The Hindu Business Line : Why the WTO talks failed

The developing countries weren't willing to offer further market access without any promises from the developed countries for tariff cuts and subsidy reduction.

Chennai , July 1

Failure of WTO talks has become so common that it no longer surprises us. Yet, for records' sake, we now learn that the latest parleys to take global commerce forward at the forum of WTO (World Trade Organisation) have failed in Geneva this weekend.

But what were the talks about and why did they fail? The WTO members were trying to reach agreement on `modalities' in agriculture and industrial products. Please note that `modalities' is WTO-speak for finding ways to proceed, with broad outlines for final commitments, as explains `A layman's guide' on http://news.gov.hk.

Opposite poles

Tussle was rife in the matters of agreeing on formulas for cutting tariffs and subsidies, with the rich and poor countries at the opposite poles. "Market access is the key that will unlock the negotiations," said the US Trade Representative, Ms Susan Schwab, and the Agriculture Secretary, Mr Mike Johanns, as per a joint statement dated June 30 posted on www.usda.gov.

"The US stands ready to roll-up our sleeves and negotiate, but we need a balanced proposal on the table," they added.

But the developing countries weren't willing to offer further market access without any promises from the developed countries for tariff cuts and subsidy reduction. While high tariffs imposed by the rich countries make exports from the poor countries uneconomical, what hurts more are the subsidies that the developed countries pay to their farmers, a practice that leads to a bloated supply.

Wikipedia cites a New York Times report of December 2005, that corn subsidies had reached $20 billion per year in the US and as much as $85 billion per year in the European Union. Together, the amount is more than a seventh of the nominal GDP (gross domestic product) of Brazil, India, Mexico or Russia.

Internal bickering

Meanwhile, the rich nations are bickering among themselves. For instance, even as the EU agreed to drop farm export subsidies by 2013, "the US, where Congress is fiercely opposed to agriculture liberalisation, believes that Europe's move does not go far enough to merit a reciprocal reduction in its own subsidies," as www.eupolitix.com informs in a report dated June 29. The EU, for its part, wants focus on freer trade in services such as IT, finance and transport. It is argued that subsides by the rich nations to their farmers can "promote poverty in developing countries by driving agricultural prices below what third world farming industries can compete with," as http://en.wikipedia.org notes.

Though subsidies are a drain of taxpayers' money, subsidy cuts are a vexing problem even for the developed world. For, any move to do so can result in a backlash from the local farmers. Ditto with tariff cuts.

Scene for stalemate

Just the scene for a stalemate that WTO talks have been used to, what with aggressive postures by the developing countries in the face of stubbornness on the part of the developed countries.

For instance, a quote of the Zambian Trade Minister, Mr Dipak Patel, cited on www.swissinfo.org reads: "We are not here to bend backwards to accommodate more market access for industrialised nations. We are not going to allow ourselves to be blamed for any failure."

And our Commerce and Industry Minister, Mr Kamal Nath's statement too reflects the reaction of the developing countries to the shaky trade talks: "There is no need to pretend that this has not been a failure."