Trade talks: Vital signs / WTO trade talks: an agreement to deal

Date: 16/08/03

Trade talks: Vital signs

Good news: the Doha Round still has a pulse

TRADE ministers from all over the world are due to meet in Cancun barely three weeks from now. One of the things they must decide is whether a new pact to liberalise global trade can be fashioned, according to plan, by the end of next year. The chances of success in this endeavour, so crucial to the prospects of the world's poor countries, remain slim - but this week they at least looked better than zero. Don't scoff. When it comes to trade policy, where governments are reliably at their craven, cynical and incompetent worst, one must be grateful for all mercies, however small.

The new ground for hope is an understanding, announced on August 13th, between America and the European Union on farm trade. Because of this agreement, the risk that the round might collapse altogether before it had even got properly under way has abated. If the United States had ruled that the EU's latest proposals on farm trade, announced in June, offered no basis for negotiation, then such a collapse would surely have followed. Agreement on agriculture, first between the United States and Europe (both of them egregious agricultural protectionists) and then between those two and everybody else, is indispensable if a broader package of trade liberalisation is to be put together: without it, many developing countries will feel that the new round offers them nothing.

So the new agreement is a breakthrough? Hardly. Trade-watchers will be unsurprised that it has virtually no content. The deal mainly reaffirms the fine liberalising intentions already expressed in the Doha declaration. Yes, it also purports to set out a framework for achieving those aims, so far as agriculture is concerned - through curbs on the most trade-distorting kinds of domestic support for farming, lower rich-country trade barriers against the developing countries' farm exports, and cuts in rich countries' subsidies for their own farm exports. But the real bargaining on these issues lies ahead: none of the cuts is quantified, none of the affected products is specified, none of the timetables for reform expresses anything so binding as an actual date. In effect, Europe and America have merely agreed to come to an agreement.

Other countries would be within their rights to say that, after so many years of procrastination on farm trade, this is not good enough, and to walk away from the round. But that would be unwise, and they probably will not do it. So long as there is even a chance of meaningful farm-trade reform - and Europe and the United States have at least affirmed their commitment to that goal - the talks are worth pursuing. Also, with this new text, empty as it may be for now, Europe and America have spent some political capital on signalling that they want the round to proceed and be a success. Lately, not even that desire could be taken for granted.

All the work is still to do. But the Doha Round is still breathing. Good news on trade: enjoy it while it lasts.

WTO trade talks: an agreement to deal

The Doha trade round may be back on the rails

IMPENDING doom does wonders at the negotiating table. Until this week, after four years of bitter arguments and missed deadlines, it looked as if disagreements on agriculture would sink the current multilateral trade round at the World Trade Organisation, known as the Doha Development Agenda. A failure of Doha, so soon after the Seattle trade talks failed in 1999, would have been terrible news for free trade.

After August 13th that seems less likely to happen. A joint proposal by the United States and the European Union, announced that day, appeared to have buried some of their many differences and come up with ways to move forward on agriculture. The agreement was vague, and there remains the small matter of getting the 131 other members of the WTO to sign up to it. But when the two trade giants are working together rather than fighting (which they do a lot), they tend to get more or less what they want. An agreement between America and the EU was deemed necessary, though not sufficient, to get things going again.

It was at the end of July that other WTO members first asked America and the EU to “do some homework together”. Their joint proposal this week leaves less than a month before the trade summit at Cancun, Mexico, at which ministers of WTO member states are hoping work on new multilateral trade rules.

The proposal starts brightly: “Members reconfirm the objective to establish a fair and market-oriented system through fundamental reform in agriculture.” Most WTO members have been clamouring for this for years. Some - the Cairns Group of 17 agricultural exporting countries, including Australia and Brazil - have competitive agricultural sectors, while others have large numbers of subsistence farmers that they cannot afford to protect or support. In both cases, a commitment by rich countries to reduce agricultural protectionism and unfair trade methods is seen as an essential part of any deal.

Indeed, the current agricultural trade rules are an affront to the principles of free trade and fairness that the multilateral trading system is meant to embody. The Uruguay Round's agricultural agreement exempts farm products from standard trade rules. Almost everyone is worse off as a result. Farm subsidies amount to $300 billion a year, paid for by taxpayers. Import restrictions and tariffs have kept food prices high for consumers, and 96% of the world's farmers, who live in poor countries, lose out on both world and local markets.

Unfortunately, the actual measures proposed by America and the EU fall some way short of their optimistic opening shot. If the proposal does not change, many protectionist measures will be retained. Some export subsidies and credits will be kept. Import tariffs for many sectors look like being subject to a uniform percentage cut for all, even though most countries want a more ambitious formula that would force countries with the highest tariffs to make the largest cuts.

The proposal would cap some trade-distorting payments as a share of total agricultural production at 5%. But this is much less significant than it seems: it ignores many other distorting payments. And, conveniently, most of the European and American farm subsidy programmes, which at $88 billion and $52 billion a year respectively are among the world's most lavish, are deemed not to be trade distorting. Oxfam, a British campaigning group, labelled the text “extremely disappointing”. Several developing countries, including India and Brazil, also complained that it gives them too little.

In addition, no one knows what numbers might eventually fill the many blanks deliberately left in the document. Certainly, farmers' lobbies in rich countries will do everything in their power to keep commitments to liberalise at a minimum.

Allen Johnson, the chief American farm-trade negotiator, recognises that the deal “doesn't answer every question” but argues that this will allow other WTO members to share the decision-making. America and the EU want to avoid having their back-room negotiations portrayed as a repeat of the 1992 “Blair House Accord”, when they cut a bilateral deal on agricultural trade and presented it to the rest of the world as a fait accompli.

It is unlikely that any country will reject the proposal outright. At least there is now a framework, however empty it seems. As David Spencer, the Australian ambassador at the WTO, points out, just finding common ground was an achievement for America and the EU.

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