the day after the trade negotiations collapsed, the Irish Exporters Association issued its half year review of trends in Irish exports. Against a relatively gloomy background of a slight 1 per cent fall in overall exports, a few bright spots stand out. Exports to China grew by 33 per cent, exports to India by 10 per cent and exports to Singapore by 8 per cent.
Irish service exports grew by 5 per cent. We are by far the largest global exporter of services per capita, and in absolute terms our total services exports of $68 billion in 2006 makes Ireland the 11th largest exporter of services in the world.
But these sectors failed to get across the message that a successful Doha Round would reduce barriers to Irish exports to these markets. One is reminded of the spirit of Edmund Burke’s dictum that all that is necessary for evil to triumph is for good men to do nothing.
The failure of Doha is a missed opportunity. There will be no rush to pick up the pieces. The WTO will continue to play its role of policing existing international trade rules. WTO members will be tempted to put more effort into achieving bilateral trade deals following the failure of the multilateral process, but the prospects of success are not guaranteed and the likely gains will be much smaller.
While changes in the structure of talks have been called for, the fundamental basis for WTO negotiations is that all members must realise net gains, and the more comprehensive rounds provide the scope for tradeoffs to allow that to happen.
Yet others may be tempted to achieve through litigation what they failed to obtain through negotiation. The WTO dispute settlement machinery has proved to be a very powerful mechanism, but it does depend on the willingness of WTO members to adhere to the rules, and this may come under strain if global economic difficulties persist. (more…)
Filed by Ivana Jankovic under Multilateral Trade, Development
