By IPS Correspondents
GENEVA, Jun 22 2007 (IPS)

The high-profile Potsdam meeting of the Group of Four members – the United States, the European Union, Brazil and India – broke down on "North-South" lines Thursday when the two developing countries thwarted sustained attempts by the trans-Atlantic trade partners to undermine the developmental concerns of the developing countries in the Doha Development Agenda trade negotiations.

"This is not a North-South showdown," said EU trade commissioner Peter Mandelson. "Both the developed world and the fast growing competitive countries of the developing world must create trade-offs for the most needy."

Such talk did not take the talks far. "Unless there is an attitudinal change in the mindsets of the two dominant players (the United States and the European Union), the Doha trade negotiations will never succeed," said Indian trade minister Kamal Nath. Developing countries would not buckle down under pressure as they would in the past, he said.

Nath blamed the U.S. and the EU for changing the terms of engagement during the last six years of Doha trade negotiations.

"The U.S. and the EU were determined to extract a huge price from the developing countries in market access for industrials for absolutely minimal commitments by the U.S. to reduce its overall trade distorting domestic support (a combination of different subsidies) and by the EU to lower its farm market access barriers," Nath said.

"They are supposed to be givers when the Doha Round was launched in 2001 but over the last three days they behaved as though they are the takers from the developing countries, and this is unacceptable."

Ahead of the meeting in the historic German city that saw the partition of Europe and the surrender of Japan at the end of World War II, EU trade commissioner Peter Mandelson said that "convergence" reached among the four members on difficult issues in the Doha agenda will be reflected in the multilateral process to conclude the round.

The EU&#39s calculations, however, went awry, as Brazil and India refused to accept the onerous demands placed on them. U.S. trade representative Susan Schwab and Mandelson said Brazil and India had adopted "rigid" positions and refused to show "flexibility" in opening their industrial markets to imports.

"It remained totally unclear from our discussions whether there is a comparable landing range in the industrial goods, without which it would not be possible to find a reasonable trade-off," Mandelson told journalists after the collapse of the talks.

After months of preparation, the Potsdam meeting witnessed a combined onslaught by the U.S. and the EU on developing countries to agree to a Swiss formula that would bring down import tariffs on industrial products in developing countries by a huge margin.

Under the Doha mandate, the United States, the European Union and other rich industrialised countries are required to commit to substantial and effective cuts in their domestic farm and export subsidies, and lower their import barriers for agricultural products from developing countries.

Besides, the mandate clearly spelt out that developing countries would lower their industrial tariffs less than what developed countries would undertake in their tariff reduction commitments under the principle of less than full reciprocity.

Finally, the Hong Kong Ministerial Declaration in December 2005 said commitments in reducing industrial tariffs would be in proportion to what is done in agriculture, implying that if there are high reduction commitments in agriculture, reduction commitments would be correspondingly higher in the industrials.

For the first three days of the Potsdam meeting, the two powerful elephants of the global trading system showed little flexibility in offering realistic and balanced proposals to address the core issues of the Doha mandate. Brazilian foreign minister Celso Amorim said that the U.S. had offered to reduce its domestic farm subsidies to 17 billion dollars with great difficulty but sought liberal disciplines for implementing commitments.

"The U.S. also demanded a peace clause (which would insulate it from potential trade disputes arising from its egregious subsidies)," he argued. "In return, the U.S. and the EU wanted developing countries to agree to a coefficient of 18 in the Swiss formula to reduce industrial tariffs, which in percentage terms amounted to over 70 percent reduction in the industrial tariffs of the developing countries."

"Agriculture is the locomotive of the Doha Round," said Amorim, arguing that the U.S. is not prepared to drastically cut its overall trade distorting domestic subsidy to a level of 12.1 billion dollars. The U.S. was also not prepared to lower the OTDS (overall trade-distorting domestic support).

The EU was willing to offer only 51 percent market access for farm products while refusing to bring down barriers for the treatment of sensitive farm products, said the Brazilian minister.

"Instead of addressing distortions in the global trade, the U.S. and the EU wanted to undermine the developmental component, which was unacceptable," the Indian minister said.

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