The announcement by Pascal Lamy, Director-General of the WTO, that the Trade Ministers of the 150 member nations backed a full resumption of the Doha Round of WTO trade talks ends a six month suspension of the talks. The challenge now is to break the logjam over agricultural issues.
When the negotiations stalled out last summer, it was generally agreed that talks would not resume without a new political commitment from key countries and industrial business leaders willing to offset the influence of farm lobbies. President Bush is again pushing more open trade without having to protect a Republican majority in the House and Senate. Angela Merkel, the Chancellor of Germany, is a supporter of an agreement and now holds the rotating six-month presidency of the EU and is the leader of the G8 meeting in Germany next summer. The reelected President Lula da Silva of Brazil has again been vocal about the need to move the Doha talks ahead.
Business leaders are also engaged. It is not a coincidence that President Bush recently talked about trade at Caterpillar in Peoria, Illinois; half of their production moves into export markets. Secretary of the Treasury Henry Paulson who came from Wall Street is taking a larger role in the talks. That 30 trade ministers attended the World Economic Forum in Davos, Switzerland is an indication that trade policy is working in a much bigger policy circle than a year ago.
The approach to negotiations has also changed. As USTR Susan Schwab recently explained, before the July suspension of talks there was a lot of effort put in by the G6 (the EU, US, Brazil, India, Japan and Australia) to work out a grand design that other countries could plug into. The U.S. offered a bold agricultural proposal in the fall of 2005 that was supposed to cause a leap forward in the negotiations. Negotiators were seeking “top line” numbers that could then be worked back to each country. A few days after the talks broke off last July, Ambassador Schwab met with Brazil’s Minister Amorin in Rio de Janeiro to talk one-on-one about issues of mutual concern. That led to quiet bilateral and small group meetings around the world at all levels from trade ministers to technical experts focused on key sensitivities and priorities to build understanding of common ground. The hope is to reengineer from the bottom up to create a top line that reflects the combined thinking of the 150 countries in the WTO. Lamy confirmed that process by saying the process would be bottom-up, inclusive and transparent, but continue to allow for “more discreet, informal, or bilateral, discussions.”
The focus on bilateral and small group discussions does not mean that top line numbers have entirely disappeared. The latest plan is the “17 & 54” plan. The U.S. would limit amber box, de minimis and blue box spending to no more than $17 billion per year, down from some interpretations that put the U.S. limit under the October 2005 proposal at $22 billion. The 54 is the average percent cut in EU agricultural tariffs in the proposal by the G20 group of developing countries. The U.S. has already pointed out that the average 54 percent cut has no meaning until decisions on which products will have the greatest tariff reductions and which will be declared sensitive with much smaller cuts. Hopefully the bottom up process can sort out the sensitive products before talking about the average tariff reduction.
The ongoing talks have reenergized some issues like having no or very low tariffs on environmental goods that improve the environment and should be freely traded. The EU and some other countries want biofuels to be on that list. Brazil has supported zero tariffs on ethanol by suggesting that it be treated like a petroleum product.
The decision by the Canadian government to request consultations on the U.S. corn program is also designed to move the talks along. Even though the case does not appear to be particularly strong, Canada has been joined by a diverse group of countries from Guatemala and Brazil to Thailand and the EU.
The farm bill proposals released by the Bush Administration can play a role in the talks. Secretary Johanns has said repeatedly that one goal is a farm bill that is beyond challenge in the WTO. Their proposals are a step toward that goal. The initial EU reaction was that the Administration had not done enough to lower government payments. The dairy and sugar programs were mentioned as problems, but those programs have not been major sticking points on a new agreement. The cotton loan rate would be reduced which would reduce loan deficiency payments that are tied to market prices. Planting restrictions on fruits and vegetables on farm program acreage would also be eliminated as suggested in the Brazilian cotton case. More funds would be directed to conservation programs that are non-trade distorting.
President Bush’s call for extension of Trade Promotion Authority (TPA) beyond its current July 1 expiration shows the Administration is serious in seeking middle ground on trade that would garner support for both TPA and a final WTO agreement. House Ways and Means Committee Chairman Charles Rangel (D-NY) is willing to work with President Bush in finding a new bipartisan consensus. He seeks to offset some of the pain that industries and workers feel when globalization forces fundamental changes. Senate Finance Committee Chairman Max Baucus (D-MT) has called for a globalization adjustment assistance package that would include service industry workers.
Agriculture does not control the agenda for restarted Doha talks. That is now controlled by political leaders from key developed and developing countries and business groups that have become increasingly impatient with agriculture’s lukewarm interest in trade expansion. Agricultural groups will need to recalculate how they can fit into the agenda for more open trade.