The Hindu Business Line : Little progress on Doha Round

The situation today is not favourable for a resolution of the problems facing the Doha Round but one coloured deeply by attempts to forge bilateral trade ties.

The news report stating that New Delhi and Washington are getting together next month (November) to try to reach an agreement on the farm subsidies issue and industrial tariffs is an indication that efforts are still on to get the stalled Doha Round negotiations off the ground. This is no doubt a positive signal given the prevailing widespread pessimism about the future of the Round which, most observers now feel, will probably not see the light of day, if ever, before 2008.

However, it is a totally different matter whether the India-US talks will be able to make any substantive headway on the ground, which is important because it is only in the event of such progress that the future of the ongoing negotiations will brighten appreciably. To those who have been keeping track of the talks, the prospects of success are decidedly weak.

In fact, though the two countries have agreed to sit across the table once again and try to resolve differences on farm subsidies and industrial tariffs, the initial statements made by those who will be involved in the negotiations have not been encouraging.

Basic differences

Thus, the Commerce Minister, Mr Kamal Nath, has said, rather bluntly, that the "basic difference" between the US and India was on agriculture, and that, more importantly, Washington "want(s) agriculture market access for their subsidized products". As the Minister said, such a stand "does not work".

Even so, one wonders whether a possible scenario of give-and-take has already been worked out between the two sides which has led to the holding of the November meeting, a scenario which is justifiably being kept under wraps to protect its chances of success. If this is, in fact, the case, the next few months could be exciting because there would then be a clear chance for the Doha Round to be finalised next year, specifically by the middle of 2007, which would enable the US President, Mr George Bush, to use his fast-track negotiating authority to get the deal off the ground.

In the absence of a deal being clinched by July 2007, when the broad trade authority given to the US President under the Trade Promotion Act of 2002 expires, it is practically certain that nothing will happen on the Doha Round front till after the US Presidential elections of November 2008 which, among other things, could deal a lethal blow to the future effectiveness of the World Trade Organisation itself.

Positive movement

Usually, if the prospects are favourable, one gets to hear murmurs suggesting positive movement on certain key issues emanating from the important players.

In this case, as everyone knows, while the developing economies have been wanting deeper cuts in tariffs on farm imports levied by the rich countries coupled with large cuts in farm subsidies (which make farm exports from the rich artificially cheaper in the world market), the developed countries have been demanding that the poor open up their markets even more to their industrial goods and services exports.

Till date, there have been no reports indicating that something good is cooking on these negotiating fronts, thus suggesting that the talks are still deadlocked on issues where progress is absolutely essential for a successful Doha Round.

It is of some interest that instead of there being concerted movement on these issues, the centrestage today has come to be occupied by initiatives on bilateral connections — indeed to such an extent that the WTO Director-General, Mr Pascal Lamy, has had to issue the warning that bilateral and regional trading arrangements could upset the WTO applecart, thereby hurting the prospects of further global trade liberalisation.

Bilateral arrangements

The chief protagonist of this trend has been the EU Trade Commissioner, Mr Peter Mandelson, who has gone a step further in trying to rationalise the policy of pushing for bilateral arrangements, the burden of his argument being that such arrangements would promote liberalised international trade in an equal measure as would the Doha Round.

Mr Mandelson has argued that the choice is not between bilateral arrangements and the multilateral system but between "ambitious bilateral agreements that drive forward global liberalization and bilateral deals that avoid sensitive issues or `open some borders only to close others'."

On the subject of how ambitious bilateral agreements can promote the prospects of global liberalisation, he has argued that "carefully constructed... bilateral agreements with carefully chosen partners can create new trade, improve the competitiveness of EU companies in key enlarging markets and prepare the ground for future liberalization by going further in areas such as investment, competition and public procurement where WTO rules do not yet fully apply."

There is no mistaking the fact that what Mr Mandelson would like to achieve through the bilateral route is large markets for EU products which would not be as easy to attain if the WTO route was adopted. In other words, trade barriers must be dismantled not equitably but equally by both partners in a bilateral trading arrangement, even if the partner of the EU happens to be a developing country.

In fact, the EU Trade Commissioner is reported to have said: "It is true that too many bilateral agreements skip the sensitive issues and therefore don't create new trade. But this is a political choice. We've argued strongly at the WTO that rules on FTAs (Free Trade Agreements) should require real depth, liberalising substantially all trade. That is why the chief criteria for our new bilaterals is economic. We've made it clear to our partners that the EU is only interested in deep Free Trade Agreements across the full range of sectors. Not just goods, but services, non-tariff barriers and rules on issues such as investment, competition and public procurement."

Against the tide

So, the picture we have before us today is not one which is favourable to a resolution of the problems facing the Doha Round negotiations but one which is being coloured deeply by attempts to forge bilateral trade ties, which would enable certain developed economies to exploit the markets of the poor countries without being obliged to make sacrifices based on the principle of equity, which is the bedrock of the Doha `development agenda'.

In such a situation, it would be foolish to expect any progress at the forthcoming India-US talks on WTO issues, an expectation that would be akin to swimming against the current tide.

As Mr Lamy has rightly warned, "all efforts should be on a multilateral deal," and that the growing number of bilateral and regional talks was increasing the risk of "deflecting attention from a global deal".

He has added that "most [WTO members] cannot afford to ride both horses" and that there was "a resource diversion problem," focusing on the fact that the problems of the world's poorest countries needed to be tackled at the WTO level because most of these economies had more problems with subsidies and anti-dumping than with tariffs, the former being `systemic issues'.

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