TCS Daily

Time to Do the Deal

By Charles Finny - June 22, 2006 12:00 AM

For the WTO Doha Round, intransigence is common. Countless deadlines have been set and missed. But despite this, prospects for a good outcome have increased significantly in recent days. Not surprisingly, the reasons for this change lie in Washington and Brussels.

This is good news. Failure or delay would be potentially disastrous for the WTO, the international trading system, and the global economy. Since failing to meet its last deadline, the WTO process has been floundering. But Ministers have agreed to another meeting -- starting June 29th, and dates for circulating draft texts have already expired.

If these texts can be agreed to by Ministers, then there is still a chance of achieving an end to this negotiation this year. What would a deal cover, and why do things look different this time?

What would a deal cover?

The EU would have to give some ground on those areas it finds sensitive in order for a deal to proceed. This deal would involve:

  • an EU offer to agree to eliminating government support for agricultural exports.

  • some limited cuts in government programs for farmers from all WTO members, and

  • some improvements in market access for agricultural products.

While the cuts in domestic subsidies will be less than many would like to see, they would help to lock in the very positive direction of EU CAP reform to date, and will push the US to go in the right direction for the new Farm Bill (to be concluded in 2007), which will set the parameters for US farm subsidy for the next seven years. Unfortunately, a deal like this would fall short of the demands currently being made by the US and others.

To secure such a deal, there will also need to be some progress in areas where the EU seeks change, including trade in services and "industrial" (non-agricultural) products. These could be modest, as well. They could include

  • the liberalization of environmental goods and services.

  • the important introduction of new disciplines on fisheries subsidies.

Under this deal, the US and the supporters of agricultural trade liberalization would get less than they were hoping for on agriculture. The EU would get less than it was hoping for on services and "industrials". But at least everyone would get something. While the outcome would not be ideal, at least there would be an outcome, and at least it would be a positive one for the international trading system and the global economy.

What will make it happen?

Things have not looked promising for a long time. However, now the EU and the US are arguably in a better position than they have been for years.

While the EU has shown intransigence with respect to outcomes in services and industrials, it has begun signaling a willingness to agree to some kind of compromise in these areas.

In the US, things had not been looking good, for a number of reasons:

  • First, the delay in the confirmation hearing for Susan Schwab, President Bush's nominee as new USTR complicated the US trade agenda.

  • Second, USTR-elect Schwab and Senator Charles Grassley (Chair of the Senate Finance Committee) had talked about the need for a high quality agreement on market access for agriculture. While their goals are theoretically ideal, their designs had begun to sound unrealistic, given the context of current negotiations.

  • Third, there was worrying talk from former USTR (and now Director of the Office of Management and Budget) Bob Portman about seeking an extension of the current President's free trade negotiating authority -- the Trade Promotion Authority (TPA) (which expires on 1 July 2007). Would a delay in the negotiations achieve any change in position by the EU and G-20 countries? No. An extension of the TPA -- coupled with the US Administration's designs for liberalization in agriculture -- would create a recipe for delays that could be exploited by protectionists. Political will among other members for an improved deal is just not there. The only thing keeping the WTO negotiations focused on an outcome is the pending expiry in the US negotiating authority.

Luckily, the last few days have seen important shifts in Washington. Ms. Schwab is now confirmed in the USTR job, and she and her colleagues from USTR have been noticeably more active in trying to secure an outcome. The White House, and President Bush himself, have in recent days engaged on the WTO negotiations. The President has gone further, talking about the importance of an outcome and suggesting that the US might be willing to show some flexibility in its position.

A liberalizing outcome would be positive not only for the US and the EU, but for most WTO members. Mr. Bush's personal involvement in trying to secure an outcome sends a very powerful signal: If Europe and the rest of the world are genuine about wanting an outcome from these negotiations, now must be the time to secure it.

Charles Finny is CEO of the Wellington Regional Chamber of Commerce and formerly director of New Zealand's Ministry of Foreign Affairs and Trade China FTA Task Force.



Who's kidding whom ? ? ? ?
We need the same courage and insight that Chile showed when in unilaterally reduced tariffs to low level nnd enjoyed an economic boom. The US should immediately and unilaterally, without consultation, reduce its tariffs and other trade impediments to zero. We'd automatically become instantly richer. If foreign taxpayers are dumb enuf to subsidize their products and services and "dump" them in the US, it will only make us even wealthier. We should encourage them to do so.

re: Don's
Don is right, the US should just declare unilateral free trade. Then the rest of the world would have to defend their positions of preferring, what would they call it?...unfree trade, controlled trade, trade by the comitern, collectivist trade. Now the US is seen as only partially capitalits because it doesn't fully believe in free markets, thus they're seen as hypocritical, thus other countries feel more justified in styming trade and keeping their captive populations poorer.

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