While progress is being made on narrow issues, a group of 22 developing nations announced agreement on a framework to cut tariffs by one-fifth or more for a substantial majority of each others’ exports to increase “South-South” trade, the larger Doha negotiations have been stalled since December of 2008. The International Food & Agricultural Trade Policy Council (IPC) recently provided some useful insights on WTO agricultural negotiations in a position paper titled ”The Doha Round and Alternative Options for Creating a Fair and Market-Oriented Agricultural Trade System.” The IPC believes the Doha Round, “still offers the greatest potential for agricultural trade reform at this time.”
The IPC paper explains some of the challenges that have dogged the agricultural talks of the Doha Round. While the Doha Round is a “single undertaking” in that it spans many sectors, the reality is that negotiations in each sector are looked at in isolation from the others. The focus has been centered on agriculture with non agricultural market access in second place and services and rules far behind. The IPC would have the Trade Negotiations Committee encourage periodic discussions about the tradeoffs among the sectors. Broadening the scope of a round would also allow for more tradeoffs.
More transparency in countries’ compliance with existing commitments and more communications with outside groups are areas IPC suggests for improvements to reduce distrust in WTO activities. These would also allow easier monitoring by developing countries and greater participation in negotiations. Developing countries require help in identifying groups that can provide “impartial” analyses of negotiating options.
The “flexibilities” that have been introduced in the current agricultural text to help developed and developing countries accept the agreement have reduced the multilateral nature of any final agreement. The IPC paper suggests that the agreement provide for a sunset or renegotiation of the flexibilities after 10 years.
While the agricultural portion of the Doha Round has had many challenges that have shaped it to this point, the general consensus in Geneva as articulated by the Conference Chair Minister Velasco was that the round should move to conclusion. Agriculture will likely remain at the center of attention, as it should given that this is only the second trade round to include agriculture and substantial distortions in agricultural trade remain. The issue remains how to move toward freer agricultural trade within this round to improve standards of living for producers and consumers.
Since 2001 the three “pillars” of the agricultural negotiations have been market access, domestic supports and export subsidies. The greatest progress has been made on export subsidies, including food aid and export credit programs, with export subsidies to be eliminated by 2013. Differential export taxes and curtailing export restraints except for extreme circumstances also need to be discussed.
Trade-distorting domestic subsidies are scheduled for substantial reductions under the current Doha language. Agriculture lags behind other industries in removing domestic subsidies. The domestic subsidy reductions are a good first step, but they should not be viewed as the end of the reductions. For example, they could be cut further after the five year reductions in the current language, or subject to further negotiations beginning within three years of implementation of the agreement.
The market access pillar in agriculture has made the least progress, and it is at the heart of freer trade. If trade barriers are not reduced there will not be increased gains from trade for consumers and producers. This is where the “flexibilities” pointed out in the IPC paper have been the most difficult. In an attempt to give countries flexibility in making the most difficult political decisions on lowering tariffs, the sensitive and special products will result in much less additional market access. A simple structure for tariff reductions must be developed with a maximum tariff rate that results in substantial reductions in the highest tariff rates. The agreement by the 22 developing countries may be a good starting point for wider discussions on tariff simplicity. Further reductions after five years or early additional negotiations as in domestic supports must be part of the final agreement. Trade-distorting high tariffs need to be phased out just like trade-distorting subsidies.
The final agreement will still need some “flexibilities.” A WTO agreement or any trade agreement is a political document created to achieve economic gain with a minimum of political costs. The Doha Round has struggled for eight years under the illusion that substantial economic gains could be achieved without ruffling many political feathers. If the focus was on the gains to consumers rather than the losses by high-cost producers, there would be less need for flexibility. If a new agreement does not result in substantially increased trade, there is no point in prolonging the agony of negotiations for another year.
Pulling together an agreement remains a long shot. A country, or countries, needs to make a bold move on agricultural domestic supports or market access to cause others to begin making tough political decisions. A clear, simple agreement would start to build the trust needed for WTO agreements to survive long-term. If this cannot be achieved, the WTO needs to consider other negotiating frameworks.