Trade: From Cancun to can-do

The European Union tries to revive the Doha round of trade talks

PASCAL LAMY, the European Union's trade commissioner, is sometimes nicknamed the Dalai Lamy. As well as being a juvenile play on his name, the moniker is a tribute to his shaven head and alleged asceticism. Fortunately for the world economy, Mr Lamy seems disinclined to apply the Buddhist virtue of infinite patience to the Doha round of world trade talks.

The round seemed to have collapsed in Cancun last September, when a deep division emerged between poor and rich countries about both the scope of the talks and the extent to which rich countries' farm support should be cut. The EU was at the centre of the furore. Now Mr Lamy has made an offer that he hopes will help get everybody back to the table. Encouragingly, his proposal has been warmly welcomed in the United States, cautiously welcomed in the developing world and roundly condemned in Mr Lamy's native France.

The reason for his compatriots' ire is that France is the biggest single recipient of the EU's farm aid and Mr Lamy has offered to eliminate all export subsidies on farm goods, a concession the Union long resisted. This offer is not quite as dramatic as it sounds. Export subsidies account for just €3 billion ($3.6 billion) of the €45 billion a year that the EU lavishes on subsidising and protecting farmers. What is more, they are already being phased out: in 1992, they amounted to €10 billion. Mr Lamy's offer is not even unconditional. He says the EU's proposal will stand only if the Americans, Australians and Canadians cut back on their own equivalents of export subsidies.

Still, his offer has some merit. Export subsidies from rich countries do particular damage to the farmers of the developing world. And the fact that the EU has finally acknowledged that they must go could get talks restarted. Mr Lamy has also modified the EU's ambitious demands on the scope of the trade talks, which had proved a serious problem in Cancun. The EU wanted to bring four topics - trade facilitation, investment, competition and public procurement - within the ambit of world trade negotiations. Mr Lamy now accepts that he made a tactical error in pushing these “Singapore issues” too hard. His new position is no longer that all these topics must be dealt with. They can be addressed one at a time and need be included in the Doha round only if “there is consensus to launch negotiations” on them.

Mr Lamy's latest gambit has injected some much-needed optimism into the world trade round. But this new mood could quickly fade. In both Brussels and Washington, officials agree that the broad outlines of a deal on agriculture need to be in place by July - or the whole round will have to go on hold until after the American presidential election.

The European Commission is trying to revive the Doha Round of international trade talks.

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