The group of six countries (G6), the U.S., EU, Brazil, India, Japan and Australia, met in New Delhi, India last week and committed to achieving a Doha Round WTO agreement by the end of this year. Missed deadlines are synonymous with the Doha Round of talks; this one may have more bite.
The short communiqué by the G6 at the end of the New Delhi meeting stressed four points:
- Intensifying work to reach convergence on trade issues,
By fall of this year the talks will have gone on for six years since the first meeting in Doha, Qatar in November 2001. The Uruguay Round completed in 1994 went eight years. November of this year is also just one year before the U.S. elections when a new president will be chosen. The talks will not likely continue during the election season. Meeting fatigue is also factor. Even the most dedicated meeting goers will find it hard to generate enthusiasm. The only options are to move forward or end the effort.
The Chairman of the House Ways and Means Committee Charles Rangel (D-NY) continues to push for a limited extension of Trade Promotion Authority (TPA) to complete a Doha deal. The current authority expires on June 30 of this year. A nine month extension would allow the agreement details to be worked by the end of the year and three months to get it through Congress. Missing the deadline would put off a new agreement until at least 2010.
U.S. financial services firms have begun pushing harder for a Doha agreement. The Financial Services Forum, a group of banks, securities firms and insurance companies, sent a letter to President Bush calling for lower barriers to international investments. Financial services are also an area in which developing countries could allow increased market access without tackling tough farm and manufacturing market access issues.
The Cairns Group of 19 developed and developing agricultural exporting countries recently met in Pakistan and committed to completing talks this year. Their push to increase market access and reduce subsidies is nothing new, but the group includes major developing countries like Brazil, Malaysia, Pakistan, Indonesia and South Africa that will be key to an agreement.
Since the collapse of the talks last summer, USTR Susan Schwab and other trade ministers have focused on behind the scenes meetings to build understanding. Those efforts have improved relations, but unrest has developed among the nations left out of the informal talks. The focus is now on engaging the wider membership in formal talks in Geneva, Switzerland.
The starting point for an agreement for agriculture is the progress already made. The EU’s commitment to eliminate export subsidies by 2013 and reduce agricultural tariffs by an average of over 50 percent should not be lightly dismissed. The same is true for developed countries increasing market access for the 50 poorest developing countries.
The talks suffer from a “what have you done for me lately” complex. Since the talks resumed in earnest in early February, there has not been an attention grabber that signaled bigger announcement on the horizon.
When participants start pointing fingers at countries to go first for a new offer, India gets the most attention. Of the G6 countries, India has offered the least and been the most protective of its farmers. A change in India’s position on tariffs would rearrange the bargaining chips, but India can hide behind the “development” part of the talks, even though it has the most to gain by lowering both agricultural and non-agricultural tariffs.
The U.S. also gets a lot of finger pointing, but has low industrial tariffs and relatively low agricultural tariffs (12 percent on average). Offering to cut agricultural subsidies at a time when Congress is writing a new farm bill to continue subsidies will not happen. The trade distorting subsidies under the next farm bill may be much less than in recent years, but that will have no impact on current trade deliberations. The EU is also not in a position to start the trade ball rolling because of resistance from France and the newer members of the EU with substantial numbers of small farmers to protect.
That leaves Japan, Korea and other developed countries (the G10) that have benefited from tariff reductions in industrial products, but still highly protect farmers. The recently completed U.S.-Korea Free Trade Agreement (FTA) has caused Japan to reassess its position on FTAs. They only have six, all with countries with little or no agriculture. A new WTO agreement that begins to dismantle Japan’s agricultural tariffs while also opening markets in developing countries for Japan’s industrial products and financial services would move Japan into the mainstream of the freer trade movement.
The latest efforts to push the talks forward have led skeptics to dig in their heels to scuttle the talks or gain a better position. A bipartisan group of 58 U.S. senators wrote to the Bush Administration on the same day the G6 meeting concluded raising concerns that agricultural subsidies would be cut too much while not reducing tariff enough in return. While the standard argument is that no deal is better than a bad deal, the more relevant issue is the choice between a partial agreement and a comprehensive agreement