Wednesday, May 18, 2011

Economy: North-South Impasse May Block Global Trade Deal This Year

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By Martin Khor* Courtesy IDN-InDepth NewsViewpoint

GENEVA (IDN) - Few really wanted it started, and now no one knows whether to end it or how to end it. In between there has been almost a decade of a roller-coaster of the Doha negotiations at the World Trade Organization (WTO).

Many political leaders, including at the G20 Summit last year, proclaimed that the Doha Round must really be completed this year. Otherwise it may have to be abandoned altogether, some have predicted.

That's because elections in the U.S. and other countries will preoccupy political leaders from 2012 and it is feared they will then not have time or attention to focus on trade policy. By the time the policy makers can re-focus on Doha, the underlying conditions for a deal may be gone.

It is unlikely that the death of the Doha talks will be proclaimed, as this would be a drastic move that no one may be brave enough to propose. However the intensive talks at bilateral level and also among 11 key members, known as the G11, since the start of this year have not yielded any significant progress.

Thus the hopes of new breakthrough texts and a Mini-Ministerial meeting in July 2011 to seal a framework agreement on modalities are now virtually gone.

There are bound to be differing interpretations of why the impasse has persisted.


The Doha talks were launched at the end of 2001, when it was dubbed the Doha Development Agenda. The Ministerial Declaration proclaimed that the interests of developing countries would be at the centre of the negotiations.

However, the developing countries have been frustrated that there is little development content left in the proposals on the table. Their priorities had been the reform of WTO rules to make them more balanced, since many existing rules are biased against their interests.

But the agenda to correct the problems of implementation and to strengthen provisions allowing special treatment for developing countries have fallen off the table.

Further, in the core negotiating issues of agriculture and industrial tariffs or NAMA (non-agricultural market access), the special treatment for developing countries has been whittled away. In fact it is the developed countries that are getting special treatment.

In agriculture, the key countries -- including United States and the European Union -- do not have to cut their actual trade-distorting subsidies; and they have also shifted a lot of subsidies to the Green Box subsidies, which do not have to be reduced. They are also getting many flexibilities for their sensitive farm products, sheltering them from significant tariff cuts.

In NAMA, many major developing countries have to cut their industrial tariffs by around 60 percent, while developed countries' cuts are only around 25 percent. On average, affected developing countries will have average applied tariffs of 11-12 per cent after the cuts, which will be damaging to their domestic industries.


The dominant proposals on the table are thus devoid of development content. On the contrary, despite these gross imbalances, the developed countries want even more from the developing countries. The U.S. in particular wants the large developing countries -- such as China, India and Brazil -- to open up their markets even more in NAMA, agriculture and services.

At the recent WTO meetings, Brazil, South Africa and India have made strong statements on why it is unfair to expect them to undertake extreme commitments that would ruin their domestic economy, especially when there are no extra concessions being offered by the developed countries that are making these new demands.

Since January 2011, the talks in Geneva have been within the G11 -- United States, European Union, Japan, Canada, Australia, China, India, Brazil, Argentina, South Africa and Mauritius.

In fact, much of the most recent negotiations took place not among the 11, but in bilateral talks between the United States on one hand, and China, India and Brazil on the other.


Many analysts believe the major block to Doha's completion is the United States. The President and his trade team have limited real negotiating authority because Congress has to approve any trade deal, and the Congress is not in the mood to cooperate with the Obama administration.

In order to avoid a fight with Congress even on a draft WTO deal, the U.S. officials have to show that they haven't made too many concessions, especially since there is an economic slowdown and high unemployment.

They also have to show that U.S. companies and farms are going to get significant new business through increased exports. Since there are limited gains from other rich countries, the U.S. is insisting on the bigger developing countries to open their markets in both goods and services.

But the developing countries have their own story. The draft deal -- put forward in texts in December 2008 -- do not require developed countries to make any significant concessions.

In particular, they will be able to maintain their high agricultural subsidies because of the peculiar WTO system requiring some subsidies -- known as the red box -- to be reduced while allowing others (green) to continue without limits.

The U.S. and EU have shifted boxes from red to green, while maintaining or even increasing total subsidies. The OECD countries' total support to agriculture in 2009 was US$384 billion in 2009 compared to US$326 billion in 2007.


Real cuts in agricultural subsidies in rich countries were supposed to be the priority aim of the Doha talks, when they started in 2001. It's quite clear that is not going to happen, given their entrenched farm interests.

The rich countries are also unwilling or unable to open up in labour services, to allow more skilled personnel from developing countries to enter and work. This was one of the key demands of developing countries, but has become almost a hopeless cause.

Meanwhile, the 2008 drafts require developing countries to drastically cut their industrial tariffs on industrial goods, in some countries by an average of around 60 per cent. They also have to cut their agricultural tariffs by up to 36 percent.

Least developed countries are exempted, but most of them are asked to cut 80 percent of all their tariffs in free trade agreements outside the WTO.

These tariff cuts mean cheaper imports, damaging the markets and even survival of local firms and farms of developing countries.

Thus the developing countries will potentially suffer losses in production and jobs, while gaining little in new exports to the rich countries.

But that's only part of the story. The U.S. is demanding that the major developing countries do even more, by cutting tariffs to zero in three large industrial sectors -- chemicals, industrial machinery and electrical goods. And that they also open up their service sectors even more than already offered to foreign ownership and competition.

This is where Brazil, China and India have objected. The December 2008 texts are already imbalanced, but these new demands -- which not only the U.S. but also EU, Japan and others are making -- are really too extreme. Especially since the rich countries are not offering anything extra either.

The impasse arising from the different positions are reflected in the speeches made at the WTO's Trade Negotiations Committee from February to March, especially in the statements of Brazil, South Africa, China and India and the United States. They show how far apart the countries are in the negotiations, and thus how unlikely a Doha deal can be finalised this year.

*Martin Khor is the Executive Director of the South Centre based in Geneva. He can be contacted at: This Viewpoint is an abridged version of 'Behind the Impasse in WTO's Doha Talks' by the author published in issue 54 of 'South Bulletin', April 15, 2011, which can be accessed at the South Centre website. (IDN-InDepthNews/17.05.2011)