TCS Daily

The Politics of Managing Failure

By Alan Oxley - July 6, 2006 12:00 AM

Pascal Lamy, Director General of the WTO, gathered 60 trade ministers in Geneva last week to secure a "breakthrough" in the stalled WTO Doha Round trade negotiations. They failed, yet again. This is the fourth time in 2 years. Peter Mandelson, the EU Trade Commissioner, Susan Schwab, the US Special Trade Representative, and Lamy himself all declared they were willing to try until the end of July to strike a deal.

Why do they continue in this way when it is clear there is no basis for a deal? All are hunting for a solution in which none will be declared responsible for the failure. They are, after all, politicians of sorts. "Sheet the blame elsewhere for failure" is a cardinal rule in politics.

Who is responsible for this failure? The US and Australia's farm producers, long locked out of European and Latin American markets, blame the EU. Their case is that the EU, the greatest subsidizer of farmers (double by dollar the US), has made insignificant offers to cut subsidies and will not reduce trade barriers to farm imports.

In the last month, Mandelson has persuaded others in Geneva, like Brazil, that it can make some further cuts in trade barriers, but only if the US offers to cut its subsidies more than it has offered. Lamy carried that message to Congress two weeks ago and discovered that no one believed it.

No Administration could propose to Congress that support for farmers be reduced while the EU maintains it high trade barriers. Over the last five year, US beef and oilseed producers have found the EU erecting barrier after barrier to US imports.

US farm groups understand that Mandelson cannot deliver such promises from the EU. France has bunkered down for a national election, as their Trade Minster, Christine Lagarde, recently admitted. And Angela Merkel, Germany's leader, who is balancing a government based on an uneasy a coalition of socialist and conservative parties, cannot support any radical change in support for German farmers.

That is not the end of finger-pointing about who is at fault. Kamal Nath, India's Trade Minister, has pompously announced that the failure lies at the feet of both the EU and the US. After he did so, he was congratulated by the Indian Chamber of Commerce for not selling out Indian interests (Indian trade barriers are on average nearly ten times greater than those in the industrialized world -- 30 percent compared to 3 percent.)

Brazil has been similarly pious, complaining that neither the EU nor the US want to face competition form Brazilian farm exporters. They're right. But Brazil has been resistant to cutting trade barriers. It is carrying reflecting the position of uncompetitive Brazilian manufacturers who are also covered by high tariffs. An election is also approaching in Brazil.

Brazil's farmers want a deal, but are closed out of Brazil's trade policy-making system. Brazil joined India last month in lodging an eleventh hour bid to amend the WTO Intellectual Property Agreement (TRIPs) in a way which would gut patent processes, in particular in a way which would inhibit research and development in agriculture. This would be as adverse for competitive Brazilian farm producers as anyone else.

Developing countries from Africa, the Caribbean and much of Latin America have also jumped onto the anti-Atlantic protectionist bandwagon, declaring they should not have to cut any trade barriers, and arguing the WTO's rules should be amended to make this a lasting right.

Get the picture? No one wants to cut trade barriers.

For the record, we should report that Oxfam, an opponent of free trade, also congratulated Nath on his 'principled stand'.

This stalemate has been the reality for two years. Yet somehow trade officials have believed that if Trade Ministers are assembled for endless rounds of talks, as Lamy staged last week, that somehow this will change the situation.

Anyone in business knows there is no point negotiating with someone who doesn't want to deal. Why has Lamy persisted, instead of telling them not to come back to Geneva unless they have a negotiating brief?

Pascal Lamy is a product of European politics. There they use the technique of endless meetings until something is thrashed out. This is a device for getting by when the edifice of an apparent agreement allows politicians to declare victory and avoid the opprobrium of responsibility for failure. Even in the EU, this technique has reached its limit as the failure of voters in the Netherlands and France to support the new EU constitution earlier this year showed.

There is only one practical solution available in the WTO right now. Extend the negotiations another three years until new Administrations are in place in Europe and Washington. If by that time there is no taste for serious reductions in trade barriers, then it will be time to decide what to do about the Doha Round.

If that sounds radical, it is not. WTO insiders increasingly talk privately about the need for major review of WTO processes. The system is supposed to serve the interests of those who want to reform trade. Right now, those who don't want to do so are gumming up the system.

Alan Oxley is a former Chairman of the GATT, the predecessor of the WTO.


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