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

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Who is Zoellick fooling?
Published: The News, 22 February 2004
By: Pradeep S Mehta

Is the US willing to work with the right spirit of trade liberalisation? History shows that it is not

Bob Zoellick will never learn. Following closely on the heels of his EU counterpart Pascal Lamy, Zoellick is currently on a whistlestop tour of Asian capitals to push the Doha Round, and adding new words to the trade lexicon, each smelling of arrogance and bullying. At Tokyo, he warned that countries reluctant to push the global talks will be 'left out', as America cuts bliateral deals on their own.

At Cancun, Zoellick spoke in an equally undiplomatic manner about the world being divided in the two camps of 'can-do' and 'won't-do' countries. Hardly a reassuring message for countries who are grappling with the stalled agenda with the hope of achieving something this summer, at least a framework for negotitations on the modalities.

Who is Zoellick fooling? Soon after Cancun, the Free Trade Agreement of the Americas met at Miami to achieve nought. Brazil and Argentina did not go along. A recent meeting at Peublo, Mexico also saw the two strong sides locking their horns over differences, which are too deeply entrenched. At Miami the US wished to push investment, stronger IPR rules etc, while Brazil pushed for agriculture (which was the major cause of Cancun's failure). Brazil, the leader of G-20 (southern alliance which emerged at Cancun), did not show any appetite for tarriff reductions within the proposed FTAA. Other bilaterals, which the US are pursuing are generally insignificant, save and except that with Australia.

Is the US willing to work with the right spirit of trade liberalisation? History shows that it is not. Just after the successful conclusion of the Doha meeting, the US brought about a new farm subsidy bill, which enhanced doles to the farm sector in the US by more than half. The steel tariffs issue, too, were a sign of increasing protectionism, though now relaxed under the domestic consumer lobby pressures. Similarly, the Byrd amendment, which distributed the spoils of anti-dumping and anti-subsidy rulings, has been struck down by a WTO panel, but is yet to be scrapped.

Indeed, Zoellick has sent out a letter to all the 146 members in January urging them to move on the stalled Doha Round, and also made an offer to address export subsidies in farm goods. This letter merely reassures others that in spite of the US presidential elections, it is prepared to move ahead. But skeptics say that it is one thing to negotiate a deal and another thing to give it real effect, even when it is agreed. History is replete with examples of unkept promises. For example, in spite of a clear mandate to negotiate implementation issues at Doha, nothing was done during the whole year of 2003.

Lately, the process issue at the WTO was also held to ransom by the US. New chairs were to be elected for the General Council and all subsidiary bodies, and it was not in favour of Japan taking up the GC chair. However, that bump has now been removed and things will move forward at Geneva. The new appointments has, however, signalled something for the opponents of Singapore issues (investment, competition, transperency in government procurement and trade facilitation), as no chairs have been appointed for these working groups. Except, that on trade facilitation--which is on the path of least resistance--the WTO Deputy Director General, Rufus Yerxa will continue to consult members.

Speaking about the process issue, Lamy has been repeatedly speaking about giving more powers to the Director General of the neolithic (sic) WTO so that he can move contentious issues. But what he doesn't realise is that WTO is about hard-nosed economic issues, and members will not accede any further powers to the DG. There is too much at stake.

The EU is also not covering itself in glory. True that it has a notorious record of protectionism in agriculture, it has been trying to deflect the same by bringing on board new trade-unrelated issues. Earlier when agriculture negotiations were going on in the past, EU had introduced the issue of animal-welfare standards. In a recent discussion paper released in February, which is yet to be adopted, EU has proposed that countries should be allowed to ban imports from countries that did not share their 'national values and standards'. This will be a nightmare, if implemented, as it will be highly subjective and divide the globalising world further.

WTO rules do allow banning imports of goods under Article XX on several grounds, such as health, saftey etc, but the WTO jurisprudence also says that it should be tested on the grounds of 'necessity' and 'least trade restrictive'. Hormone-treated beef and genetically modified food are some examples of trade friction, as being against the consumer interest, have been quoted in this paper.

Be that as it may, both the two trading giants continue to come up with confidence-reducing measures, which vitiate the negotiating atmosphere at Geneva. Another such measure is challenging the role of UNCTAD in the trading system. Ever since the WTO came into being in 1995, UNCTAD's role as a negotiating forum has diluted. However, it has continued to be engaged in generating excellent analyses and providing advice to poor countries on trade negotiations.

On the eve of the UNCTAD XI, to be held in Sao Paulo in June 2004, the US and EU have suggested that UNCTAD's role be limited to providing technical assistance and capacity-building. This would mean that the work of analyses will either be stopped or reduced. As it is the developing countries, save and except few big ones, have a very limited capacity to analyse, and have thus been dependent upon UNCTAD et al.

Thus the levels of confidence and trust in the trading system continue to be eroded. That will cerainly have an adverse effect on moving on the Doha Round. This is other than the fact that at Geneva, negotiators are often too immersed in the nitty gritty of negotiations, ie, looking at even the commas, semi-colons and full stops very carefully. Given this scenario, the parties will need greater resolve to move the agenda forward. That was the half-empty glass scenario. There is a half-full glass feeling too, as it is in the interest of all to move the Doha round. If properly negotiated, benefits will also accrue to the developing world. In the words of the former GC chair and the Uruguayan ambassador Carlos Perez de Castillo: "We are all blinking, but things can move only if we blink together".

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