First sign of spring brightens hopes for new trade round

Date: 12/04/01

With just six months to go before the next WTO ministerial meeting in Qatar, negotiators are increasingly optimistic about the chances of a new round of trade talks. Simon Taylor reports on why the prospects look good

TRADE negotiators are not normally known for their poetic leanings. But the first signs of spring across western Europe have given them convenient metaphors for expressing confidence about the chances of launching a new round of world trade talks this year.

World Trade Organisation (WTO) director-general Mike Moore started the outburst of weather imagery in March. "We've been unable to get a major round going when the sun is shining," he opined. "Perhaps with some dark clouds overhead, people may focus on it a bit."

Another senior trade official offers a similar forecast: "The sun might not be shining but the clouds have parted and the rain has stopped."

Behind the meteorology, there is a distinct feeling that a number of factors are coming together to boost hopes of ensuring that the WTO ministerial in Qatar in November will not be another Seattle.

This week's deal between the EU and US over bananas is a good omen.

Bold moves by EU Trade Commissioner Pascal Lamy to show flexibility in setting the Union's agenda for a new round, plus his brave battle over the 'Everything But Arms' package of duty-free access for the world's poorest countries, also seem to be paying dividends at WTO headquarters in Geneva.

Across the Atlantic, Robert Zoellick, the new US trade representative, has impressed observers with his early handling of the uphill struggle to convince a sceptical Congress of the merits of a new round.

But the clincher is the slowdown in the US economy, which is focusing minds on the need to open up new markets to sustain growth and sales when recession starts to bite.

European Commission Director-General for Trade Peter Carl and Japan's Deputy Foreign Minister Yoshiji Nogami put it less poetically in a joint statement after a meeting of 20 leading WTO members in Geneva at the end of March: "Many participants are concerned about a global economic downturn and a return to bilateralism and see a relaunch of the multilateral process in the WTO as all the more necessary in this context."

The signs are unmistakable: the long winter that settled over the global trade community after the disastrous 1999 Seattle summit failed to kickstart a new round appears finally to be lifting.

Lamy was the first senior politician to get back on the horse after Seattle. He has tirelessly circled the globe, strong-arming developing and developed countries alike into admitting that the EU's call for a wide-ranging set of talks, covering investment and competition rules, environmental and labour standards as well as traditional tariff lowering, makes sense.

Even the developing countries that won't benefit from Everything But Arms appreciate the enormous political capital that Lamy invested into getting the deal agreed by EU governments. Trade diplomats believe the Commissioner's efforts, combined with the Union's new-found flexibility on competition and investment rules, is starting to pay off in Geneva.

"Developing countries are much less of a monolithic bloc of countries opposed to or sceptical about a new round," says one. "There are fissures opening up between them."

Diplomats single out Egypt, South Africa and, on a good day, Pakistan as leading developing states who are swinging behind a new round as long as some of their demands are met.

This will not be so easy. The world's poorer states demand a high price for their support, insisting on a re-examination of some of the commitments on market opening they signed up to as part of the previous Uruguay Round in 1994. But trade experts maintain that WTO members will only agree to look at these issues once talks on a new round have started, threatening a dangerous Catch-22 situation.

"The developing countries have complicated and ambitious demands on implementation that can only be met as part of a new round," says one official.

The challenge of satisfying these countries comes on top of their continued wariness about the EU's call to link trade liberalisation to improved environmental and labour standards. Senior officials admit that this reticence is not just limited to less well-off states. "Asian countries are much less flexible on environment, labour and competition," says one.

After Seattle it became received wisdom that the attitude of developing countries will determine the success of the WTO ministerial meeting in Doha, Qatar in November.

But trade diplomats say the most encouraging signal of the chance of a new round is the new US administration's commitment to a new round in the person of Zoellick. "No matter how much we say that developing countries are critical the key card in the pack is the US," says one top aide. The question is whether Zoellick can convince his boss that a multilateral trade deal is worth more political energy than the regional trade agreements favoured by US business.

This month Bush will attend his first international summit, a meeting in Quebec on turning the North American Free Trade Agreement of the US, Canada and Mexico into a Free Trade Area of the Americas.

So far Zoellick has sent very encouraging signals. He has bundled into one package requests to Congress for trade negotiating authority for a range of agreements, including the next WTO round.

Although the initial reaction from Democrats on the Hill was to bat back the attempt to pull a fast one, observers are already crediting Zoellick with political savvy unexpected for a figure widely seen, like Lamy, as a technocrat. "On his performance to date," says one, "you have to be encouraged."

Both sides of the Atlantic have been working to resolve the big bilateral trade disputes, which have long blighted the relationship, ahead of Bush's visit to the Göteborg summit in June.

The telephone diplomacy paid off this week with the deal on bananas. The stakes were high. Both sides knew that if they failed Zoellick would carry out his threat to apply carousel sanctions. This, in turn, pressured the EU to play hard ball over the US' €4 billion system of tax breaks.

Leading economic analyst C. Fred Bergsten warned in the latest issue of Foreign Affairs that the US is heading for a showdown with both the EU and Asia unless it manages to quell its "domestic backlash against globalisation".

This is something of an exaggeration. In fact, trade experts see the looming economic slowdown in the US as one of the factors favouring the launch of a new round, because it will force business interests to put a WTO deal back in their sights.

"The talk of a recession in the US is code for: when the economy is booming US industry doesn't need increased market access; when there's recession, they do," said one trade diplomat.

Trade negotiators are also remarkably sanguine about the phenomenon that fatally wounded hopes of a new round at Seattle and could potentially scupper them again: protests by anti-globalisation groups.

They don't think that the choice of Qatar, with its poor record on free expression and civil rights, will undermine the claim that a new round will benefit developing countries. Rather, they say the sheer difficulty of getting there will deter all but the most resourceful protestors.

"Logistics will defeat civil society because just getting enough hotel rooms will be enough of a problem in itself," said one.

After the Seattle meeting collapsed so spectacularly in 1999, it is hard to find trade policy analysts who are prepared to put money down to back their predictions that Doha will be a success. But the mood is finally turning to one of confidence rather than the gloom and despondency of the last 18 months.

As Peter Carl put it in Geneva: "The momentum is definitely picking up." Or, as one meteorologically-minded trade official expressed it: "It might not be summer yet but the first signs of spring are here and people are wondering whether to get the deckchairs out."

Major feature. With just six months to go before the next WTO ministerial meeting in Qatar, negotiators are increasingly optimistic about the chances of a new round of trade talks.