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

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WTO: Which way forward?
Published: The Kathmandu Post, 14 May 2004
By: Ratnakar Adhikari

After the Cancun fiasco in September last year, it appeared almost impossible for the then 146 member countries of the World Trade Organisation (WTO) to bring the derailed trade talks back on track. The United States Trade Representative (USTR), Robert Zoellick said that his country would sign bilateral and regional deals to open up markets, as if he cared less about the future of multilateral trading system espoused by the WTO. Similarly, his counterpart Pascal Lamy, Trade Commissioner of the European Union (EU), charged the WTO of being a medieval organisation.

Developing countries, which were jubilant on the failure of the Cancun Ministerial, celebrated the event as a victory of developing countries’ unity over the divide and rule tactics of the developed countries. However, in retrospect, everyone realises that failure to conclude the Doha Development Agenda (DDA) within its deadline, i.e., 1 January 2005, which now looks impossible due to the Cancun debacle, has made everyone worse off. The successful conclusion of the DDA would have pumped US$ 355 billion worth of additional income into the global economy – with almost half of it accruing to the developing countries.

In the past eight months, much water has flowed under the bridge. Many have realised their mistakes and even paid the price for their arrogance. For example, Zoellick’s arrogance was evident when he nearly dismissed the prospects of multilateral trading system, with the expectation that his country would be able to sign several bilateral and regional trade deals, which would provide them the similar market access opportunities which a successful conclusion of the DDA under the WTO would have offered.

However, he has miserably failed in realising this objective. Soon after the Cancun fiasco, the potential members of Free Trade Agreement of the Americas (FTAAs) met at Miami, but achieved nothing due to difference in positions of Brazil and Argentina on the one hand and the USA on the other. Even during the last meeting of the group in Peublo, Mexico the two sides could not bridge their differences. It is, therefore, least likely that the USA would be able to impose its will on the other countries of the FTAA and clear the deal in its favour – as it would have wanted at the WTO.

Let us not be misled by numbers. True that the USA has been signing several bilateral agreements with a number of small countries, they are largely insignificant from the perspective of global trade. The only major bilateral free trade arrangement (FTA) singed post-Cancun, which the US can boast of, is the one with Australia. Given this reality, the USTR has come to his senses. He has now realised, the hard way though, that the only means to realise the true potential of trade liberalisation is through the WTO.

Unsurprisingly, he has already written letters to his counterparts in almost all the member countries of the WTO appealing for their support to revive the DDA. In February, he conducted a whistlestop tour of Asian capitals to push the DDA, but could not achieve the success he desperately needed.

The problem seems to be with his attitude, rather than intention. He never realises that the WTO members are not willing to negotiate with him in the right spirit, unless and until he offers them something meaningful in return, such as duty free market access for least developed country (LDC) products, honesty in phasing out of textile quota, reduction of peak tariffs on products of export interest to the poorer countries, and genuine commitment to agricultural liberalisation.

Look at his EU counterpart, who nearly lost his job due to his inability to save the Cancun Ministerial. Trade analysts often congratulate him for his strong shoulder – a shoulder that takes on the responsibility of defending the indefensible agricultural policy of the EU. The previous trade commissioner of the EU – Sir Leon Britton – too was not less defensive when it came to European agriculture, but Lamy seems to be overtly protective of the European agricultural policy probably because of his loyalty with the people of his country, France – the largest recipient of agricultural subsidies provided by the European Commission.

It is to his (dis)credit that he has tactically linked the negotiations on agriculture (which boils down to a reduction of trade distorting subsidies and high tariff barriers by the EU), to some other issues not directly related to trade. Popularly known as Singapore issues (because that is where they were initiated), they include global rules on competition, investment, trade facilitation and transparency in government procurement.

However, a group of 90-plus developing countries, mainly Africans, Caribbeans and LDCs, would not want to negotiate on any of the Singapore issues unless and until their demands for fairer trade – reduction in agricultural support by the rich countries, sincere commitment to take up implementation issues and special and differential treatments – are addressed. Despite Lamy’s call to drop two issues – competition and investment – from the WTO, they did not budge during Cancun. It is unclear why they would change their stance now.

However, Lamy seems to have learned the hard way that unless and until the EU liberalises agricultural trade, the DDA will not appear anywhere near the zone of feasibility. Accordingly, on 10 May he made the following commitment: “The EU is ready to eliminate subsidies on farm exports in an effort to move sluggish world trade talks forward, provided its main partners do the same.” (emphasis added).

This conditional offer from Lamy comes at the time, when EU’s largest trading partner and incidentally second biggest agricultural protectionist, is not likely to make a significant reduction in agricultural support because of impending presidential election. Despite the official commitment from the US to reduce agricultural support, it is least likely to go beyond window dressing.

Commitments from Zoellick and Lamy are not like golden rules for they can be easily broken. History is replete with the examples of such broken promises. Therefore, the statements of both the leaders should be taken with a pinch or rather fist of salt. However, if they come out with the real proposal to negotiate with a genuine intention and a transparent roadmap, without any intention to mislead, deceive, dupe or cheat the developing countries, trade negotiators from developing countries should participate in such negotiations.

Since Nepal too has formally become a member of the WTO, it is the responsibility of our trade negotiators, like those of other developing countries, to keep in mind the following issues. Firstly, since the big two are under a greater degree of pressures from their constituency than us to revive the world trade talks, we can afford to be more rigid on some issues if need be. Secondly, in order to get the genuine commitment from these two, we have to prepare our negotiating positions well and become a part of a credible alliance, which will hold on despite the inevitable arm-twisting.

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