The Hindu Business Line : WTO: The countdown to Hong Kong

The developing countries — which have a strong stake in the continued healthy functioning of the WTO — are placed in a tight corner in that they will have to make major compromises if they want the Hong Kong ministerial to succeed and, in the process, ensure the future of the Geneva-based organisation itself.

IT IS widely acknowledged that unless the Hong Kong World Trade Organisation ministerial is a success of sorts, the chances of the Doha Round of multilateral trade negotiations, which is slated to end in December next year, will fail. And if that happens, there is little doubt that it would deal a grievous blow to the effort to liberalise international trade, the milestones of which over the past quarter century have been the various rounds of similar negotiations such as the Tokyo and Uruguay Rounds under the General Agreement on Trade and Tariffs.

Three-four years back, such a failure would have been described unanimously as being disastrous for the future prospects for the world economy.

But, today, it appears things are a bit different. There is, in fact, a strong suspicion that there are sovereign economic powerhouses which would rather do without the WTO, and instead concentrate on bilateral and regional trade pacts. The advantage of this would be that while all the benefits of lower trade barriers would be there to be enjoyed, the irritating business of abiding by the WTO rules and guidelines (often culminating in an adverse ruling by the body's dispute settlement mechanism) would be avoided.

Clearly, this perception of the WTO in certain world capitals is far too important to be pushed under the carpet in view of its impact on the future course of world trade — with which the economic well being of the poor countries is inextricably woven. At this juncture, in fact, nothing much can be done about this apart from being fully aware of the dangers of such a move and also being fully alert so as to be in a position to nip in the bud any effort made in this direction.

Indeed, perhaps the best way in which this larger `conspiracy' against the WTO itself can be fought is to make every effort to make the Doha Round a success.

But this would mean making the Hong Kong ministerial meeting a success, the effort on the other side being to do exactly the opposite.

So what is happening on the Hong Kong front? More specifically, is there any hope of a breakthrough in the ongoing negotiations which, for the moment at least, seems to be the only way in which the December meeting can be salvaged — and with it the Doha Round?

To begin with, how does the new WTO Director-General, Mr Pascal Lamy, view the current situation?

The important point that emerges from his most recent statement, is that there is very little time left between now and the Hong Kong meeting, the inference being that within this short span a lot will have to be got through to keep the end-2006 date with the Doha Round's completion intact.

To quote Mr Lamy: "I believe we should stand by our target of circulating a comprehensive draft text in mid-November, which is essential for governments to prepare themselves properly. That is about 30 days from now, counting every day as a working day. The amount of ground to be covered in this very short time is very large. But I am convinced it is not impossible. It can be done, and I believe that a number of issues are ripe for rapid movement once other sectors unblock." What are these `other sectors' on the `unblocking' of which the WTO chief is laying so much emphasis for Hong Kong's success?

This brings us to the real negotiating table as it is now, and allows us to draw our own conclusions on whether the players involved are actually keen on getting through with the Doha Round or whether they are playing a surreptitious game of appearing to be malleable and compromising when in fact they are playing for much higher stakes — stalling the current round and the ultimate withering away of the WTO itself?

The most important sector on which there has to be progress to the liking of all the parties concerned for Hong Kong to have a fair chance of success is agriculture. As Mr Lamy, among others, has said: "(Agriculture) is the engine that has to lift the bulk of our plane. If that engine is log-jammed, as it has been, the plane gets stuck on the tarmac."

In recent days, there has been some movement in this sector with the US and Europe making offers on domestic farm support and export subsidies which — though concessionary in character since they have conceded ground which they have been tenaciously holding on to over the past year and more — have not really met the stated requirements of the developing world.

Thus, Brazil's Foreign Minister, Mr Celso Amorim, has said bluntly: "It is not what we want but... it can get things moving." Oxfam, which has been a consistent critic of the developed world's negotiating stand at the WTO, has described the US offer as just "smoke... aimed at getting 'painful concessions' from developing nations".

This apart, there is a problem among the developed-economy farm subsidisers themselves, with Japan strongly arguing against the US position that it was prepared to reduce the bulk of its trade-distorting domestic support by 60 per cent over the five-year period so long as the EU and Japan reduced theirs by 83 per cent.

The Japanese have said that Washington's demands on them and Europe were "out of balance with the level of reduction the US itself is ready to make". While Tokyo feels that the cuts offered by the Americans are too ambitious, the G-20 countries have said on the other hand that the US offer did not go far enough, the Brazilians and Indians specifically saying that the offer "did not do enough to cut actual payments, as opposed to merely lowering ceiling levels".

Brazil has also rejected the suggestion that those members lowering subsidies should be protected by a renewed `peace clause' that would bar countries from taking each other's farm subsidies to the WTO dispute settlement body.

On the other hand, as a transparent bargaining ploy, on non-agricultural market access (NAMA), the EU has called for industrial tariffs to be capped at 10 per cent for developed countries and at 15 per cent for `certain' developing countries. Brussels has also backed the use of a `simple Swiss formula' for computing the cuts, which means there would be steeper cuts for higher tariffs and smaller reductions for lower tariffs.

The implications of this are clear when it is known that the average industrial tariff for developed countries is close to six per cent while the corresponding figure for developing member countries is closer to 30 per cent.

This apart, Brussels has introduced the concept of differentiating among non-LDC economies in that it has suggested it would not mind allowing `some developing countries' to make tariff cuts lower than others.

Not much imagination is required to suggest that this is nothing if not a ploy to divide the ranks of the developing economies.

To cap it all, the EU Trade Commissioner, Mr Peter Mandelson, has said that if the EU is not satisfied with the level of industrial tariff reductions, "there will be no outcome on agriculture or other parts of our negotiations".

There is no doubt at all that the developing countries — which have a strong stake in the continued healthy functioning of the WTO — are placed in a tight corner in that they will have to make major compromises if they want the Hong Kong ministerial to succeed and, in the process, ensure the future of the Geneva-based organisation itself.

Those economies which are fed up with the entire multilateral trade-policing process (specially after Seattle and more so Cancun) are aware of this dilemma facing the poor world and are of course using it to their fullest advantage.

What this means is that countries such as India must make sure that the Hong Kong ministerial is successful and also, at the same time, protect their own trading interests as far as is possible in the circumstances.

This requires first-rate strategic and tactical negotiating skill. To be sure, New Delhi (and the other G-20 countries) has this capability; it remains to be seen whether it will be put to good use in this particular instance.

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WTO: The countdown to Hong Kong