Business Standard, June 05, 2006

By Pradeep S Mehta

Some possible solutions given that agriculture and Nama issues are stuck.

Why did India and Brazil not join the recent mini-ministerial of the WTO at Paris to move the stalled Doha agenda? For two reasons: first, they were frustrated with no progress, and second, their own realisation that the Geneva process was being suborned. Anyway, the mini-ministerial did take place with only the US, the EU, Japan and some other rich countries in attendance. What came out was also nothing to write home about. However, we cannot sit back but need to push a resolution sooner than later.

The main problem with the WTO negotiations is and always has been agriculture, and the fact that both the EU and US accuse each other for not offering enough. The latest EU offer is but to move about twenty yards. To make matters more interesting and to divert attention, the US threw a spanner in the works by asking the poor countries to curb their list of special products in addition to their earlier demand of lower farm goods tariffs. The poor countries responded with scorn.

The other spanner is further quid pro quo, that is, both rich countries are asking the poor for lower tariffs on industrial goods and opening up services. This is something which bugs many poor countries, because they feel that they have done enough during the Uruguay Round and its payback time. On services, there are some genuine and some far-fetched concerns against opening up on utilities, education and health sectors. Alas, perceptions are tragically often a reality.

Businesses in rich countries seem to have lost appetite on the Doha round, and are instead pressuring their governments to go through side deals through preferential trade agreements (PTAs). That is an increasingly pursued agenda by not only the rich but also the developing world, in spite of its pitfalls. The rich countries find it easier to get smaller countries to sign onto a PTA, and it does not matter to them that the multilateral agenda will collapse or seize.

On the multilateral agenda, it was agreed at Hong Kong that the offers and so on will have to be stated by all members by end-April. Following that, the modalities will have to be negotiated by end-June. We missed the April deadline, and now the agenda is to complete the whole exercise by end-June. Even that appears to be difficult, in spite of the WTO Director General Pascal Lamy’s caution that we have now entered a “red zone”. Nothing will move until the US and EU agree on farm goods, and that is becoming an increasingly difficult thing.

But, that is nothing new. It is, therefore, worth revisiting the contentious area of agriculture trade negotiations and how the international community has missed the bus on many occasions in the past. Though with some difficulty, agriculture was made a part of the “single undertaking” framework in the Uruguay Round. In fact, it was first seriously raised in the Kennedy Round (1963-67). Among other more complex issues, the EU suggested that it will take them 20 years to roll back all subsidies. None wanted to negotiate something with such a long timeframe. In hindsight, if there was an agreement in 1967, the problem would have disappeared by 1987, that is, 20 years ago!

We are most likely to face a similar situation, that is, after the numbers have been agreed, then the attention will turn to end dates. The good news is that there are internal budgetary pressures on the expanding EU and, thus, we can expect an end date in 2013, when the EU’s common agriculture policy comes up for review. How will the US behave is something one cannot speculate about. Their seriousness about the Round was evident in their changing the chief negotiator mid-stream, when Rob Portman was replaced by Susan Schwab.

So as India, what do we do now? We are also following the fashionable non-multilateral route of tying up deals with countries in the east, and also mulling about similar bilateral deals with the EU, among others. But, that too is coming under fire from many important politicians. The best way forward is the WTO route, and for that we need to do some imaginative thinking.

First, call for a temporary moratorium on non-multilateral deals until the Doha Round is sorted out. Second, hand over the baton to Pascal Lamy to design a final draft under the guidance of a representative group of negotiators and a group of eminent persons, such as Ernesto Zedillo; Kofi Annan; Peter Sutherland and Jagdish Bhagwati.

Third, as Plan B, since the fundamental issues of agriculture, non-agricultural market access (NAMA) and services cannot be settled in the meantime, WTO members should consider what can be agreed upon. The controversial issues can be left on the back-burner until the US and EU sort out their political situation that may take a few years. It is time to turn the Hong Kong declaration on its head and straighten out negotiations in other areas, such as WTO rules, TRIPs, trade and the environment, aid for trade and the Integrated Framework, all of which are crucial for developing countries and have been unaddressed during negotiations.

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