President Obama started on a somewhat negative note in a Sunday lunch speech by saying the offers on the table were inadequate. That is obvious because if the offers were adequate there would be an agreement, but someone had to state the obvious. The President quickly followed up that he was committed to the talks and was not talking about starting from “scratch.” The Chinese ambassador to the WTO had earlier accused the U.S. of that position. The President encouraged out of the box thinking and wider discussions than just agriculture and non-agricultural products. Various sources said the comments were well received by other leaders and led to an hour and a half frank discussion about obstacles to an agreement.
Jeffery Schott, senior fellow at the Peterson Institute for International Economics, a Washington, DC based think tank that supports open trade, wrote before the G20 meeting in A Trade Agenda for the G20 that members should make good on their commitments last September to “fill in the gaps” on agriculture, manufactured products and services in the WTO negotiations. These new offers would stimulate broader negotiations and create an “ambitious and balanced” outcome that would result in support at home and abroad.
Schott suggested President Obama take the lead with a new offer on U.S. farm programs. The offer would show his commitment to long-term U.S. budget reform and encourage other G-20 partners to make reciprocal offers on barriers that impede US exports of farm products, manufactured products and services. The new “ceiling” on farm payments would be above current payments, but would limit additional payments if market prices decline in future years. The other G-20 leaders would then commit to far fewer tariff reduction exceptions than permitted under the current draft agreement on agriculture. Such an exchange would get at the heart of the stalemate on agriculture because developing countries do not trust the U.S. to not increase income supports if market prices decline and the U.S. does not trust developing countries to make meaningful reductions in high tariffs on agricultural products.
Because of a growing complacency with not achieving an agreement, Schott is not an optimist on the Doha Round. He was quoted in a Reuters story saying that the talks were headed toward a ‘Niagara moment’. “If the talks continue to drift downstream, I think there’s a very real chance that the Doha round will fall crashing down over the falls,” Schott said. “You have to steer away from the rocks, and nobody is doing any steering.” He believes making a bold proposal carries little risk for President Obama because if other countries do not immediately reciprocate there is no possibility of reaching a deal Congress would approve.
WTO Director-General Pascal Lamy repeated at the summit his well worn comments that 80 percent of the negotiating job is done. He said that technically finishing the Doha Round was possible, but the tactical and political impasse must be broken.
Despite the stalled WTO talks, leaders of the G8 developed countries meeting in Canada on Saturday before the G20 meeting agreed to push forward on bilateral and regional trade agreements. Talks on trade agreements among developed and developing countries have picked up in recent years because participants can see the two-way benefits of freer trade. That suggests there are functional problems with the WTO talks that have stifled the general interest in trade agreements. Talking about domestic agricultural supports is one of those functional problems.
In the ending G20 statement, trade was addressed in paragraphs 35-39 of the 49 paragraph document. The members renewed for three years “our commitment to refrain from raising barriers or imposing new barriers to investment or trade in goods and services…” Their commitment to the WTO talks stated, “We therefore reiterate our support for bringing the WTO Doha Development Round to a balanced and ambitious conclusion as soon as possible, consistent with its mandate and based on the progress already made.”
The G20 countries meet again in November in Seoul, South Korea. South Korea is one of the countries seeking out new Free Trade Agreements (FTAs). President Obama has said he will push for progress before November on disagreements between the U.S. and South Korea over their FTA and offer it to Congress in early 2011. Australia is already pushing to get trade high on the agenda in Seoul.President Obama had little positive to say about trade in his Presidential campaign and first year in office, but now appears to be the only leader who can prevent the Doha talks from going over the falls. He talked in his 2010 State of the Union address about doubling exports in five years, is now negotiating on the Trans Pacific Partnership trade agreement and is committed to working out the U.S.-Korea FTA. The President now has a chance to step to the larger stage of the Doha talks.
President Obama is also being pushed to back a WTO agreement from policy advocates who support “international multilateralism” in dealing with foreign policy issues. Former President Bush was accused of acting unilaterally on issues and candidate Obama talked of pursuing multilateral solutions to problems. Now President Obama is seen pushing a bilateral trade agreement with South Korea while ignoring work with the WTO which is the multilateral institution for trade.
WTO Director-General Lamy noted that negotiators are “staring at each other waiting for the other side to move first.” President Obama is the only leader who can change that situation by making the first political move.