‘Doha Round of talks on global trade is deadlocked, not dead’

This September, World Trade Organisation Chief Pascal Lamy is ready to make way for the new Director General after eight years at the helm of tottering trade talks. But, he is not quite willing to give up on the Doha Round. “The Round is deadlocked, not dead,” Lamy said in an interview to Business Line. The DG gave a take on his assessment of what ails the Round and the prospects at the Bali Ministerial Excerpts:

Q. With countries still taking extreme positions on the small package of issues picked up for agreement at Bali in December, what are the chances of its success?

A. We are running out of time and need to move fast. I think the big issue that has moved, and is of most economic significance, is trade facilitation. You know the number for moving trade through borders is about 10 per cent of trade value. If you shrink that by half, the value of 5 per cent of world trade is available. More importantly, it is available to small businesses for whom the 10 per cent entry ticket is often the border they cannot cross. I think it is doable. It is very complex, as harmonising and streamlining procedures are complicated. But, it is an administrative issue. You won’t have taxi drivers or farmers or workers on the street if the procedure was simpler.

Q. But, developing countries like India say there needs to be balance within the agreement and in terms of better customs co-operation and have spelt out steps that are being ignored by developed countries?

Ans. It (agreement) is doable…If people want to conclude it, they can do it. The issue is how you scale up development country commitments as a function of needs assessment and capacity-building, because a number of these countries need support to modernise their customs system. On the table, there is some kind of a monitoring mechanism, which includes needs assessment, capacity building and capacity to scale up operations. The fact that there is recognition, that there are different capacities for entering into this commitment, just organises this process in a more pragmatic way.

Q. What about the G-33, including India’s proposal of not counting Government procurement from poor farmers at support prices as a trade distorting subsidy?

A: The proposal came quite late as compared to the rest and so far hasn’t converged with both sides. The proponents of the proposal say they need flexibilities to purchase food at higher than market prices and cannot do that with the existing disciplines. So, the disciplines need to be revised. The other side says this round is about improving agricultural trade through more market access. This is asking for one step backward, which is not acceptable.

The problem lies on the purchasing side. When you decide to buy at higher than market prices, then the difference between market prices and the price at which you buy is price support. And is there a fix for this. Well, it is not for me to say. The chair of the negotiating group has to manage this process. But, so far this hasn’t converged.

Q. Does it worry you that the two issues of trade facilitation and price support for poor farmers are being linked?

A. If India says it wants a mini single undertaking as an early harvest at Bali, what can we say? Every nation is sovereign in this organisation. They can decide the trade-offs and their offensive and defensive, and they can decide to present their case. It’s a game of negotiations. I have been a negotiator. I have been trying to explain to my partner that something was formidably important for me while I knew it wasn’t. The only question that they (the membership) need to bear in their mind is whether they collectively will better off or worse if there is no deal in Bali.

Q. There are smaller economies which feel that their trade deficit might worsen if trade facilitation happens?

A. I heard this view, which is mathematically impossible. If all exports are facilitated and all imports are facilitated then how can some benefit more?

Q. But there is a line of argument that most of the developed countries have good infrastructure in place, so there is nothing in it for developing countries …

A. If that were true, section one of the trade facilitation proposal would be cooked already. Section one is there because of differences between developed countries. They will have to change the way they operate, like pre-shipment inspection, evaluation fees, advance ruling and single window.

India is probably the best placed country to realise that how mastering IT has the capacity to improve speed, safety and customs perceptions.

Q. After speaking to several officials of member countries in Geneva, one gets an impression that nobody is willing to move?

A. They all have negotiating positions. They are all fighting their corners. My diagnosis at this stage is that trade facilitation is doable. LDC development is doable. I am less sure about a compromise on the G33 proposal, because in my view, positions are further away on this than the rest. There have been suggestions by some at some stage and it is all part of the discussion that ensuring that stock disposal doesn’t lead to the international market might need a quid pro quo. This would imply not only to make flexible rules of the amber box (subsidies that are prohibited) in this specific case but also strengthen rule in green box (subsidies that are allowed) on what you do with this stuff which at the moment is reasonably flexible. Given the number of parameters to play with, it is formidably complex. But it also gives us a chance. If there is enough goodwill, you may by fixing a few things and have a bit of space that you did not have before.

Q. If an agreement on a small package happens in Bali, what happens to the rest of the Round?

A. That’s the principle of early harvest. It doesn’t kill the Round.

Q. But what about implementation of what is agreed upon? Does it wait till the entire Round is finished?

A. That’s up to the members to decide…. My guess is that if you have an agreement on something which everybody can live with, which everybody believes is good for everybody, they better do it.

Q. One gets a feeling that the Doha Round was already under a dark shadow when it was launched because it was too ambitious….

A. With retrospect, we can say many things. We use the single undertaking (that nothing gets settled till everything is settled), a sort of trick in order to balance trade offs, which is complex, the virtue of which is in theory that you compensate your offensive with defensive. The fact is that it has not worked well with 20 topics and with three times more members in the negotiations. The Uruguay Round technology probably never tested this size.

Q. What about the development agenda of the Round? Were the commitments taken on by developed countries too high?

A. The development agenda was inescapable. The rules of trade were framed at the time when the balance of forces between the developed and developing countries were different. And there is always been a recognition that these need to be adjusted. But, given the fact that developing countries are developing, this rebalancing must have a viable geometry so that you really fix the problems of those who are still in development and capacity needs. I totally recognise that this necessitates viable geometry, but what about China, India, Mexico, Indonesia and Brazil which, if you look at the numbers, had formidably benefited from expansion of trade in this period.

Q. Despite the jump in trade in large developing countries, isn’t their per capita GNP several times lower than developed countries?

A. The argument is not that there should not be a viable geometry. The argument is that the viable geometry should be organised in such a way that it promotes convergence.

Q. Will the fate of the Doha Round have a bearing on what already exists in terms of multilateral trade rules that were agreed upon in the previous Rounds?

A. Long term probably. It is a fact that trade is a living animal. Patterns of trade change. Obstacles to trade change. And if you are in the rules business, you better adjust your rule book in order to remain a public good that offers levelling the playing field, stability and predictability. We need to change. Otherwise who will adjust the rule book? The dispute settlement system would be mauled with interpretation because the rules were written with one world in mind and they are interpreting it in another world. If WTO members cannot agree to revamp the rule book regularly, and probably in a way which is more flexible than the big spaghetti bowl of single undertaking, the public good is damaged.

Q. Are you suggesting that they should choose topics that are easily doable and do it in stages?

A. Overall, they should listen more to reality, to what really matters to people, to what really makes opening trade work. But this is politics. This is not universal rationality.

COMMENT NOW