Masthead graphic based on a painting by Gudrun Thriemer.

Monday, July 10, 2006

Doha failing: Does it matter?

Today we pause our discussion of peacekeeping to consider for a moment the failure of negotiations last weekend at the WTO mini-ministerial meetings in Geneva.

Not only did the meeting of 60 Trade Ministers from WTO member countries fail to agree on the outlines of a deal. The conference collapsed two days ahead of its scheduled end, after Indian Commerce Minister Kamal Nath walked out in protest.
On Sunday, Pascal Lamy, director general of the WTO told delegates quote "I will not beat about the bush. We are now in a crisis."

However, Biswajit Dahr, head of the Center for WTO Studies at the Indian Institute of Foreign Trade says quote "It is ridiculous to assume that the Doha round can be concluded so easily and within just a few years."

The last two rounds of negotiations, the Tokyo round that began in 1973 and the Uruguay round that began in 1986, carried on for six years and seven years respectively, when developing countries were not involved.

Called the "development round," The Doha round of trade negotiations started in 2001. That was after the so-called Battle of Seattle, water cannons and all. The Doha round was based on the principle that developed countries should show the way in market access and allow a measure of protectionism to the rest so that the latter can trade their way out of poverty.

For the first time, American and European leaders vowed to focus their global trade talks on the needs of developing nations and to address the biggest trade grievance of those nations: some $300 billion worth of import restrictions and government subsidies that protect farmers in rich countries. (Andrews and Kanter Jul 5 06)

At the Cancun ministerial in 2003, the EU made an effort to impose a set of non-trade issues such as competition policy, investment and government procurement on the developing world, which would have taken WTO away from its Doha path. Instead, Cancun collapsed in failure. (Times of India Logjam Jul 5 06)

So the WTO has been through many crises in its 10-year history. Arguably it has emerged stronger as a result.

The Doha round has been hailed as a "once in a generation" chance for global growth and to reduce poverty. (Paddington Key Jul 7 06)

Yet last weekend in Geneva, one after another, Latin Americans, Africans and Asians pointed out that the talks had been proclaimed a "development round," with the interests of nations like theirs supposedly paramount. They asserted that the biggest concessions must come from rich countries and that they had no intention of exposing vulnerable groups, such as subsistence farmers, to foreign competition. Accordingly, they said, they must retain extensive rights to exempt "special" and "sensitive" products from tariff cuts. (Blustein Jul 4 06)

Kamal Nath, India's commerce and industry minister, voiced incredulity that he was being asked for bigger percentage cuts in his country's tariffs than rich countries were willing to make in their own. "If they will cut 70 [percent], I will cut 60; if they cut 60, I cut 50," he said. "But they say, 'We'll cut 20, and you cut 70' -- well, that's not what this round is about." (Blustein Jul 4 06)

There is no mystery about what has to happen. The United States must agree deeper cuts in its farm subsidy program, while the EU needs to lower tariff barriers to convince US farmers they can export more to Europe when their subsidies are pulled.

Completing the so-called 'triangle' from which a deal will be created, developing countries like Brazil and India are expected to open up their markets to more foreign cars, electronics and services like banking.

Well, the deal is that there is no deal. Brendan Vickers, senior researcher at the Institute for Global Dialogue, writes in the South African publication Business Day quote, "No deal is better than a bad one."

Vickers goes on to point out that "Even before last December’s Hong Kong ministerial, the World Bank massaged its estimates of global gains from this round, down from a high of $832bn--that's globally--to $287bn, and finally to a modest $96bn. Vickers claims that realistically developing countries can expect an uneven distribution of $16bn in gains from the Doha round.

He then cites recent studies — by the World Bank, the Carnegie Endowment, the European Commission, and the Food and Agriculture Organisation — which suggest that the majority of Africa’s poorest nations stand to lose substantially from the liberalisation of both agricultural and industrial goods.

Writing from Kampala, Uganda, Sssombwe Ronald reminds African negotiators of two issues:

"First, the EU and the US are focused towards achieving control over the world's resources, oil and gas, energy, money and all important public services.

"Second, these rich nations are using the WTO to achieve legitimacy to control the world's poor countries.

"The methods used to achieve their goals are that the rich and industrialised countries continue to maintain their trade advantage and protectionism but pressurise Africa to further privatize and liberalise their industrial and service sectors" endquote (The Monitor Hostile Jul 5 06).

Another view comes from Pakistan. Speaking to a seminar on "Agriculture negotiations: Challenges and opportunities for Pakistan," last week the Federal Minister for Food, Agriculture and Livestock, Sikandar Hayat Khan Bosan told his audience that "The reduction in farm subsidies by the developed countries is expected to benefit Pakistani farmers through higher and more stable global commodity prices....The increase in global prices of agriculture commodities would help reduce poverty in rural areas. He observed that Pakistan realised that as part of the WTO negotiations, market access must also be improved in the developing countries to accelerate the growing South-South trade."

In a special to the Dubai publication Gulf News, Mike Moore, a former prime minister of New Zealand and a former director-general of the World Trade Organisation, notes that "The 'disputes system' alone, uniquely provided by the WTO, is reason enough to justify the WTO's existence..." (Moore Standoff Jul 6 07)

Damning them with faint praise, Moore says there are alternatives to a WTO deal.

One he calls "an inferior, potentially dangerous route" is that of regional and bilateral agreements. "That road," Moore says, "is well-travelled with dozens of deals in negotiation at the moment. None have a legal disputes resolution system, most avoid tough issues such as agriculture, most are not interested in poor customers such as Africa, most have conflicting rules of origin, many don't create new jobs."

An NGO representing Chicken Farmers of Ontario notes that "the recently concluded negotiations failed to address the issue of 'sensitive products' which is designed to allow countries to designate specific products to be treated outside the general tariff reduction formula. It is critical to Canada's dairy, poultry and egg sectors that they be included in the sensitive product category and that the emerging definition of "sensitive products" allow for no cuts in over quota tariffs and no increase in market access. Any changes would significantly undermine Canada's dairy, poultry and egg sectors while not providing any additional meaningful increases in opportunities for exporting sectors. (CNW Jul 5 06)

The Canadian Restaurant and Foodservices Association (CRFA) disagrees. According to Ron Reaman, CRFA's Vice President of Food Supply, "Pursuing greater market access for Canadian exports while seeking to protect the status quo for supply managed products compromises Canada's credibility."

Unless an agreement is reached this summer, the whole process will probably be put on hold until after US presidential elections in 2008. Bush's authority to strike fast track trade deals expires next year. So the effort to make a deal is increasingly desperate.

As Bhaswajit Dahl suggests, it may be time to scale down expectations for the WTO.

Til now, globalization has been the initiative of business and economic elites. Steven Pearlstein at the Washington Post argues that it is now entering what he calls a "more democratic phase" (Brakes Jul 5 06).

In places where globalization has generated little progress -- like Russia and most of Africa and Latin America -- it may be that some countries have yet to develop the economic, political and social institutions required to benefit from a globalized market economy. Or they may pursue a multilateralism based on values other than materialistic consumerism.

Mexico, for instance, "has dutifully followed the globalization script written by the US Treasury, the World Bank and the International Monetary Fund, adopting a free trade pact, privatizing and deregulating much of its economy, and making itself attractive, above all, to foreign investors.

It has, for its trouble, suffered one financial crisis, seen its small farmers brought to the brink of ruin, and failed to develop an efficient and entrepreneurial service sector. The one sector that produced the most gains, manufacturing for multinational corporations, is now threatened by even cheaper labor in China.

How the Zapatista movement, bolstered by growing aboriginal influence in the Andean region and a resurgent Nonaligned Movement, will play out remains to be seen.

Even in the countries like the US, China and South Korea, that have benefitted the most from globalization, dividends must be spread more broadly and fairly. And imbalances like asset bubbles and unsustainable trade imbalances must be resolved.

As Pearlstein puts it quote "You can't go around the world preaching about democracy and free markets if you're not willing to accept the results of elections and acknowledge the shifting sentiments in the marketplace of ideas."

France, where farmers are fighting fiercely for their quotas, is gearing up for elections, while President Bush, mired in low approval ratings, faces heavy resistance from Republican lawmakers in Congress who are up for re-election this fall. (Andrews and Kanter)

Ultimately, it seems, the pragmatics of domestic politics, and not laissez faire market ideology, will prevail in Washington and Paris. Why should it be otherwise in La Paz and Caracas or Baghdad and Kabul for that matter?
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