End of the road for WTO?
It will be appropriate to foresee that WTO and the present form of DOHA development forum has failed and will go to extinction unless something dramatic happens in 2007
The goal of the Doha talks
The expectation of the Doha talks was that all forms of export subsidies would end by 2013. Trade distorting domestic support would be chopped by at least 60% and tariffs on farm products would be halved by 2013. This seems unlikely to happen because of the present standoff.
Standoff
Trade ministers from 60 of the 149 World Trade Organization member states talked in Geneva for three days pm July 2006 but failed to agree on a blueprint. The conference collapsed two days ahead of its scheduled close, preceded by a walkout by Indian Commerce Minister Kamal Nath in protest against the talks' futility.
The breakdown was hardly unexpected, as it was clear that few members were ready to relax the rigid position they had held for the past two years. While WTO opponents used the collapse to endorse the view that globalization was in crisis again, others said any hopes for an agreement at this "mini-ministerial" conference on reducing farm subsidies and import tariffs for agriculture and industrial products as a part of the Doha round on multilateral trade, were overly optimistic anyway.
A primary focus and stumbling block of the Doha talks are agriculture (read farm subsidies particularly in rich nations) and market access (Read Lesser Industrial tariff and services in developing countries). Supporters of free trade argue that farm tariffs and subsidies in rich countries hit poor nations unfairly because agriculture is a much larger part of the economies of poor nations. EU-US combines inflexible attitude towards cutting domestic support to its farmers and cutting down the export subsidies have stalled negotiations in 2003 (cancum), 2004 (Hongkong). In Geneva (2006) the developing countries les by India, China and Brazil argued that Industrial tariffs couldn’t be brought down to reasonable levels until there is a visible progress on the agriculture issue. The developing countries under the umbrella of G20 understand that the Uruguay talks only marginally benefits them.
Minefeild
While the US refused to reduce farm subsidies to the levels demanded by the developing countries like India, Brazil and China (members of the so-called G20), the EU stance also was an obstacle: it offered just a 50% cut in its agriculture tariffs instead of 64% suggested by the US. On other hand, India and Brazil, which represented the developing countries in the negotiations, were upset because the US, instead of talking about reducing subsidies, actually wanted to increase them while at the same time insisting that developing countries open their markets to industrial products.
Present Scenario as on End of 2006
In July 2006,the talks were dissolved, and may take months or possibly years to restart. Talks on the Doha Development Agenda were put into deep freeze. One of the key reasons talks were down to crunch time is that the US president's "fast track" trade negotiating power runs out in 2007. With it unlikely Congress will vote to extend fast track, any Doha agreement will have a hard time making it through Congress. (MarketWatch)
WTO Director General Pascal Lamy called negotiations to a halt because too many countries refused to compromise on their offers. The aims of the Doha Development Agenda negotiations according to him were to liberalize trade rules and make them more fair, to give developing countries a bigger slice of the global trade pie. The indefinite suspension of the talks means trade rules will remain as they are. Most analysts agree that there is no point in resuming talks until two key election dates have passed - the American congressional elections in November 2006 and the French presidential elections in May 2007.
Let us analyze the various stakeholders of the standoff.
United States
The US as such plays a double game by playing with the farmers as well as with the WTO against subsidies. The industrial lobby is fighting for WTO approval, so that they can penetrate into the developing markets like India , Brazil and China. At the same time they are not ready to stop the subsidies to the farmers.
The congressional elections gave a shot on Pres Bush and the last thing Bush is expected to do is upset US hugely powerful farm lobby citing the presidential elections slated for 2008.
The timescale is made more complicated by the impending expiry in July 2007 of fast track authority, the rule under which the US Congress can only approve or scrap trade deals, rather than change their detail.
European Union
EU is pressurizing for more concessions from developing nations like Brazil and India on Industrial tariffs and services. They are not with US to extending subsidiary reductions in the case of agriculture. They are more adamant against reduction of agricultural subsidies. This is the muzzle power they tried to attain after forming the union- being the larger economy comparable to US and sometimes bigger.
Japan
Japan as such has taken a protectionist position in agriculture as well as tariff cap. Developed countries often give a dig on Japan for the position citing dumping.
G 20 Nations
During the earlier talks the developing countries could shut the mouth of other developing nations. G-20 comprising India, Brazil, South Africa, China, Pakistan and other countries was formed on August 20, 2003, in response to the joint US-EU proposals on farm negotiation before the Cancun Ministerial. Brazil and Argentina have offensive interests in agriculture and advocate trade liberalization through reduction in tariff barriers, while India, Pakistan and China have defensive interests in agriculture.
India and Brazil emerging as power brokers
The group proposed a middle ground formula for tariff reduction that was widely accepted as a basis for further negotiation. On export competition, it proposed a 5-year deadline for eliminating all subsidies. The G20 comprises Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Tanzania, Thailand, Venezuela and Zimbabwe. It took a lot of lobbying before and during Hong Kong, with both governments putting their reputation as leaders of the developing world on the line, but they succeeded in getting everybody, though not without some grumbling, to assent to a bad deal. In the lead-up of the Hong Kong ministerial, Brazil and India's new role as power brokers between the developed and developing world was affirmed with the creation of a new informal grouping known as the "New Quad". This formation, which included the EU, US, Brazil, and India, played the decisive role in setting the agenda and the direction of the negotiations.
Developing countries sinister moves
During the Cancun Ministerial, the bullying and arm-twisting tactics of the EU and the US seriously backfired when, in the face of intense pressure, developing countries formed alliances, such as the G20, G90 and G33, to defend their trading interests. Unwilling to accept this shift in power dynamics, developed countries, such as the US, adopted a ‘divide and rule’ response, with a series of aggressive attacks, designed to undermine the new alliances and pick off countries.
Attempts to break G20 by ‘divide and rule’
the G20 membership continued after Cancun with most extreme pressure being exerted on those countries aiming to negotiate FTAs with the US. Guatemala, Peru, Ecuador, Colombia and Costs Rica all left the G20 in the weeks following Cancun in response to threats that their trading arrangements with the US would be jeopardized if they continued as members. Developed countries has started a set of bilateral trade deals, handpicking developing countries so that the developing countries go against their leadership, particularly against India and Brazil.
Bilateral pacts to tame G-20
As the WTO talks are getting into a never ending loop, Developing countries US has already signed 10 bilateral pacts, including that with Australia, Columbia and Oman. Treaties with South Korea, Taiwan and Malaysia are planned on 2007.EU also has got grant plans to press ahead with aggressive bilateral deals irrespective of the outcome of Doha talks , and adopt a “WTO Plus” strategy thereby building a layer up the level of liberalization achieved at the WTO. France intended to focus its bilateral efforts on certain countries where there was strong demand, such as countries in the Association of Southeast Asian Nations (ASEAN) which includes Thailand, Vietnam, Indonesia and Malaysia.They also tries to target the Gulf and the Mediterranean basin in a push towards bilateral trade deals following the collapse of global free trade talks The countries are picked one after the other and are forced into more concessions than what they must have normally got in the WTO framework. The idea is to weaken G20 , particularly India and Brazil. The weakened G20 can be dealt more easily so that the developed countries get more concessions during the next round of talks.
Fight back of Developing countries
What can developing countries do at the scenario? Fight the developed countries in their own game. India is working on a comprehensive economic cooperation agreement with Mauritius, Malaysia and Indonesia and a preferential trade agreement with South Africa and Chile. A free trade pack with Japan is on the way for next year. All other developing countries are thinking in that line. End result? Premature Death of WTO like GATT of course.
Coffin for WTO?
World Trade will survive the multi lateralism or not is an open question which only time can tell. Once the WTO comes apart or the talk fails, most countries have bilateralism to fall back on. Even if the Doha talks continues the delivery will be very late and after all the deadlines have been missed.
Bibliography:
CNN - mainstream news mediaBBC - mainstream news mediaThe Economist - mainstream news media
U.S. Proposal for Global Agricultural Trade Reform
Outlook business weekly
For more information on the Doha round:
A Washington Post article summarizes the current situation.Information on the G8 and G20 groups of nations.The World Trade Organization home page, and statistics on all member nations.
Different Images of same story line .
Different level of protests occured round the world after WTO. Lots of discussion happened on prons and cons of Free trade. I would like to reserve my thoughts to later.
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