Can Mandelson lift Doha out of the dump?

The last few weeks have seen a number of positive signals about prospects for agreement on the Doha Development Round of global trade talks.

Last Thursday (1 February) the US administration presented its draft Farm Bill, with some attempt to make farm support payments less trade distorting. The initial reaction from the EU has been lukewarm, pointing out that cuts in loan deficiency payments, seen as one of the most trade-distorting mechanisms, were "extremely modest" while support programmes for dairy and sugar producers were "virtually untouched".

The day before (31 January) Pascal Lamy, the World Trade Organization’s director-general, asked the 150 members to move into "full negotiating mode" to capitalise on the new political momentum which came from the world economic forum in Davos at the end of January.

The same day, George W. Bush asked US Congress to renew trade promotion authority which the US administration needs to negotiate international trade agreements. Despite these positive signals, the way ahead is littered with difficulties.

The French government has already attacked European Trade Commissioner Peter Mandelson for suggesting that the EU could make an offer on cutting import tariffs on farm products which came close to the 54% average figure demanded by the G20 group of developing countries, led by Brazil, India and South Africa. But the commissioner has said that the EU cannot meet the G20’s demands on sensitive items such as beef, poultry and dairy products.

French Farm Minister Dominique Bussereau last week accused Mandelson of exceeding his negotiating mandate while denying that France’s position was influenced by the presidential elections in April and May. But he received surprisingly little support from other EU countries with strong farming interests such as Ireland, Poland and Hungary at last week’s meeting of farm ministers, while the Commission was backed by Horst Seehofer, the German farm minister, the current holder of the EU’s rotating presidency. The EU will need to improve its offer from the 39% average cut in import tariffs it proposed in October 2005 if the G20 countries are to sign up to the round. But while Mandelson has said that he could make an offer close to what the G20 wants, he will not make a formal proposal to do so unless he gets concessions from other trading partners. A key element will be an improvement in the US Farm Bill as it goes through Congress, further reducing the most trade distorting support payments. Lourdes Catrain, a trade specialist with US law firm Hogan and Hartson in Brussels, says that US lawmakers will be fully aware of the direction in which they have to amend the bill to meet the concerns of US’ trading partners. Susan Schwab, the US trade representative, "will have been telling Congress exactly what they have to do in terms of reducing domestic support", she says. The EU and the G20 group are united in wanting to see more commitments to cut subsidies in return for signing up to a deal. As an EU official points out, under the draft bill a US farmer could receive as much as €283,000 in public funds, while their exports are hurting farmers in developing countries living on less than a dollar a day.

Another key factor will be whether Congress renews President Bush’s trade promotion authority (TPA). While many new Democrat members of Congress campaigned on a mildly protectionist slate, there is some optimism that the strong support for free trade among the Clintonite Democrats could prevail. A number of approaches to get the support of a sceptical Congress may be to have a limited TPA which only covers the Doha negotiations or a commitment to impose labour and environmental standards only in bilateral trade negotiations.

EU trade officials are cautiously optimistic. "There’s been a mood change in Congress. We are convinced they [the US] are prepared to move," said one. Trade officials say that there could be a breakthrough on the "big numbers", such as cuts in import tariffs, in March or April, despite the French elections. This would then help Bush in his negotiations with Congress on renewing TPA, creating a loop of positive feedback.

EU trade ministers will meet in Brussels on Sunday (11 February) for a dinner to discuss progress on the Doha round and on bilateral trade agreements.

There is a palpable sense that a deal is more realistic now than it has been since talks were suspended last July.

The last few weeks have seen a number of positive signals about prospects for agreement on the Doha Development Round of global trade talks.