Doha Road: An inevitable fate
Published: PROACT E-Newsletter July 2006 Issue
By: Shyamal Krishna Shrestha
The breakdown of the Doha Round trade negotiations is undoubtedly a setback to the multilateral trading system. At an emergency meeting on 27-28 July, the General Council endorsed the recommendation of World Trade Organization (WTO) chief Pascal Lamy to officially announce the suspension of the ongoing trade talks because major trading partners failed to reach agreement on key issues. The Round began at the Qatari capital, Doha in 2001; but consistently missed deadlines to reach 'modalities' on liberalising merchandise trade in agriculture and industrial products among its 149 Members. With the suspension, the stipulated deadline of concluding the Round by 31 December 2006 set by the Sixth WTO Ministerial at Hong Kong in December 2005 is now history.
Collapse hardly comes as a surprise as developed Members never showed any signs of translating their commitments to a 'development round' by their actions. As a response to the 9/11 attacks on the United States (US), the Doha Ministerial held in December 2001 attempted to portray a sign of unity among the free world by rapid trade expansion. However, the first signs of a fissure were already visible at the Cancún Ministerial in 2003 when the conference collapsed due to differences over agriculture. Negotiations resumed after the adoption of the 'July Package' in August 2004.
The Doha Round was supposed to redress the inequalities and imbalances of the past international economic order but the unity and emergence of the developing world caused primarily by the rise of dynamic economies such as Brazil, China and India posed a formidable challenge to the hegemony of the industrialised nations, especially Organisation for Economic Co-operation and Development (OECD) Members. Any breakthrough required the European Union (EU) to lower agricultural tariffs, the US to remove its trade-distorting subsidies and the major developing Members to lower industrial tariffs. However, Members continued to maintain their rigid positions. Hopes of saving the Doha Round at the G-8 summit in St. Petersburg in mid-July and the 24 July meeting of ministers from Australian, Brazil, the EU, India, Japan and the US (the so-called G-6) came to naught.
The collapse is blamed on the US, which is accused of not committing to remove huge amounts of farm subsidies that distort agricultural trade. Although agriculture amounts to only 2 percent of US gross domestic product (GDP), applied domestic subsidies are worth US$ 19 billion. The US refused to make commitments on reducing these payments until the EU pledged to bring down its high agricultural tariffs and developing Members lowered their industrial tariffs. India felt that reducing subsidies in the US or lowering farm tariffs should not be seen as a concession but an obligation by the industrialised nations to reflect their commitments to a 'development-friendly' Doha Round. In India's view, facilitating market access in developing Members in response to removal of distortions was a one-sided deal that could not be sold to domestic constituents, whose livelihood options are intertwined with a future multilateral agreement. Such an agreement would also compromise the policy space which developing Members seek for pursuing their development objectives. The US sensed 'victory' as it did not give in to pressures to remove farm subsidies when the Farm Bill is due to renewal and the US administration does not want to alienate powerful domestic interests.
With the failure to reach compromise, world trade and all its participants are "losers", as Pascal Lamy noted. WTO Members will inevitably turn to bilateral and regional free trade agreements, enfeebling the multilateral trading system. In the absence of a concrete rules-based trading system, world trade could slow down, protectionism would rise and trade disputes could escalate. As the US President's Trade Promotion Authority expires in July 2007, a delayed deal reached could face stiff opposition from the country's law-makers.
After the breakdown, the major WTO Members have renewed their commitments to resuscitate the Doha Round but given their lack of political will, nothing short of a major departure from hitherto policies would ensure that. For the developed Members, that basically means not refusing to bow to domestic interests that resist reform but also to recognise the 'development dimension' that the Round entails. That, after all, is the essence of the Doha Development Agenda.
