WORLD TRADE: THE MOMENT OF TRUTH APPROACHES

By Pascal Lamy Reprint | | Print |

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GENEVA, Apr 1 2006 (IPS) - The end of this year marks the deadline for negotiations of the Doha Round of the World Trade Organisation (WTO), writes Pascal Lamy, WTO Director-General. The date was not picked out of the air: it is the day the US Trade Promotion Authority Act expires, the author writes in this analysis. The Act gives the US president \’\’fast-track\’\’ authority to enter into trade agreements which the US Congress must then submit to an up-or-down vote without amendment. If this deadline is missed, trade liberalisation on the scale envisaged by the Doha Round would become impossible to achieve in the near future. The main loser would be the developing world. The main aim of Doha is \”development\”, in other words, redressing the existing imbalances in multilateral trade relations. We are now faced with a difficult situation. The Hong Kong Ministerial Declaration called on countries to complete the \”modalities\” for the agricultural and industrial goods negotiations by 30 April. In the services areas, the Declaration called for revised offers to be submitted by 31 July. For these deadlines to be met, all actors will need to move.

The end of this year marks the deadline for negotiations of the Doha Round of the World Trade Organisation (WTO).

The date was not picked out of the air: it is the day the US Trade Promotion Authority Act expires. The Act gives the US president ”fast-track” authority to enter into trade agreements which the US Congress must then submit to an up-or-down vote without amendment. If this deadline is missed, trade liberalisation on the scale envisaged by the Doha Round would become impossible to achieve in the near future.

Were the Doha Round to fail, the main loser would be the developing world. The main aim of Doha is “development”, in other words, redressing the existing imbalances in multilateral trade relations.

The smallest and weakest economies would also be hard hit. For them, the multilateral process acts as an “insurance policy” against the pressures exerted by the strong in bilateral trade accords.

The other major loser, however, would undoubtedly be the WTO itself, the system that has served the collective interests of 150 different members and that has ensured trade opening that is adapted to changing realities and is based on a consensus between us all.

Last December, the WTO Hong Kong Ministerial Conference led to progress on some fronts. It also set a series of important deadlines to pave the way for our work this year. Hong Kong represented a modest success. Indeed, in Hong Kong only two outcomes were possible: modest success or serious failure.

The centre of the Doha Round is agriculture. This is logical given that the agricultural sector is several trade rounds behind industrial goods. The Agreement on Agriculture did not come into force until 1995. The agricultural sector has not benefited from the 50-year process of trade liberalisation that we witnessed in industrial goods.

In agriculture, Hong Kong secured a deal that involved all three pillars of the negotiations: export subsidies, domestic subsidies, and tariffs. Countries agreed to the elimination of export subsidies by 2013, with the removal of a substantial part by 2010. Europe lived up to the unanimous demand that had been made of it in this regard by the developing world. In Hong Kong, members also agreed to make “effective cuts” in trade-distorting domestic support.

It was also agreed that the biggest subsidisers would cut their subsidies the most, with the EU, the US, and Japan making the largest reductions.

With respect to tariffs, there was limited progress. The size of the tariff cuts to be made has yet to be resolved.

So what then are the outstanding remaining issues in agriculture?

The first is the magnitude of the reductions in agricultural subsidies in both Europe and the United States. (Needless to say, other members such as Japan will also need to make reductions.)

The second is the magnitude of the tariff reduction that will be required for agricultural products and the treatment of sensitive and special products for developing countries.

In industrial goods, which constitute 80 percent of world merchandise trade, there is an enormous potential for increased North-South and South-South trade. Members agreed to reduce tariffs using a formula that would reduce tariff peaks and the tariff escalation that remains in developed countries, but which would also reduce tariffs in developing countries in a manner suited to their needs and interests.

The Hong Kong Conference also succeeded in addressing a long-standing demand of 32 of our poorest members: rich countries agreed to provide duty-free and quota-free access to 97 percent of all Least Developed Countries (LDC) products on a lasting basis with a view to eventually extending this treatment to all of their products.

In services, Hong Kong opened the door to plurilateral negotiations, encouraging countries to submit collective requests in the services of sectors that are of particular interest to them.

Hong Kong, in my view, was able to strike a careful balance between opening trade in services and maintaining the right of countries to regulate this part of their economies.

We are now faced with a difficult situation. The Hong Kong Ministerial Declaration called on countries to complete the “modalities” for the agricultural and industrial goods negotiations by 30 April. In the services areas, the Declaration called for revised offers to be submitted by 31 July. For these deadlines to be met, all actors will need to move.

While agriculture has been placed at the forefront, the Doha Round is a “single undertaking”, and progress needs to be made on all fronts. To unblock agriculture, the US needs to move on domestic support, and the EU on market access. India, Brazil and other big developing countries need to show greater flexibility on industrial goods. The services negotiations must continue to progress.

This brief overview can be summed up in one sentence: we have no time to lose. The possibility of closing a deal — deciding on whether to succeed or to fail in the negotiations started over four years ago — will be decided in a few weeks. (END/COPYRIGHT IPS)