Doha round of trade talks suspended after negotiations fail

July 25, 2006 The director-general of the World Trade Organisation (WTO), Pascal Lamy, suspended negotiations in the Doha round of trade talks on Monday, after a meeting of six "core" negotiators India, Brazil, the United States, European Union, Japan, and Australia in Geneva failed to make any headway in reconciling differences over agricultural trade liberalisation. The US wanted cuts in import tariffs for farm products, which were rejected by EU, Japan and India, who asked for cuts in agricultural subsidies.

Peter Mandelson, the EU trade commissioner, told the Financial Times: "If the US continues to demand dollar-for-dollar compensation in market access [cutting tariffs] for reducing domestic support, no one in the developing world will ever buy that and the EU will not either." Brazil also identified the US stand on subsidies as the reason the talks failed.

Susan Schwab, the US trade representative, said that the other countries sought exemptions from tariff cuts for a wide range of goods and that such exemptions would defeat the object of the talks - to expand trade. "As we went through the layers of loopholes . . . we discovered that a couple of our trading partners were more interested in loopholes than market access," she said.

The Indian Commerce and Industries Minister, Kamal Nath said that developing countries could not allow their subsistence farmers to lose their livelihood and food security to provide market access to agricultural products from developed countries.

Many reasons attributed
The major agricultural exporters US, Australia and initially Brazil called for reductions in import tariffs on farm goods, saying that this will benefit the poor by reducing the price of food items and will expand markets for farmers everywhere. Developing countries such as India, Indonesia, and the Philippines, which have millions of poor farmers, countered that cheap imports would drive the vulnerable farmers out of their livelihood. Their call for more tariff protection was also supported by developed nations in the EU and Japan, who also sought cuts on agricultural subsidies paid by the US to its farmers, saying that such subsidies distort prices and undercut their domestic producers unfairly.

Officials involved in the negotiations told the Financial Times that there wasn't sufficient pressure by exporters either to overcome the protectionist lobby. The upcoming congressional elections in the US have been cited by some as one of the reasons the US is holding firm on not cutting subsidies further. The unpopularity of the talks in many developing nations has also been cited as a reason negotiators from such countries preferred the talks to fail.

Peter Draper, a research fellow at the South African Institute of International Affairs told the South African Business day, "The question is whether it is brinkmanship underpinned by major powers' negotiating tactics that has led to the breakdown or genuine irreconcilable differences. If it is the former, then the question will be for how long the negotiations will be suspended."

Reactions
Oxfam, the NGO working on aid and development, which had earlier supported the talks but later withdrew it after the subsidy-cuts it sought appeared to be unlikely, blamed the US and EU for not cutting subsidies while demanding developing countries to open their markets. Saying that any delay has "enormous costs", it called for the US and EU to make fundamental changes to their offers.

The Congress of South African Trade Unions said the suspension of talks was an opportunity for developing nations to negotiate a better deal, adding that no-deal was better than the deal on the table.

The Australian National Farmers Federation expressed disappointment, saying that the suspension has cost Australian farmers $1.5 billion in potential new markets.

The US Farm Bureau said that it was not prepared to give additional ground until Europe offers more concessions, and that farmers will now try to lock in subsidies.

Among U.S. business groups, John J. Castellani, president of the Business Roundtable, an association of the chief executives of 160 of the biggest U.S. companies, said American negotiators were prepared to open markets if others did the same, and that Europe and other countries "surrendered to protectionist measures".

What is the Doha round?
The Doha "development" round of talks, named after Doha, the capital city of Qatar, where it was inaugurated in November 2001, focuses heavily on creating a fair system of trade for the benefit of developing countries, in particular for trade in agricultural products.

Successive rounds of negotiations have failed to produce agreements on key issues such as cuts on subsidies and tariffs. In a ministerial meeting in Cancun in 2003, developing countries, forming about two-thirds of the WTO members let the meetings fail rather than agreeing to a compromise. In 2004, the US came up with an offer to cut subsidies along with a demand that others cut tariffs. The previous two summits, the Group of Eight nations, passed declarations expressing commitment to the talks and calling for a deal.

The congressional authority of the US President to negotiate an agreement on trade, the Trade Promotion Authority, expires by the middle of next year. The amount of work needed to complete an agreement before that meant that the end of this month was effectively a deadline for a framework agreement.

Parallels to the Uruguay round
The previous Uruguay round of talks were also suspended in 1990 after disagreements. The director-general of the WTO's forerunner, the General Agreement on Tariffs and Trade (GATT), Arthur Dunkel then worked with member nations to produce the Dunkel draft, which eventually lead to a final agreement in 1994.

Future of the Doha round
The suspended talks can only be revived by a consensus among the WTO's 149 members. The EU trading commissioner Peter Mandelson said that there were little short or medium term prospects of the talks restarting. Mark Vaile, Australian deputy prime minister and trade minister, said he would not accept superficial or partial reforms in the Doha round. The Indian Commerce and Industry Minister Kamal Nath that there was little ground for convergence on the core issues in the Doha round as of now.

The US trade representative Susan Schwab said that she would push the Doha agenda in regional trade meetings and with individual countries. She also said that she did not expect to use the current TPA, which expires in mid-2007 to enact a Doha round agreement. The Financial Times reports that it is unlikely that the US Congress will renew the authority, again dimming prospects of a near-term agreement.

Repercussions of the failure
The WTO director-general, Pascal Lamy said the failure of the negotiations sent a "strong negative signal for the future of the world economy amidst the danger of a resurgence of protectionism".

The South African chief negotiator Xavier Carim called the failed talks a "serious setback" and pointed to the "huge" opportunity cost it implies, particularly for developing countries. A World Bank study in 2005 estimated that global free trade in agriculture would generate gains of US $287 billion, of which $86 billion will accrue to developing countries.

Peter Mandelson, the EU trade commissioner said that formulating the EU trade policy going ahead will begin by the end of August. Australia and Japan have said that they will focus on bilateral and multilateral trade agreements. A Japanese foreign ministry official, speaking to the Mainichi Daily News, and Hilton Zunckel, trade adviser to developing countries, speaking to Business Day said that many other WTO members would focus on bilateral and regional trade agreements.