US and EU set to share Doha blame

Date: 27/04/06

The chances of a successful outcome to the Doha Round of world trade talks appear to be slipping, with a 30 April deadline for a deal on farm and industrial goods now certain to be missed.

Peter Mandelson, the European commissioner for trade, blamed the US farm policy and the industrial policies of emerging economies, especially Brazil and India, for the latest setback to the Doha development agenda.

In a speech on 21 April, Mandelson acknowledged that historically, the EU had been the bigger spender on farm subsidies and had been more culpable in distorting international trade than the US.

Yet he said that the reform of the 43 billion euro Common Agricultural Policy agreed by EU governments in 2003 and subsequent offers to reduce farm support by 70% indicated the EU was rehabilitating itself.

By contrast, he claimed that the US had "yet to cut a single dollar or dime from its escalating farm spending".

Mandelson also urged Brazil and India to reduce tariffs on industrial goods.

But anti-poverty campaigners have argued that Brazil and India should not be pressurised into liberalising their markets. Tim Rice from ActionAid said that western Europe took 50 years to open up its manufacturing markets, so it should drop demands that developing countries should reduce tariffs designed to protect their nascent industries from outside competition.

With deep divisions between some of the key players, one of the few agreements likely to be delivered in talks at the World Trade Organization (WTO) in Geneva over the next few weeks is on trade facilitation.

This is designed to benefit the 42 landlocked states in the world by setting out more advantageous formulae for calculating the custom duties that will be levied when they export goods.

Carol Cosgrove-Sacks, a professor at the College of Europe in Bruges and a former United Nations director of trade, said that this would be a "small piece in the overall jigsaw but at least it would give the Doha development agenda a real outcome".

Diplomats in Geneva are now working towards a new deadline of late July for the other dossiers under negotiation.

But Adrian van den Hoven, a trade specialist at European business association UNICE, said there was a real danger that the Doha Round would be put on hold for three or four years.

He said it was "absurd that the EU and US were not working together", as they had a "common interest" to jointly promote liberalisation of services and industries, with a view to providing a "level playing field" between rising economies like Brazil and India and more economically developed countries.

Some have even suggested that a failure to reach an agreement in the coming months could be hugely damaging to the WTO, possibly even leading to the collapse of the 149-country organisation.

Ranabir Ray Choudhury, a writer with the Hindu Business Line in India, said that his government should be reluctant to bow to pressure from the EU and US, whose "immediate interest" was to protect inefficient systems of farming that have been blamed for undermining the livelihoods of farmers in poor countries.

Choudhury added that for the US and the EU, the existence of the WTO was not as important as it was for the developing countries.

Shelby Matthews from the Committee of Professional Agricultural Organisations in the EU said the Union had made concessions on farm spending "but doesn't seem to be getting very much back from other partners".

George W. Bush, the US president, had called for a 5% reduction in payments on farm commodities, to save $7.5bn (6.2bn euro) over a decade. Last month, however, the budget committee in the US Senate rejected his proposal.

Nonetheless, Matthews said that the recent appointment of the former Trade Representative Rob Portman as head of the White House's budget office could be a sign that the Bush administrationwas determined to introduce some reforms to farm spending. Portman's former deputy Susan Schwab has been nominated as his replacement.

Failure to reach agreement on the Doha Round would undermine trust in trade liberalisation, damaging, perhaps irremediably, the WTO.

If this happens, the EU and the US will be held responsible by the rest of the world.

Mandelson is keenly aware of that. After reporting to his fellow commissioners on the state of negotiations, yesterday (26 April), he said: "The world has much to gain from the round and much to lose if it fails." His problem is that the EU's trading partners are not happy with the price they are being asked to pay to achieve a deal.

Article takes a look at the state of negotiations at the World Trade Organisation on the Doha Round, reporting that a deadline on 30 April 2006 for a deal on farm and industrial goods was certain to be missed.