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TRADE: Old Talks Never Die

Gustavo Capdevila

GENEVA, Sep 1 2008 (IPS) - “History tells us that multilateral trade negotiations never die, and the current Doha Round is no exception,” said economist Carlos Pérez del Castillo, Uruguay’s former permanent representative to the World Trade Organisation (WTO) and chairman of the global body’s General Council in 2003 and 2004.

But the failure of the latest talks, held in Geneva, Switzerland in late July, strongly suggests that “the negotiations will now enter a period of hibernation,” Pérez del Castillo told IPS.

“Things will pick up again in due time, when conditions are ripe for the parties to engage in meaningful negotiations, but this is unlikely to happen until the second half of 2009, at the earliest,” he predicted.

“We will have to wait for the result of the election in the United States in November, the nomination of a new U.S. trade representative and, probably, the granting of trade promotion (‘fast-track’) authority” for the White House to negotiate international trade agreements which Congress can only approve or reject, but not modify, he said.

The Uruguayan expert, now an independent consultant to private institutions and international organisations, said that a revival of the Doha negotiations would also have to wait for the changes in the European Parliament and European Commission, elections for which are due in June 2009, and the Indian elections which have to be held before May next year.

“With the recent breakdown of negotiations , the multilateral trading system has suffered a serious setback and the credibility of the WTO is in danger,” Pérez del Castillo told IPS in an e-mail interview from his Montevideo office.

“A bigger menace is that the larger developed trading partners, no longer able to get what they want in the WTO and frustrated by the slow pace of multilateral trade negotiations among its 153 member countries, might decide eventually to shift the negotiating process to the Organisation for Economic Cooperation and Development (OECD, which includes all the industrialised countries) or other organisations where they have full control,” he said.

“There are some precedents in the fields of export credits and investment which, fortunately, failed to produce results,” he said.

“Countries wanting to participate in those negotiations would have no option but to join the OECD, if they let them. This would seriously undermine the WTO,” he said.

The Doha Round of multilateral trade talks was launched in the Qatari capital in November 2001 with the goal of liberalising global trade and bolstering development, and was originally scheduled to end Dec. 31, 2004. But profound discrepancies between different countries’ interests and aspirations led to a series of failures, such as July’s collapse.

The WTO and many of the delegations participating in the final debates blame the failure to reach agreement at the talks on differences, especially between the United States on the one hand and India and China on the other, over the Special Safeguard Mechanism (SSM), intended to shield developing countries from having their economies unexpectedly flooded with agricultural imports.

However, Pérez del Castillo said “my feeling is that it is an over-simplification to consider that the SSM was the only factor responsible for derailing the negotiations.”

“Even if that issue had been solved, I can think of a number of other issues in both the agriculture and industrial (non-agricultural market access, or NAMA) negotiating groups, that would have subsequently cropped up to prevent a closure of the ‘modalities’ (a sort of ‘blueprint’ for the final deal),” he said.

For example, agricultural issues such as “the levels of reductions in cotton subsidies, (demanded by African countries), the ACP (Africa, Caribbean and Pacific countries) reservations about the EU-Latin America banana deal, and the number of special products tariff lines which would be eligible for zero tariff cuts (‘no cut’ lines) are all controversial issues which were far from being solved,” he said.

In the NAMA negotiating group, disagreements persisted among several countries over the suggested Swiss formula coefficients for tariff reductions and the flexibilities proposed as compensation, including Argentina and other members of the NAMA Group of 11 (G11) led by South Africa, said the Uruguayan economist.

“These were also probable candidates for producing a breakdown” and bringing the talks to a halt, Pérez del Castillo said.

In his view, internal political considerations in a number of countries “played a major role in preventing convergence” at the July meetings, which brought together trade ministers from 30 countries and delegations from the other WTO members.

“India, in a fragile political situation, with weak support from its rural sector and with elections possibly coming up later this year, never showed any signs of compromising from its maximalist positions. Their outright defence of food security and the rural poor through the SSM will certainly strengthen the government’s political base,” he said.

“The United States entered the negotiations with little credibility due to the absence of trade promotion authority on the one hand, and the indecent (from a WTO perspective) approval of the Farm Bill on the other,” said Pérez del Castillo.

The U.S. negotiators “wanted to close the modalities, but at a price they could sell to Congress. As the days went by, they realised the little likelihood of being able to harvest any significant deal, in particular with regard to market access both in agriculture and NAMA,” he said.

“The SSM dispute with India and China gave the United States delegation a good excuse to bow out without losing credibility,” he said.

In Pérez del Castillo’s view, “Argentina’s concerns were devoted exclusively to NAMA the whole time, and, surprisingly, they practically abandoned the defence of their interests with respect to agriculture.”

“The Argentines did not back Uruguay and Paraguay in their stance regarding the SSM, although they were originally co-sponsors with these two countries (all three are members of the Mercosur or Southern Common Market, along with Brazil) of a proposal on the subject,” he said.

“The Argentine position must have been influenced by the tense relations prevailing in the country between the government and the agricultural sector, and the desire to avoid at any cost the extension of the conflict to the industrial sector,” the expert said.

“Considering the current situation of high commodity prices and the fragile situation of the domestic process of industrialisation, they saw no need to rush into an agreement,” he suggested.

“The European Union seemed to be relatively comfortable with (WTO Director-General Pascal) Lamy’s package.

“However, the Europeans insisted that their approval of the package was subject to getting results in intellectual property issues. They were seeking an extension of geographical indication protection for products other than wines and spirits,” he said.

“China, which is still suffering the impact of the trade liberalisation measures linked to their accession to the WTO (in 2001), was probably relieved with the failure of the negotiations, which would have imposed additional liberalisation efforts,” he said.

About Brazil, Pérez del Castillo said the country “wanted to close the deal at all costs.”

In order to preserve its leadership of the Group of 20 (G20, made up of developing countries with common agriculture trade interests), Brazilian Foreign Minister Celso Amorín “has, from way back, sacrificed the country’s level of ambition in agriculture, in particular access to markets,” he said.

Thus Brazil supported “the defensive interests of net (food) importing G20 members, such as India, China, Egypt, Venezuela and others.”

“At the recent negotiations, Celso Amorim fully endorsed the Lamy package proposal, including the modest levels of reduction in overall trade distorting domestic support (OTDS) from the major trading partners,” he said, referring to U.S. and EU farm subsidies.

“He also accepted the terms suggested for the triggering of the SSM, and the coefficients and flexibilities proposed for NAMA,” said the former head of the Uruguayan WTO delegation.

“As a result, the Brazilian negotiators lost the support of India, China and also Argentina, and probably others in the G20,” he said.

“The final outcome certainly weakens the position of Brazil as the self assigned spokesman for the Third World,” Pérez del Castillo concluded.

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