G20 leaders pledged to finish the WTO’s Doha talks this year, but this goal is difficult to meet because of the large gaps in positions between WTO members.

Few really wanted it started, and now no one knows whether to end it or how to end it.  In between there’s been almost a decade of a roller-coaster of the Doha negotiations at the World Trade Organization.

Many political leaders, including at the G20 Summit last year,  proclaimed that the “Doha Round” must really be completed this year.  Otherwise it may have to be abandoned altogether, some have predicted.

That’s because elections in the US and other countries will preoccupy political leaders from 2012 and it is feared they will then not have time or attention to focus on trade policy.  By the time the policy makers can re-focus on Doha, the underlying conditions for a deal may be gone. 

Thus the “crunch time” is now.  On 21 April a set of new documents on ten or so negotiating topics will be issued by the Chairs of the various groups (agriculture, non-agricultural market access, services, rules, etc). 

Some of the documents may contain new texts of what the Chairs believe may enjoy some degree of agreement among the WTO member countries.  Others may be the Chair’s report of what is seen to be the state of play, i.e. areas of agreement and disagreement.

What happens after these texts are issued is a major question.  A meeting of the WTO’s Trade Negotiations Committee on 29 April will hear the views of the members on how to proceed.

It may be a significant meeting to discuss the options on the way ahead.  Whether to continue to try to reach a deal this year; whether to honestly declare that this deadline is now impossible, but that the talks should go on in case a breakthrough may occur; whether to informally discontinue meetings in some groups but to continue in other groups; whether to declare that the Doha talks are dead.

It is unlikely that the death of the Doha talks will be proclaimed, as this would be a drastic move that no one may be brave enough to propose.

However the intensive talks at bilateral level and also among 11 key members (known as the G11) since the start of this year have not yielded any significant progress.

Thus the hopes of new breakthrough texts and a Mini-Ministerial meeting in July to seal a framework agreement on modalities are now virtually gone. 

There are bound to be differing interpretations of why the impasse has persisted.  It is hoped that a “blame game” will not take place, if the impasse is confirmed at the end of April.

The Doha talks were launched at the end of 2001, when it was dubbed the Doha Development Agenda.  The Ministerial Declaration proclaimed that the interests of developing countries would be at the centre of the negotiations.

However, the developing countries have been frustrated that there is little development content left in the proposals on the table.  Their priorities had been the reform of WTO rules to make them more balanced, since many existing rules are biased against their interests.  But the agenda to correct the problems of implementation and to strengthen provisions allowing special treatment for developing countries have fallen off the table.

Further, in the core negotiating issues of agriculture and industrial tariffs or NAMA (non-agricultural market access), the special treatment for developing countries has been whittled away.  In fact it is the developed countries that are getting special treatment. 

In agriculture, the key countries (including US and EU) do not have to cut their actual trade-distorting subsidies; and they have also shifted a lot of subsidies to the Green Box subsidies, which do not have to be reduced.  They are also getting many flexibilities for their sensitive farm products, sheltering them from significant tariff cuts.

In NAMA, many major developing countries have to cut their industrial tariffs by around 60%, while developed countries’ cuts are only around 25%.  On average, affected developing countries will have average applied tariffs of 11-12 per cent after the cuts, which will be damaging to their domestic industries.

The dominant proposals on the table are thus devoid of development content.  On the contrary, despite these gross imbalances, the developed countries want even more from the developing countries.  The US in particular wants the large developing countries (China, India, Brazil etc) to open up their markets even more in NAMA, agriculture and services.  

At the recent WTO meetings, Brazil, South Africa and India have made strong statements on why it is unfair to expect them to undertake extreme commitments that would ruin their domestic economy, especially when there are no extra concessions being offered by the developed countries that are making these new demands.

Since January, the talks in Geneva have been within the G11 -- United States, European Union, Japan, Canada, Australia, China, India, Brazil, Argentina, South Africa and Mauritius.

In fact, much of the most recent negotiations took place not among the 11, but in bilateral talks between the United States on one hand, and China, India and Brazil.

Many analysts believe the major block to Doha’s completion is the United States.  The President and his trade team have limited real negotiating authority because Congress has to approve any trade deal, and the Congress is not in the mood to cooperate with the Obama administration.

In order to avoid a fight with Congress even on a draft WTO deal, the US officials have to show that they haven’t made too many concessions, especially since there is  an economic slowdown and high unemployment.

They also have to show that US companies and farms are going to get significant new business through increased exports.  Since there are limited gains from other rich countries, the US is insisting on the bigger developing countries to open their markets in both goods and services.

But the developing countries have their own story.  The draft deal (put forward in texts in December 2008) do not require developed countries to make any significant concessions.

In particular, they will be able to maintain their high agricultural subsidies because of the peculiar WTO system requiring some subsidies (known as the red box) to be reduced while allowing others (green) to continue without limits.

The US and EU have shifted boxes from red to green, while maintaining or even increasing total subsidies.  The OECD countries’ total support to agriculture in 2009 was US$384 billion in 2009 compared to US$326 billion in 2007.

Real cuts in agricultural subsidies in rich countries were supposed to be the priority aim of the Doha talks, when they started in 2001.  It’s quite clear that is not going to happen, given their entrenched farm interests.

The rich countries are also unwilling or unable to open up in labour services, to allow more skilled personnel from developing countries to enter and work.  This was one of the key demands of developing countries, but has become almost a hopeless cause.

Meanwhile, the 2008 drafts require developing countries to drastically cut their industrial tariffs on industrial goods, in some countries by an average of around 60 per cent. They also have to cut their agricultural tariffs by up to 36%.

Least developed countries are exempted, but most of them are asked to cut 80% of all their tariffs in free trade agreements outside the WTO.

These tariff cuts mean cheaper imports, damaging the markets and even survival of local firms and farms of developing countries.

Thus the developing countries will potentially suffer losses in production and jobs, while gaining little in new exports to the rich countries.

But that’s only part of the story. The US is demanding that the major developing countries do even more, by cutting tariffs to zero in three large industrial sectors (chemicals, industrial machinery and electrical goods). And that they also open up their service sectors even more than already offered to foreign ownership and competition.

This is where Brazil, China and India have objected.  The December 2008 texts are already imbalanced, but these new demands (which not only the US but also EU, Japan and others are making) are really too extreme.  Especially since the rich countries are not offering anything extra either.

The impasse arising from the different positions are reflected in the speeches made at the WTO’s Trade Negotiations Committee from February to March, especially in the statements of Brazil, South Africa, China and India and the United States.  Extracts of some of these statements are published in this issue of South Bulletin. (1)

They show how far apart the countries are in the negotiations, and thus how unlikely a Doha deal can be finalised this year.

There were suggestions that the Chairs of the negotiating groups prepare new texts that give their own views on new compromise solutions.  However several key countries including India, Brazil, South Africa as well as the United States have cautioned against this move.  For them, an attempt to propose a compromise when none is possible at the moment would be counter-productive.  

It is thus likely that some Chairs will only produce reports of the state of play rather than new texts.

In the next few weeks, the WTO will come closer to a decision on what to do about the Doha talks. Some officials and commentators have voiced the view that a suspension or collapse of the Doha talks will doom the WTO and the multilateral trading system. But this is not true. The WTO has established rules, a dispute system and a trade review mechanism that will all be maintained, irrespective of whether the Doha talks conclude or not. In fact it was the understanding that there would be no more Rounds after the Uruguay Round. Thus, any projection of views that the WTO system would be threatened by the failure to conclude  the Doha talks is inappropriate.

Source:  South Bulletin Issue 54 (15 April 2011)

(1) See http://www.southcentre.org/index.php?option=com_content&view=article&id=...