EU-US linchpins crucial to trade summit outcome

Date: 31/10/01

By Dick Leonard

Two years ago, the World Trade Organisation disastrously failed at its ministerial meeting in Seattle to begin a new comprehensive trade round on tariff reductions and the removal of obstacles to expanding trade.

The popular conception is that the failure was due to the massive anti-globalisation demonstrations which disrupted the conference, and which have since been a recurrent feature of international economic gatherings, including EU summits.

In fact, if there had not been a single demonstrator (violent or non-violent) on the streets of Seattle, it is highly unlikely that the millennium trade round would have got under way. The conference was badly prepared, and the divisions between the conflicting parties - notably the EU and the US, and the developing against the developed world - were too great to be easily bridged.

Next week the 140 countries represented in the WTO - plus others as observers, such as China, which is on the brink of being admitted as a full member - will have another try, when the 4th WTO ministerial conference opens in Doha, Qatar, on 9 November. Its success will depend, to an enormous extent, on the flexibility shown by the EU's chief negotiator, Trade Commissioner Pascal Lamy, and his American opposite number, Robert Zoellick.

The prospects seem quite good. During the past couple of years, a great deal of quiet preparation has proceeded behind the scenes - the EU and US positions have moved much closer, aided by the long-standing friendship between Lamy and Zoellick, and there is now general recognition that the views and needs of developing nations must be taken fully into account.

The events of 11 September have undoubtedly increased the pressure for agreement to be reached, and the location of the meeting is likely to ensure that the number of hostile demonstrators will be sharply reduced. Most of the governments which had opposed the opening of a new trade round at Seattle have since softened their resistance, with the conspicuous exception of India, which is still smarting from the poor deal it believed it had received from the previous Uruguay Round, and is wary of going down the same path.

Most observers believe, however, that the Indian position is largely pre-negotiating posturing, and that the green light for a new round will almost certainly be given. The real struggle at Doha will be over the contents of its agenda. The two key areas are likely to be agriculture and services, where the Uruguay Round made only limited provision for liberalisation. These will undoubtedly overshadow more traditional issues such as tariff reductions, trade facilitation and customs procedures, on which there is already a large consensus in favour of further progress.

The EU has its own shopping list of issues, including competition policy and public procurement, investment, anti-corruption measures, labour standards and a wide range of environmental concerns. It will not have an easy task in persuading developing countries to take these questions on board.

They are seen by many as a disguised form of 'protectionism' for the economically advanced nations, and, in any case, largely lack the infrastructures necessary to implement regulation in these fields. Any attempt to impose higher standards on them would lead to the total collapse of the negotiations.

The best that the EU, which is backed by the US on most of these issues, could hope to achieve is a declaration of aspirations, perhaps accompanied by sets of rules with a wide range of exemptions for countries not deemed ready to shoulder such responsibilities.

The developing nations have their own demands. These include the complete removal of barriers to their exports of textiles and clothing, free access for their agricultural products, an end to anti-dumping restrictions and the easing of patent protection which restricts their access to cheap medical supplies.

The core issue is certain to be agriculture, with many developing countries demanding improved access to European and US markets, and an end to export subsidies. The EU has already made a move in this direction by its adoption of the 'Everything but Arms' directive, which allows free entry into the Union of all non-military exports by the 49 least-developed countries (LDCs).

This mostly benefits sub-Saharan Africa, and even if the 49 countries make the maximum use of this concession it will have only minimal effect on the EU market. Excluded from the concession are much more serious agricultural producers, such as India, Pakistan and Brazil, not to mention wealthier members of the Cairns Group, such as Australia, Argentina and Canada.

Several factors are already pushing the EU towards liberalising its agricultural sector, including budgetary pressure on the CAP and the prospect of Eastern European enlargement, which would greatly increase the cost of the current level of protectionism. It will, however, be essential for both the EU and the US to go much further than they have yet dared, if the projected trade round is to lead to a successful conclusion.

Finally, it must be stressed that the anti-globalisation campaigners, most of whom are undoubtedly well-intentioned, are wide of the mark when they claim that trade liberalisation is the cause of poverty in the Third World. As former GATT and WTO chief Peter Sutherland argued, in a recent talk in Brussels to the European Policy Centre, it is not the process of globalisation, but their exclusion from it - largely at the behest of their own governments - which has led to their being left behind. "In the 1950s", Sutherland said, "per capita income in Egypt was the same as Korea's. Now it is less than one-fifth. In Morocco it had been close to that of Malaysia, but now only one-third as much."

The figures speak for themselves.

Major preview of the issues to be discussed at the 4th World Trade Organisation Ministerial Conference, Doha, Qatar, 9-13 November 2001.