The “mini-ministerial” meeting for the Doha Round of WTO talks began in Geneva, Switzerland on July 21 and has been as slow moving as most analysts had expected. Revised outlines of a deal had been expected by Friday, July 25, with a wrap-up session on the 26th. The talks are now expected to be extended into next week.
The EU and the U.S. have taken a leadership role in the agricultural talks with the EU announcing a commitment to cut bound agricultural tariffs by an average of 60 percent instead of an earlier agreed to 54 percent. Much of the changes will be in tropical crops with no change in the overall framework for agricultural tariff reductions. The U.S. announced a commitment to limit overall trade distorting supports to $15 billion per year, down from an informal commitment of $17 billion, a formal commitment of $22.5 billion and the current limit of $48 billion per year. There would be no additional reductions in the limit for Amber Box price contingent payments, considered to be the most trade distorting, of $7.6 billion per year.
Neither of the proposals is a huge policy change, but they do provide commitments that require domestic policy changes that will cause difficulties with agricultural constituencies. These proposals were met with the standard “not enough” that has been voiced by developing countries for the last seven years of talks. That assessment is not a surprise. What is somewhat surprising is that the developing countries have not offered a modest new proposal of their own to make changes in bound agricultural tariffs that would provide at least some measure of increased market access. That has been a key demand of both the EU and the U.S. and would offset some of the criticism from back home that the EU and the U.S. negotiators continue to make proposals to increase market access and reduce subsidies, but receive nothing in return. This is even more glaring in light of a recent widely reported analysis showing that India would have no reduction in average applied agricultural tariffs under the proposal now on the table.
The most rapidly growing developing countries have rightly demanded larger roles in the Doha talks that reflect their economic impact on world markets. They have been afforded that opportunity, but have done little with it. India and Brazil get much of the criticism for failing to negotiate, but that blame must also be shared by China, which has benefited greatly since joining the WTO in 2001. China is one of the group of seven countries (the EU, U.S., Japan, Australia, India, Brazil and China) meeting on key issues, but has not been vocal in proposing reforms that would move the talks forward. China has been partially blamed for developing countries reluctance to open markets because of fears that Chinese companies may be more aggressive competitors in their markets than companies from developed countries. The failure to open markets among developing countries is a key economic development issue because 70 percent of the import duties paid to developing countries are paid by other developing countries.
Despite the lack of a new initiative in agriculture from developing countries, WTO Director-General Pascal Lamy stated that the G-7 trade ministers have made progress on agricultural export subsidies, export finance and food aid, overall trade-distorting domestic support and top-tier tariff cuts for developed countries, cotton, sensitive products shielded from full tariff cuts with increased market access through tariff rate quotas, special products shielded from full tariff cuts for developing countries, and a temporary special safeguard mechanism for developing countries to deal with import surges and/or price declines. These have all been key sticking point that must be addressed at a high political level in most countries.
One talked about scenario has the U.S. making a commitment for overall trade-distorting domestic support at $12-13 billion per year with a reduction in the Amber Box limit. This would supposedly force the EU to come lower on their domestic supports and increase their tariff reductions. The developing countries would then respond with a reasonable market access program. That would have huge political risks for the U.S. government and the EU Commission with no indication that the developing countries would actually provide a reasonable market access proposal.
If the talks cannot move forward to a comprehensive new agreement, then an alternative ending is needed that does not damage the existing WTO infrastructure. While the WTO is far from perfect and negotiations that need consensus by all 153 WTO members may no longer be doable, the world needs some framework to work through trade policy issues. Without that the only alternatives are the expanding protectionism already developing that will leave all countries worse off or unilateral free trade which is the best economic outcome, but virtually unachievable because of special interest groups seeking protection.
Agricultural trade could gain under a new negotiating format. The recent commodity and food price increases have caused some importing countries to lower tariffs on key products like vegetable oils. As governments see imports as a way to help consumers rather than as threats to domestic producers, they may be ready for serious talks about tariff reforms. Regardless of the final outcome of the Geneva meeting, it will not be the end of negotiations on agricultural trade issues.
Maintaining the economic gains achieved from 60 years of market openings has to be part of whatever comes out of the meeting in Geneva. If these comprehensive rounds of negotiations are no longer viable, then the WTO needs to move to industry-by-industry talks and/or talks by willing countries that see the need for greater market access to achieve economic efficiencies.