The Doha trade round. A stopped clock ticks again

Date: 15/10/05

But time is running out

THIS week, Zurich played host to ministers from five of the most important players in world trade negotiations: America, Australia, Brazil, the European Union and India. Next week, these same guests will grace Geneva. The ministers do not need one of Switzerland's expensively engineered timepieces to know that it is very late in the day for the Doha round of trade talks. A crucial summit, in Hong Kong in December, is fast approaching.

Fear of a flop brings out one of two responses in politicians. Either they push harder for success; or they start running from the blame for failure. Both motivations probably played a part in America's encouraging proposal this week to shake up agricultural trade.

America can currently spend up to $19.1 billion on farm-production subsidies, which heavily distort trade. The EU can spend over $75 billion. Robert Portman, America's trade representative, offered to cut his country's limit by 60%, if the EU agreed to cut its permitted subsidies by 80%. Mr Portman also suggested limiting other subsidies, which do not distort trade as heavily, to 2.5% of the value of agricultural production. These two limits provide plenty of scope for creative accounting. Even as America lowers the ceiling on the most trade-distorting subsidies, some of this money will be reclassified as something else.

To the big agricultural exporters, such as Brazil, handouts to rich-world farmers, however galling, matter less than access to rich-world consumers. The trade powers appear to have settled on how to cut farm tariffs, if not by how much. Following a scheme outlined in July, tariffs will be divided into four "tiers", according to their height. Those in the top tiers will be cut by more than those in the bottom. This week, Mr Portman proposed that rich countries should cut any tariff over 60% by as much as 90%, and any under 20% by more than half. No rich country should impose a tariff above 75%, he said.

These are big numbers. But they refer to internationally agreed ceilings, above which countries cannot raise their tariffs. Since most tariffs are currently set well below these limits, lower ceilings may not result in many actual reductions.

Nonetheless, the EU was unable to match the offer. The cuts its trade commissioner, Peter Mandelson, proposed in response were less deep, and their scope less wide. Only tariff ceilings above 90% would be lowered by more than half; and the maximum tariff would be set at 100%. The EU also wants to spare 8% of its products from tariff-cutting. According to research at the World Bank, if even 2% escape the chop, 75% of the benefits of a successful round would be wiped out.

Mr Mandelson did push things forward on industrial tariffs and insists that services should not be the "Cinderella" at the Hong Kong ball. His position is not easy. France's trade minister thinks he has already gone too far. Meanwhile, America's farm lobby and its placemen in Congress complain that a trade deal would tie their hands when they write the next farm bill, before the current act expires in 2007. Hong Kong is imminent, and success still distant. But for the first time in a while the protectionists sound a bit nervous. That should give everyone else a bit of hope.