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WORLD-TRADE: "Make Doha Round About Development Again"

Julio Godoy

PARIS, Jul 15 2009 (IPS) - The present global economic crisis and the need to reform the international financial architecture should encourage a return to the original focus on development in the international negotiations on agriculture, trade and development, also known as the Doha Round, according to two economists studying the issue.

Kevin Gallagher and Timothy Wise, professors of international economics at the U.S.’s Boston and Tufts University, said that the centrepiece of reforming the global financial architecture must be "a new development and trade policy that remembers why the world's most powerful nations once agreed to negotiations to improving the prospects of developing countries".

This new development and trade policy should be incorporated into the revival and revision of the Doha Round, currently underway in the World Trade Organisation (WTO), Gallagher and Wise told IPS in an interview. They have just released a paper with the Global Development and Environment Institute at Tufts University setting out their argument.

The Doha Round collapsed in July 2008 for the third time in seven years, after the industrialised countries of the world insisted that the developing world drastically reduce applied tariffs on industrial and agricultural goods and virtually eliminate protection mechanisms for their own production.

"Pressing to conclude a new WTO deal on the basis of the existing proposals would be counterproductive" for developing countries, Gallagher and Wise told IPS. Instead, the "organising principle to revive the global trade negotiations must be the recognition that the world economy consists of nations at widely differing levels of development," they argued.

"Developing countries need the policy space to retain, adapt, and evolve the kinds of government measures that have proven to work for development in the U.S., western Europe, and in the emerging economies" of South East Asia, Gallagher and Wise added.

IPS spoke with Gallagher and Wise against the background of the newest efforts to revive the collapsed Doha round. Last month, delegates of the most industrialised countries of the world and several emerging developing economies met in Geneva, Switzerland, and Paris, France, to try to relaunch the negotiations.

On Jun 18, New Zealand's ambassador to the WTO, David Walker, who acts as chairperson of the Doha Round, announced in Geneva that the agriculture negotiations would soon return to a "multilateral" process (that is, one involving all member states), reflecting WTO members’ desire to see the talks pick up momentum again.

Indeed, official-level talks on the Doha Round restarted last month in Geneva, and continued in Paris, alongside the annual ministerial meeting of the Organisation for Economic Cooperation and Development (OECD).

Ministers from 40 countries participated at the OECD meeting, which took place Jun 24-25 in the organisation's headquarters in Paris.

Participants included the 30 OECD member countries – the most industrialised of the world – and the five major economies with which the OECD has a policy of "enhanced engagement" – Brazil, China, India, Indonesia and South Africa – and who happen to be leading actors at the Doha Round.

In Jul 2008, India, accompanied by a large number of developing countries, walked away from the Doha trade talks after the U.S. government had refused to accept that a "special safeguard mechanism" (SSM) be included in the agreement.

This mechanism would institutionalise the right for developing countries to raise tariffs in the event of a large or sudden increase in imports threatening the domestic producers.

For Gallagher and Wise, the SSM is a legitimate demand of developing countries.

"Rich nations should grant poorer countries extensive rights to exempt staples of their local economy such as maize, rice, and wheat – so-called "special products" – from tariff cuts, and allow them to raise duties when imports surge – the 'special safeguard mechanism' the United States would not agree to in July," they said.

After the trade delegates’ meeting in Paris last month, Indian commerce minister Anand Sharma told journalists that his country is committed to an agreement in the Doha trade negotiations only if it addresses the "legitimate developmental concerns" of developing countries in a balanced way.

But he emphasised that "the SSM is not for negotiation as it concerns the livelihoods of poor farmers." In addition, Sharma said, industrialised countries "will have to revisit the subsidy dossier in the Doha agriculture package, as several outstanding issues remain unaddressed".

But both the U.S. government and the EU have rejected revising their subsidies to their local agricultural production.

After the Paris meeting, both the French government and EU delegates dismissed the Indian calls for reducing agricultural subsidies. "We have tried our very best and we can't move," EU agriculture commissioner Mariann Fischer Boel said in a press conference.

The newly appointed French minister for agriculture, Bruno Le Maire, concurred. "We went to the absolute limit of what was acceptable to the agricultural community. We won't go any further," Le Maire said. France is the main beneficiary of EU subsidies for agriculture.

Gallagher and Wise supported the Indian demand on subsidies. "In agriculture, the U.S. government and the EU should honour WTO rulings that have found their subsidies for cotton and sugar to be in violation of existing trade rules that forbid exporting products at subsidised prices."

This would give a tangible boost to farmers in West Africa and Latin America and send a strong signal to developing countries that developed nations are willing to honour existing WTO rules, they explained.

What’s more, Gallagher and Wise added, "the WTO should take seriously the proposals made by many African nations to tame highly concentrated global commodities markets, dominated by agribusinesses that suck most of the value out of these value chains".

These conflicting positions suggest that progress in reviving the Doha round would be most difficult.

Gallagher and Wise have made proposals to frame negotiations on a "pro-development foundation", as they put it.

"First, nations should preserve the space under current WTO law to place capital controls, use safeguard mechanisms when faced with surges in imports or investment, subsidise credit to domestic firms, and stimulate the domestic economy through government procurement programs," they insisted.

As for solving the present global economic crisis, "developing nations need to be part of a coordinated response to it. At least one trillion U.S. dollars in new capital needs to be infused into the developing world to preserve currencies, for coordinated stimulus packages, and to cover the costs of adjustment such as tariff losses and job retraining in sectors where tariffs are cut."

In manufacturing, Gallagher and Wise recalled that the WTO holds a principle of "special and differentiated treatment".

This treatment "should be re-enshrined for poorer nations. Developed nations should roll back patent laws that impede poorer nations from manufacturing cheaper generic drugs and allow selective industrial policy so governments can diversify their economies," the economists told IPS.

And finally, they said, "there should be a moratorium on North-South preferential trade agreements.

"These deals exploit the asymmetric nature of bargaining power between developed and developing nations, divert trade away from nations with true comparative advantages, and curtail the ability of developing countries to deploy effective policies for development."

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