World trade talks: A step forward

But the Doha round of trade talks is far from finished

LISTEN to the world's trade negotiators describe their deal on July 31st, and you might think something radical had just happened. Supachai Panitchpakdi, top man at the World Trade Organisation, touted a “truly historic” achievement. Bob Zoellick, America's top negotiator, talked of a “milestone”. The reality is less dramatic. By itself, the Geneva deal will not lower any tariffs or cut a single subsidy. It does not imply the end of the Doha round negotiations, or even the half-way point of real horse-trading. At best, it marked the end of talks about how to negotiate - and in important areas, such as cutting industrial tariffs, it did not even do that.

So why the collective backslapping? One reason for genuine celebration is that this deal has saved the Doha round from near-certain collapse. Trade ministers first tried to agree a negotiating framework in Cancun, Mexico last year, and failed spectacularly. A second failure would have led many countries to conclude that trade talks involving 147 players, each with a veto, are a fool's game. The multilateral system risked being sidelined in favour of bilateral and regional trade deals. That danger has passed, at least for the moment.

And the trade ministers did more than just administer life-support. They agreed on a framework that could - note, could - lead to an ambitious trade-opening deal eventually. Controversial attempts to broaden the negotiations to new areas, such as rules on investment, were abandoned. The very poorest countries, who precipitated Cancun's collapse by walking out, were bought off with promises, albeit vague, on cotton, and exemptions from demands to open their markets. Though squarely against their own long-term economic interest, these exemptions will discourage the poorest from holding up the rest of the negotiations.

Most important, there was progress towards liberalising farm trade. Rich countries realised that they had to go beyond the paltry concessions offered at Cancun last year. Export subsidies are to be eliminated, eventually. Countries promised “substantial reductions” in trade-distorting domestic subsidies; those with higher subsidies promised bigger cuts. Promises to cut farm tariffs were weakened with weasel words about allowing countries, rich and poor alike, to protect “sensitive” products. But here, too, the principle that higher barriers should be cut more was upheld.

Aim higher

With few numbers or dates and no products specified, it is impossible to gauge how much reform this framework will deliver. Given the addiction of rich countries to coddling their farmers, anyone expecting rapid change will doubtless be disappointed. But, at the very least, the Geneva deal ought to stop the Europeans backsliding on their reforms and also ought to force changes to America's grotesque farm subsidies.

The negotiators' sights, however, should be set much higher. They should aim for a thorough dismantling of distorting subsidies and for truly open markets for farm goods. Given the mercantilist mindset of trade negotiations, that will only happen if barriers to industrial goods and services are also reduced, especially by big developing countries such as Brazil and India. (The fact that lower tariffs benefit an importing economy is lost on trade negotiators.) In this area, the Geneva deal achieved less. The framework for talks on industrial goods has many loose ends, and the text on services does little more than tell negotiators to try harder.

Only with a serious political commitment from the biggest countries can the Doha round achieve a final trade deal. And such a serious commitment cannot be taken for granted, particularly in America's case. For all his trade team's contributions to the Doha round, George Bush has shown little interest in facing down powerful domestic interest groups. John Kerry's rhetoric on trade has been disappointing. Far from championing the Doha negotiations, his campaign never mentions them. Whoever is president next year will have to persuade a sceptical Congress to extend his negotiating authority. The painful truth is that, unless America's next president makes reaching a final Doha agreement and getting that deal through Congress a top priority, the Geneva framework will be nothing more than an “historic” breakthrough on a doomed venture.

Editorial argues that despite the agreement in July 2004 the Doha round of world trade talks is far from finished.

• Primary Source