Published: The Financial Express, January 26, 2004,

By Pradeep S Mehta

On a whistlestop tour of Asia, Pascal Lamy arrived in New Delhi last week to be reminded about what was already said at Cancun. But the European trade supremo is not one to give up so easily. A significant movement on the stalled Doha Round of the WTO is a personal ambition, as he will relinquish his current post by September, 2004. He would like to depart from the European Commission having achieved something. This opportunity slipped out of his hands when the Cancun ministerial meeting of the WTO collapsed this September.

There are other reasons as well, for Lamy to push for getting the Doha Round back on track. Firstly, the push by Robert Zoellick, the US trade representative. Zoellick, trapped between ’can-do’ and ’won’t-do’ countries, has realised that his efforts on the non-multilateral front-especially with bigger trading partners—have been futile. Thus he has called for moving on the Doha agenda. This means, that the August 13th deal on agriculture between him and Lamy will be given the short shrift. In any event, that is what had catalysed the creation of G-20, now a formidable force in moving the farm agenda forward. Pundits have speculated on the impasse to be worsened by the ensuing presidential elections and the EU expansion as being further bumps on the road.

But, that doesn’t matter because for both it will be desirable to get into the negotiations mode sooner than later. One major factor in this calculus is the possibility of countries launching disputes on the ’peace clause’. If negotiations are on, then they would be able to buy peace. For this will be a condition of both that there should be a status quo, until the whole negotation is concluded. Already the ’peace clause’ issue is up for a test in a current dispute between Brazil and the US on cotton subsidies. The panel is yet to deliver a verdict. On the other hand, the issue of cotton subisidies has been a rather emotional one for the poor West African countries. At Cancun, the US response to the Africans’ demand for a sectoral approach to this was rather dismal. This too will be now part of the ongoing negotiations on agriculture. Secondly, Zoellick in a recent letter to all the 148 members of the WTO has attacked the export subisdy structure of the EU, as the ’greatest barrier to progress in trade negotiations’.

Lay has responded to this by agreeing to eliminate all trade-distorting subsidies at a future date, which is to be negotiated. There is no concrete deadline for this, for Lamy is in no position to make a commitment a priori. He also hopes that the US farm bill too would be attacked and thus a level playing field could be achieved. Thus a critical mass could be generated, if things move forward at Geneva. Lamy feels that the derailed talks can be salvaged upto sixty percent in 2004, if serious efforts are launched in April. Getting tariff correction on farm goods will be another major battle among the trading partners. The Cairns group, which includes the two G-20 members: Argentina and Brazil, are not ready to accept the Uruguay Round formula of linear reduction, but would rather adopt the Swiss formula of reducing tariffs on high duty items first. As far as the US is concerned, its amorous advances with ’can-do’ countries in South America have been spurned. On the other hand, US farm groups like the Florida dairy and sugar producers have raised their protests against such a deal. Their objection is also against a bilateral deal with Australia.

Expressing fears over huge job losses, they would rather have a deal in the WTO because they too believe that complex issues of subsidies and distortions can be better addressed at the multilateral forum.

On the other hand India is not prepared to reduce her own high tariffs. In the words of commerce minister: Arun Jaitley, there are 650mn farmers in India who need protection. Undoubtedly, that is a worthy argument. But this argument cannot be analogous to farmers in the rich world. For, often the subsidies in the rich countries end up in the hands of middlemen rather than the supposed beneficiaries. Secondly, it is only through reform in agriculture in the OECD world, that development benefits can reach the poor in the poor countries. But agriculture is not the only bone of contention. On Singapore issues, whereas EU was ready to drop investment and competition at Cancun, they were not prepared to abandon trade facilitation and transparency in government procurement. Now, Lamy would not want to drop investment and competition but put it on the back burner, positioning the other two on the front burner. But that’s is not the end of the story. Perhaps as tactics or fact, Lamy believes that many developing countries are interested in getting an investment agreement at the WTO. It might just be their ego which doesn’t prevent an easy solution to the impasse. However, the EU’s approach of unbundling the Singapore issues and taking forward two of them offer the possibility of a deadlock, again. Not only that, but the EU would like to negotiate them as plurilateral deals. It is still a mystery why the four issues were bundled in the first place.

At a breakfast meeting in Delhi, when this writer questioned Lamy that even the OECD had failed in negotiating a plurilateral (wrongly dubbed as ’multilateral’) how does he expect it to succeed in the WTO even if some members are ready to negotiate one.

Readers may recall that the OECD efforts had failed due France’s objection, while the US intransigence was the major blockade. According to Lamy, if the US doesn’t want one it enables her to unilaterally dictate terms in bilateral agreements. But that is a rather weak wicket.

Clearly, considering the position adopted by the G-20 on agriculture and the G-90 (LDCs and ACP countries) on Singapore issues, unless the US and EU see some sense and do climb down sincerely, the Doha Round will continue to remain on an artifical life support system. That would be bad for both the trading system and the poor in the world.