Will there ever be a breakthrough?

Apr 1st 2003
From The Economist Global Agenda


The Doha trade negotiations could founder if there is no progress on
agriculture soon. A vital deadline has been missed with no sign of a
breakthrough


“A SERIOUS setback”. “Disappointed but not surprised”. Just some of the
reactions from key participants in the Doha round of international trade
talks after a key deadline on agricultural negotiations was missed on March
31st. Negotiators at the World Trade Organisation (WTO) in Geneva are now so
entrenched that they seem incapable of shifting their positions. The
participants failed to reach agreement on a framework for the detailed talks
on agriculture which will, ultimately, determine the success or failure of
the Doha round. Stuart Harbinson, chairman of the agriculture talks, has
said that the necessary compromises “remain elusive”. Some observers are
beginning to think the unthinkable: that the schedule will be delayed to
such an extent that progress becomes extremely difficult, or that the round
might even collapse.

European Union (EU) intransigence has been singled out by many participants
as the main stumbling block. But though agriculture is at the heart of the
Doha round’s difficulties, it has not been the only issue causing trouble.
As deadlines come and go, so the prospect of making substantive headway
fades. Already, the agenda for a key ministerial meeting in September in
Cancun, Mexico, is becoming unmanageably crowded. The stalemate on
agriculture will make things much worse.

The battle lines are clear—and they are uncomfortably reminiscent of the
transatlantic dispute about policy on Iraq. America wants to see
agricultural export subsidies scrapped over a five-year period, to cut
domestic subsidies to 5% of the value of farm production and to cap tariffs
at no more than 25%. Such sweeping cuts horrify the EU. Europe is ready to
cut subsidies, but by nothing like as much as America wants to see. Efforts
to bridge the gap have so far failed: compromise proposals have been
rejected by America as being too weak and by Europe as going too far.

There is no disguising the depth of transatlantic differences. But it is not
just the Americans and Europeans who are at odds with each other. There is
no doubt that the EU is deeply attached to its notoriously expensive Common
Agricultural Policy (CAP) and no doubt either about the lengths to which
France, in particular, will go to protect it. The French president, Jacques
Chirac, stitched up a deal with his German counterpart, Gerhard Schröder,
last October to ensure that the CAP would be protected for years to come.
Efforts are nevertheless under way to reform the CAP, but if they fail, the
chance of progress in the Doha talks will shrink.

Several other countries, including Japan, also provide generous support to
their farmers and tend to hide behind European intransigence. And America’s
attachment to abolishing farm support sits oddly with the farm bill which
President George Bush signed last year and which provides for massive new
subsidies for farmers. Mr Bush’s trade negotiator, Robert Zoellick, argues
nevertheless that America is ready to slash subsidies if those countries
with higher levels of support cut back proportionately more, to produce a
level playing field.

The divide over agriculture threatens to undermine Doha because the
developing countries, which object most strongly to the trade-distorting
subsidies provided to farmers in the industrial world, were such reluctant
participants in the first place. Many poor countries felt they got a raw
deal from the earlier Uruguay round and were not convinced that they had
much to gain from a new round. They were persuaded to go along with Doha
because the rich countries held out the prospect of significant concessions
in several areas, including agriculture.

So far, the poor countries’ initial scepticism appears justified. The
promised changes to existing trade agreements, aimed at helping developing
countries, have yet to materialise—even though the deadline was the end of
last year. A deal to improve poor countries’ access to cheap medicines was
also due to have been concluded by the end of 2002: America’s refusal to go
along with the deal agreed by everyone else scuppered that. Now it is clear
that, for the time being, talks on farm trade are going nowhere.

In the current international climate it is hard to see how all these issues
could be resolved at the September meeting. The Doha round was launched in
November 2001, just weeks after the terrorist attacks on America. There
seemed at the time a genuine desire on the part of rich and poor countries
alike to strengthen international co-operation on a broad range of issues;
and a recognition in the industrial world of the importance of ensuring that
developing countries participate fully in the global economy.

Since then, of course, the atmosphere has soured: the war in Iraq, and the
events that led up to it, have opened up fresh divisions, not least among
the rich countries themselves. So far there have been relatively few
attempts to link economic- and foreign-policy issues by the key
transatlantic participants. But that might change, especially after the news
of the WTO’s preliminary ruling on American steel tariffs.

When Mr Bush imposed the duties to protect the American steel industry last
year, he sparked protests from just about every steel-exporting country—all
were outraged by what they saw as a flagrant breach of international trade
rules. America has since made a large number of concessions—many products
have been excluded, and many countries, including the poorest, exempted. But
a WTO ruling on March 26th found in favour of those countries that have
filed formal complaints, including Europe, Japan and China.

If confirmed, the WTO’s finding will set the scene for yet another row. Some
American lawmakers have already reacted angrily to the ruling and started to
argue that the WTO is exceeding its authority. Talk of America leaving the
WTO is likely to follow, even if it comes from a small minority. All this
could, in turn, revive other bilateral disputes, subdued during the Doha
talks: about unlawful tax concessions for American companies and about the
EU’s refusal to import genetically modified crops. It is hardly the context
in which to encourage hopes of a breakthrough on agriculture.









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