South Asia Watch on Trade, Economics & Environment (SAWTEE)

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Doha Round: Back on track?
Published: The Kathmandu Post, 7 January 2006
By: Shyamal Krishna Shrestha

Summing up the outcome of the Sixth Ministerial Conference held this December in Hong Kong, World Trade Organization (WTO) Director-General Pascal Lamy remarked that the meeting had put the Doha Round trade talks "back on track". Given the tardy progress, one wonders whether it really has. The outcome was, by all accounts, unsatisfactory in achieving the goals set by the Doha Round, which had begun in 2001 with the goal of putting development "at the heart of the multilateral trading system". Although the Ministerial did not collapse in the manner of Seattle and Cancún, the façade of breakthrough is misleading. Any progress was, at best, limited.

The impasse on reducing agricultural tariffs, facilitating industrial market access and opening up services outweighed the limited deals reached on reducing farm export subsidies by 2013, eliminating subsidies to cotton producers in the United States by 2006, providing duty-free and quota-free market access to products from the least developed countries (LDCs) by 2008 and provision of 'aid for trade'. There is also lingering doubt as to whether the new commitments will provide meaningful benefits. As the members have set a deadline of April 2006 to finalize full modalities and submit comprehensive draft schedules of commitments based on them three months later, i.e., by 31 July 2006, reaching an agreement in a short span is vital.

The EU decision to eliminate agricultural export subsidies by 2013 was already agreed upon in its 2003 Common Agricultural Policy. Developing country members hoped that such grants would be phased out by 2010. Eliminating export subsidies yields just 2 percent of the theoretical gains from free trade in agriculture, according to the World Bank. Besides, domestic farm subsidies still continue in the EU. Furthermore, agricultural market access, including the treatment of 'sensitive list', remains a hurdle to achieve full agricultural trade liberalization.

The Ministerial Declaration, which calls for an end to all cotton subsidies to US farmers, follows the decision of the WTO Dispute Settlement Body's ruling in April 2005 that such forms of support were illegal under WTO rules. It is far from clear whether cotton producers (mostly African LDCs) would gain, as they do not export cotton to the US and domestic subsidies to cotton producers in the US would continue. In what is regarded as the most significant achievement of the Hong Kong Ministerial, the developed country members were called upon to provide, by 2008, duty-and-quota free access for LDC exports with at least 97 percent of tariff line coverage. Although welcome, such Special and Differential Treatment measures would need to consider the undiversified export basket of LDCs. The 3 percent exemption accounts for 330 tariff lines, which would deprive LDCs' access for nearly all of their products, including textiles, sugar, rice and leather.

Aid is required for implementing trade reform measures in developing countries (particularly LDCs) to build the supply-side capacity and trade-related infrastructure they need to benefit from WTO Agreements and more broadly to expand their trade. However, it must be recognized that such aid cannot be a substitute for the development benefits that will result from an ambitious conclusion to the Doha Round, particularly on market access. Japan, the EU and the US have committed to provide US$ 10 billion, Euro 2.7 billion and US$ 2 billion as 'aid for trade' but it is unclear to which countries and for which sectors such aid would be directed. If such aid were either 'tied' or 'donor driven', it would undermine its effectiveness.

The trade liberalization agenda needs to urgently address the three main issues stipulated by the DDA: agricultural market access, non-agricultural market access (NAMA) and services. In agriculture, the members have already agreed to structure their tariffs into four bands for reduction, but are yet to agree on thresholds for developing and developed countries. They also need to agree on how to treat 'sensitive products' for exemption from liberalization.
As in farm subsidies, a date as to when market access would come into effect is essential. On NAMA, industrial tariff reduction formula provides for a 'Swiss formula' but the number of coefficients remains unspecified. This largely reflects position of developed countries, who favor two-coefficients and developing countries, who advocate a multiple-coefficient approach linked to each country's average tariff rate. Irrespective of the number of coefficients, the formula would only be meaningful if it reduces tariffs and eliminates tariff peaks and tariff escalation, in particular, on products of export interest to developing countries.

The pre-Ministerial draft on services was marked by controversy as its provisions contained mandatory language requiring the members to enter into 'plurilateral' agreements. The Ministerial Declaration later addressed this issues by stipulating that liberalization in services should pay heed to member countries' development levels while they are required to submit final draft schedules of commitments by 31 October, 2006.

The Ministerial was also unsuccessful in terms of the lack of consensus among the major economic powers - the EU, the US, Japan, Canada and Australia - who have openly stated that their ability to compromise on agriculture depends on reciprocal concessions on NAMA by major developing economies including Brazil, China and India. Developing economies are in no mood to budge from their respective positions unless the industrialized countries make renewed offers on reducing agricultural tariffs and lowering domestic farm subsidies. Similarly, negotiations on services are plagued by the problem of linking liberalization in services to concessions in both agriculture and industrial products.

Despite the veneer of progress during the Hong Kong Ministerial, significant progress is required before the Doha Round can be considered as being "back on track". Unless these outstanding differences are resolved, the Doha Round will still be "off the rails". However, the WTO is the only global forum wherein the goal of promoting free and fair trade can be realized. Any kind of skepticism would have to be assessed in terms of its expanding membership. Saudi Arabia joined as the 149th Member on 11 December and around 30 countries are in queue to join the multilateral trade bandwagon.

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