G. Srinivasan

The World Trade Organisation (WTO), in a limbo after the failure of the Cancun and Hong Kong Ministerial Meeting in 2003 and 2005, is now witnessing high decibel activity in a serious bid to seal the unfinished modalities for launching the Doha Development Round, aimed at liberalising global trade in agricultural, industrial and services domains.

The Doha Round, now in its seventh year, has not yet arrived at any semblance of convergence on the ‘modalities’ in both agriculture and non-agricultural market access (NAMA) or industrial products under which both the developed and the developing countries would proceed to translate their modalities into tariff cuts on thousands of industrial products, in the case of developing countries and on subsidies and support, in the case of developed countries.

In the last week of May, the WTO’s Negotiation Committee Chairs on Agriculture, NAMA and Services released their respective revised drafts, evoking mixed reactions from its wider membership, with developed and developing countries’ differences sharper than ever.

While countries such as India voiced disenchantment over the draft texts in no unmistakable terms, particularly those of agriculture and NAMA, the United States Trade Representative (USTR), Ms Susan Schwab, miffed at the demands by developing countries to make deep cuts to its trade-distorting farm subsidies, said it could do that only if advanced developing countries such as Brazil, India and China open their agricultural, manufacturing and services markets to more foreign trade.

Stating that “a successful breakthrough in the coming weeks is only going to be possible if we find a negotiating path that leads to real market access contributions by both developed and developing countries”, Ms. Schwab said that instead of furthering this fundamental goal, the new agricultural and industrial goods texts have shifted the Doha Round talks away from a focus on opening markets “to negotiating about expanded exceptions and exclusions”.

She also did not spare Brazil, China and India when she wryly quipped that “these countries mask their narrow interests behind claims of speaking for the rest of the developing world when, in fact, there are developing countries that are very pro-ambitious in this round and their voices are being drowned out. It is basically a case of elephants hiding behind the mice”.

Coming to the latest two texts, in agriculture, the negotiations aim to reform agricultural trade mainly in three areas (the three pillars): domestic support, market access and export subsidies and related issues (export competition).

In the revised text, the overall trade-distorting domestic support (OTDS) is put thus: the European Union (EU) to cut by 75 per cent or 85 per cent; US/Japan to cut by 66 or 73 per cent; the rest to cut by 50 or 60 per cent.

“Down payment” (immediate cut) is 33 per cent for the US, the EU and Japan, and 25 per cent for the rest. Cuts are to be effected over five years (developed countries) or eight years (developing countries).

Tariffs will be mainly cut according to a formula that prescribes steeper cuts on higher tariffs. This is now largely in single numbers instead of ranges.

For developed countries, the cuts would rise from 50 per cent for tariffs below 20 per cent, to 66-73 per cent for tariffs above 75 per cent, subject to a minimum average. Export subsidies are to be eliminated by end of 2013, while this is longer for developing countries; half of this by end of 2010.

For developing countries, the cuts in each tier would be two-thirds of the equivalent tier for developed countries, subject to a maximum average.

Some products would have smaller cuts via a spate of flexibilities aimed at addressing various concerns. These include sensitive products (available to all countries), the smaller cuts offset by tariff quotas allowing more access at lower tariffs; and special products (for developing countries for specific vulnerabilities).

Even as the latest draft on agriculture modalities was doing the rounds, evoking a medley of reactions from stakeholders among the WTO members, the United States Congress passed the Farm Bill on May 19, preceding the release of the draft text.

The US is currently in the process of approving a massive new farm subsidy bill and President Bush vetoed the bill on May 21. But both the Houses might override the veto and pass it as the Bill secured so much support in Congress that the legislative outfit has enough votes to override him.

The five-year $307-billion 2007 Farm Bill the Congress approved accords largesse to wealthy farmers through a convoluted and overlapping machinery of government-sponsored insurance, counter-cyclical assistance, disaster aid and legacy payments. Analysts said the Bill’s authors tied some future subsidy payments to today’s record commodity prices, thereby guaranteeing the well-off farmers a steady stream of income.

Even as the existing farm programmes of the US have come under fire, the latest US Farm Bill cynically responded by augmenting trade-distorting supports on 17 out of the 25 of the commodities that the US provides, thereby cocking a snook at the ongoing attempts by the Trade Negotiations Committee of the WTO to eliminate domestic support and export subsidies of the world’s biggest grain producer.

On the industrial tariff or NAMA text, India and other developing countries have stated that it ignores the core mandate of the Doha Round of less than full reciprocity in reduction of commitments between developed and developing countries.

It has also diluted the comparability in ambition between NAMA and agriculture. They said that equity and balance in this development-centric Round can only be achieved if developed countries agreed to take a tariff cut of 49 per cent to 51 per cent on their dutiable lines, with developing countries being allowed lesser cuts.

This is not only to safeguard their domestic industries from being marginalised by the deluge of imported goods, but also to ensure revenue to sustain ongoing development programmes and achieve inclusive growth for their people.

In sum, both the revised texts that form the crucial core of the launch of the Doha Round have left both the developed and the developing countries squirming at their many infirmities and inadequacies.

As the Round can be launched only as a single undertaking, progress on modalities covering services and rules are still to be resolved.

But the indefatigable Director-General of WTO, Mr Pascal Lamy, has confidently stated that a ministerial meeting can be convened towards the end of this month to get the members’ consensus for finalising all the modalities.

With the twin texts of agriculture and industrial tariffs generating enough resentment among the core group of WTO players, and with both the US and the EU not overly keen on cutting down the flab of farm subsidies in any meaningful manner, the developing countries are faced with the unenviable prospects of the Doha Development Round soon becoming denuded of development content.

Trade policy analysts across the world aver that as long as the world economy was growing and inflation was at a low level, the tendency to engage in trade negotiations to frame rules and provide market access was heightened.

But, today, not only inflation has emerged as a biggest challenge to many a country but the accompanying gloomy tidings of a possible downturn in economic activity in the global economy have persuaded even liberalisers to become inward-looking and protectionist, pooh-poohing the genuine efforts to ensure a rule-based liberal international trading milieu.

The whole game has become an exercise to wrest market access from one another or to get opt-outs from any onerous commitments and, in such an atmosphere, no worthwhile deal can be done, they warn.

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