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Doha Round

Failure after near success

In brief

Farmers’ market in Malawi.

Farmers’ market in Malawi.

In late July, a technical dispute between the USA, India and China thwarted an agreement on wide-ranging global trade liberalisation between members of the World Trade Organization. The deal-breaker was a technical measure that would have helped poor farmers deal with a surge in imports.

It may take several years to revive the seven-year epic of negotiations, known as the Doha Round, which started in the capital of Qatar in 2001 with the goal of comprehensive trade liberalisation. Fast progress now looks almost impossible, particularly due to the upcoming change of government in the United States. Moreover, it is feared that protectionism will be encouraged at a time of rising food and oil prices, growing unemployment and general economic instability. A third concern is that failure in the WTO context may lead to more bilateral agreements.

Recent talks in Geneva had dealt with cutting and standardising trade barriers for agriculture, industry and services. The “special safeguard mechanism”, on which the talks floundered, would have allowed developing countries to increase farm tariffs in the case of suddenly surging food imports or a collapse in prices. India and other developing countries said they wanted to protect poor farmers. The US, after agreeing to cut farm subsidies, argued it feared losing new markets. Agro-exporters such as Costa Rica and Uruguay also opposed the safeguard mechanism.

For decades, farm subsidies have been a sticking point in trade talks. The recent rise in food prices provided a rare moment to agree on cuts, because prices on the world market are now close to – or even above – levels previously guaranteed domestically by governments in rich nations and enforced through subsidies.

All parties expressed shock that the talks had broken down, especially over such a minor part of what had been deemed largely successful talks. WTO chief Pascal Lamy said that 80 to 85 % “convergence” had been reached. Of 20 points on the agenda, 18 had been solved. Celso Amorim, Brazil’s foreign minister, said: “Someone coming from another planet would not believe that, after the progress made, we would not be able to conclude.”

The story is not just one of the traditional dispute between developed countries pitted against the developing world. Many observers say the constellation of economic and political conditions has changed much since the Doha Round, with heavyweights from both the advanced and the disadvantaged world now dominating the scene. China, India and Brazil, once eclipsed by the US and EU, have recently become powerful exporters of goods and services. Increasingly, the concerns of domestic constituencies in such assertive developing countries have an impact on trade talks. Indian farmers are just one example.

The biggest losers of the recent setback are the poorest developing countries, especially African ones, which need access to consumer markets in rich economies. African negotiators had been looking forward to a big cut in US cotton subsidies. Those subsidies depress prices and threaten the livelihoods of about 10 million people in Africa. Before the talks broke down, the US had agreed to cut cotton subsidies by more than 80 % if China would lower trade barriers to US cotton exports. But without a deal, the USA is not forced to comply.

African, Caribbean and Pacific (ACP) countries, which pay no EU import tariff on their bananas, opposed a deal that would have ended 16 years of litigation and cut the EU’s tariff on Latin American bananas to € 114 per ton from €176. But they had hoped for a deal that would compensate them for a loss of trade. Without the broad scope of the WTO talks, they may find themselves left out in the cold, should the EU and Latin America resort to a bilateral pact.

(Ellen Thalman)