TCS Daily

WTO: Will the Talks Collapse?

By Charles Finny - May 10, 2006 12:00 AM

I was in Washington late last month talking to Government officials, think tanks, lobbyists, and some distinguished former influential trade policy officials about the prospects for the World Trade Organization's (WTO) Doha Round. Like me, most had already concluded that it was impossible for the WTO to meet the end of April deadline that had been set as the next milestone for the negotiations at the last meeting in Hong Kong.

So the formal acceptance by the WTO that the deadline would be missed was not a shock. What shocked me was a view that the WTO Round was either "dead," or that it had less than a "50% chance of success." I heard these assessments many times. I was also surprised at the extent to which the same people were seeing bilateral or regional free trade agreement (FTA) negotiations as a viable alternative to the WTO negotiations.

Long Live the Round

I frankly disagree with these views. The missing of a deadline does not mean that the Round is dead. Likewise, there is a long way to go this year before anyone should be taking odds that the Round will fail. WTO rounds, like the rounds of international trade negotiations that were the precursors to the WTO, frequently miss deadlines; but they are yet to fail. I think that this Round is likely to continue this record.

We have to acknowledge that the Doha Round will not deliver a result anything near what was hoped for when the negotiations began. But I remain confident that with more hard work, the WTO Round will deliver a useful outcome, particularly in the areas of subsidies, non-agricultural goods and in services.

As for the argument that bilateral and regional free trade agreements can provide an alternative to the WTO, this, too, is unconvincing. I support the negotiation of bilateral and regional free trade agreements (FTAs), but I think it essential that these not be seen as an "alternative" to the WTO process. These negotiations can be a useful complement, but there are some important things they can't do. They can't reduce or eliminate the impact of export subsidies or bring about reductions in domestic subsidy programs.

What to Focus on Now

Rather than give up, governments and business groups alike should be redoubling efforts to make sure that the Round doesn't fail. The following tacks are crucial:

  • Reduce export subsidies in agriculture: We have on the table after the December meeting of WTO Ministers in Hong Kong an offer by the EU to eliminate export subsidies on agricultural products (they are already prohibited in other products, under existing WTO rules). At the very least, the WTO should confirm this offer. Export subsides give the beneficiaries advantages over their unsubsidized competitors. They encourage over-production and act to dampen international prices. The removal of export subsidies will therefore be a very significant step forward for the WTO Round.

  • Liberalize trade in industrial goods: The EU offer in Hong Kong was conditional on the WTO making progress in other areas of the negotiation -- particularly in liberalizing markets for trade in industrial (non-agricultural) goods. Yet key developing economies have achieved no progress in this area, which is a large part of the reason the talks have failed to meet the April 30 deadline. Progress can be achieved in liberalizing trade in industrial goods if those developing economies prepared to liberalize get together and strike a deal. If some don't want to liberalize, leave them out of the room; just so long as those inside the room represent the bulk of world trade in the products in question.

  • Drop the blame game: The EU blames the US or Brazil for not doing enough. The US, Australia and New Zealand tend to blame the EU. This is achieving very little and risks a result that is counterproductive. Negotiators should remind themselves that we all stand to benefit from an end to agricultural export subsidies. We also stand to benefit from further liberalization of non-agricultural product market access and services barriers. Rather than criticizing the EU for insisting on progress in these important areas, other economies should be joining the EU in such calls.

If we can achieve even more this would be great, but if we eliminate export subsidies and achieve some new liberalization on manufactures, fish and forest products, plus liberalization in areas such as environmental services, this would be an acceptable result. It would have significant positive benefits for the global economy and provide a firmer foundation on which bilateral and regional negotiations can be built. Such an outcome is eminently achievable before the end of this year.

Time to Redouble Our Efforts

Delegations should not move resources away from the WTO to the bilateral or regional effort. Unless you are the United States or negotiating with the United States, the bilateral negotiations can wait. The WTO can't. The US President's Trade Promotion Authority (TPA) will expire in 2007 and it's uncertain that the US Congress will renew it. Without TPA, concluding the round will be far more difficult. So negotiations must be concluded largely by the end of this year.

As an incentive, Governments might insist that if sufficient progress is not achieved by the end of June, the usual WTO recess over the European summer will be cancelled this year. Keep the negotiators in Geneva. They may not like it much, but the end result will be worth the inconvenience.

Charles Finny is CEO, Wellington Regional Chamber of Commerce.


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