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Doha Round: Going, Going, Gone

Despite continuing half-hearted attempts to "conclude" the decade-long Doha Round of trade talks under the World Trade Organisation, the round is effectively dead though no country wants to say so. There have been many guilty of refusing to work out a fair package for all countries, but none are more responsible than the United States and the head of the organisation.

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Agenda (DDA) died on Friday 29 April 2011

Doha Round: Going, Going, Gone

and Osama bin Laden (OBL) was killed on Sunday 1 May 2011”, says Lehman, suggesting that “had there been no 9/11 there D Ravi Kanth would not have been no DDA, which was

Despite continuing half-hearted attempts to “conclude” the decade-long Doha Round of trade talks under the World Trade Organisation, the round is effectively dead though no country wants to say so. There have been many guilty of refusing to work out a fair package for all countries, but none are more responsible than the United States and the head of the organisation.

D Ravi Kanth (dravi_kanth@hotmail.com) is a journalist and commentator on trade and international economy issues based in Geneva.

T
rade negotiators and commentators seldom agree on anything. But there is a growing consensus among them on one issue: the Doha Development Agenda (DDA) trade negotiations of the World Trade Organisation (WTO) have stopped breathing. Governments are not prepared yet to declare them dead for the fear of blame and finger-pointing; so they have not formally abandoned them either.

But obituaries are already being issued about the demise of the Doha Round. It is time to give up on trying to “save” the Doha Round, says Susan Schwab, the former US trade representative. Schwab played a major role in engineering the breakdown of the negotiations in 2006 and 2008. “That the pretence that the deal will somehow come together at long last is now a greater threat to the multilateral trading system than acknowledging the truth”, she says, without referring to the common refrain of the self-proclaimed “guardian” of the WTO Pascal Lamy that 80% of work in the Doha Round is completed. “Prolonging the Doha process will only jeopardise the multilateral trading system and threaten future prospects for WTO-led liberalisation and reform”, argues Schwab.

Doha and 9/11

Jean-Pierre Lehman, a well-known commentator on trade issues and the founder of the influential Evian Group issued a differ ent message. There are “two interrelated deaths” that occurred almost simultaneously, he says: “The Doha Development

july 30, 2011

launched only a few weeks later in November of 2001”. His reference to 29 April is about the informal meeting of the Trade Negotiations Committee (TnC), in which Lamy spoke about “fundamental different views” and a “clear political gap” on what ought to be the ambition in reducing tariffs on industrial goods.

“The reality is the [Doha] round is dead”, says a trade negotiator, who is closely immersed in global trade negotiations but prefers not to be quoted. “The small package that is now being negotiated, which is unlikely to materialise, can hardly be called ‘developmental’”, he argues. “It is basically meant to declare that the Doha Round is over and we will meet again sometime in 2013”, the negotiator adds. “Even if a limited agreement materialises”, he says, “the least developed countries (LDCs) will have little or no additional benefits from duty-free and quota-free market access or cotton”.

The unmistakable reality in Geneva and elsewhere is that Doha is difficult to be retrieved from its deathly-state. There are umpteen reasons as to why things have reached a point where differences remain irreconcilable. Schwab blames the emerging countries – China, India, Brazil, and South Africa – for not shouldering “a somewhat heavier share of the burden of any multilateral economic agreement, making their positions consistent with their more dominant positions in the global economy”.

Her major criticism is that the Doha negotiations’ “heavy emphasis on rigid formulas for tariff cuts, rather than a looser combination of targets and negotiations over

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specific openings, has generated ‘formula and flex’ models that undermine both the negotiating dynamic and any potential outcome.” Both in industrial goods and agricultural products, she says, the emerging countries will not make commensurate contributions given the “anachronistic” categorisation of countries – particularly developed and developing – and the current mandate. She argues for a new category of emerging countries – China, India, Brazil, and South Africa among others – to be hived off from the current classification of developing countries. Her stance is reflected in day-to-day US positions even on the small package which is meant only for the poorest countries.

Why the Doha Round?

It is always a puzzle as to why the US and its former US Trade Representative (ustr) Robert B Zoellick launched the Doha Round along with the then European Union Commissioner Pascal Lamy in 2001 with a detailed mandate. Why did both of them negotiate with Brazil, India, and Australia on a framework agreement in July 2004, that was premised on the less-than-fullreciprocity principle in which developed countries would undertake higher tariff cuts in industrial products than developing countries by using the “Swiss” formula? Why did the next USTR, Robert Portman, who is now an influential Republican senator, agree in 2005 to the Hong Kong Ministerial Declaration that provided a road map on cotton, duty-free and quotafree market access, and an agreement (“paragraph 24”) that stipulated the principle of proportionality in the commitments that members would make between agriculture and industrial goods?

After all, these agreements involved considerable negotiations and investment of political capital. India opposed the launching of the Doha Round but later it came down to negotiate an outcome based on these mandates. China became a member of the WTO only in 2001. It was not remotely associated with the construction of the mandate. Brazil was the only country among the three major developing countries now being targeted by the US which agreed to the launch of the Doha Round with other industrialised countries. Therefore, for the US to turn around and say now that we do not accept these mandates unless China, India, and Brazil pay what we want in industrial goods and agriculture amounts to a historic devaluation of its leadership role in the global economy.

Little wonder then that the rapid deterioration in the health of the DDA is in large part due to the elephant in the room which shifted the goalposts time and time again. Washington has turned the DDA negotiations upside down on the plea that the current deal on the table is not acceptable to its trade lobbies. It wants to extract a heavy price from China, cloaking it under the general rubric that emerging countries – India, Brazil, and South Africa now and Argentina and Indonesia later – must deliver. The US chants the mantra that there are changes and upheavals in the global trading framework which have brought the emerging countries to the centre stage. Therefore they must make a commensurate payment in market access gains by bringing their industrial tariffs in chemicals, industrial engineering, and electricals and electronics close to zero. On other industrial products, the US says, the three emerging countries must reduce their current bound tariffs from the Uruguay Round below their applied levels.

Brazil says the US demands would amount to adopting a coefficient below 8 in the Swiss formula which would wipe out their industry in one go. And this would force deve loping countries to reduce their industrial tariffs by between 60 to 70% on industrial pro ducts from their current bound levels. (The developing countries were willing to agree to a coefficient of 20 which would effectively bring their import tariffs to around 10% with a set of flexibilities to shelter their sensitive tariff lines.) It is not the US alone which is making these intransigent demands. Other indus trialised countries, particularly the European Union (EU) and Japan, are also behind the US in raising the bar beyond the Swiss formula.

In agriculture, neither the US nor the EU is willing to agree to a radical approach based on the Swiss formula or sectoral tariff cuts on farm products. During the recent face-off between these two trans-Atlantic trade partners on one side, and Brazil, China, and India on the other over sectoral tariffs on industrial goods, the Brazilian official challenged Brussels to agree on a sectoral tariff agreement on beef, poultry products, and sugar. Brussels immediately rejected the proposal saying new demands cannot be raised at this late hour.

The political climate too is not suitable for a deal following the financial crisis and the worsening fiscal problems and rising unemployment in the industrialised countries. While the US and its partners at Geneva, particularly the EU, managed to shift the goalposts on what ought to be the terms of “payment” from the Doha Round, after the July 2004 framework agreement the developing countries allowed themselves to be dragged from one compromise to another. Consequently, the Doha mandate as set out in 2001, the July 2004 framework agreement, and the 2005 Hong Kong Ministerial Declaration, is now of little validity

Role of Director-General

While in a member-driven organisation like the WTO, the member-countries are held responsible for the current endemic paralysis, director-generals too have to take the flak if things are bungled on their watch. As the WTO works on the basis of a mercantilist trading framework – embodying the principles of comparative advantage, competition and efficiency, and consumer welfare among others – its operational head is bound to be judged by the performance-criteria that is applicable for the heads of governments or business enterprises. More than anything, the directorgeneral is also the chairman of the TNC that oversees the negotiations. Some analysts, therefore, apportion the blame for the sordid state of affairs in the Doha Round on the director-general and his whole approach to trade negotiations. They argue that the round is fated to die because it has been continually “bungled” by successive director-generals and more so, during the last six years. Mike Moore of New Zealand who launched the Doha Round in 2001 and Supachai Panitchpakdi from Thailand were low key in comparison to the incumbent Pascal Lamy who played a dominant role in the negotiations in his different avatars.

Lamy’s stint as European Trade Commissioner, prior to the WTO, was an uneventful one. Those who have seen him at

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the forefront of the WTO ministerial meetings in Seattle in 1999 and in Cancun 2003 testify how he lost the plot when he pushed hard for trade and labour and the controversial Singapore issues – investment, competition policy, government procurement, and trade facilitation. While the Seattle meeting broke apart amid street protests on labour and controversial issues, including environment, Lamy’s role at Cancun will be remembered for his “denial” of the negotiating realities and vehement refusal to accept the writing on the wall. Indeed, these two traits – persistent “denial” as well as refusal to pursue a truly “bottom-up” approach – have been in abundant display since Lamy began his innings as head of the WTO.

In his first intervention at an informal ministerial meeting in Zurich in September 2005, Lamy goaded the EU to deliver more in agriculture market access in response to a shallow US proposal to cut its most trade-distorting amber box payments while keeping the critical countercyclical payments intact. Surely, it was too early for a director-general, who was there in his new office for only 10 days, to ask any member to do this or that without first surveying the negotiating terrain from an impartial and non-partisan perspective. Obviously, he must have assumed that getting the US on the board was imperative to conclude the Doha Round.

At the Hong Kong Ministerial Meeting in December 2005, Lamy came under intense criticism and ridicule from his own successor as trade commissioner, Peter Mandelson, in the green room meeting for shifting the focus from all other issues to the elimination of export subsidies in agriculture. Six months after Hong Kong, Lamy committed a major blunder, when he unilaterally decided to suspend the negotiations in July 2006. It was an open secret that the decision to suspend the negotiations was to enable the George Bush administration to tide over its difficulties because of the domestic congressional elections later that year. Of course, the meeting brought into open the differences between the US and the EU on agriculture, particularly over tradedistorting domestic subsidies. But it also caused a void and irreparable damage to the negotiations.

Between July 2006 and 2008, Lamy invested heavily in the G-4 (the US, EU, India, and Brazil), the G-6 (the US, EU, India, Brazil, Australia, and Japan), and the G-7 (the US, EU, India, Brazil, Australia, Japan, and China) formats. His spin doctors would justify this approach on the basis of the “variable geometry” as issues could not be resolved through the participation of the entire membership. Instead of focu s ing on a genuinely bottom-up approach, the director-general’s preferred approach was to push his agenda in the G-7 meetings first, then at a bigger meeting of trade envoys in a green room meeting, and finally at an informal TNC meeting. His latest gameplan to use an amorphous group like G-90 – comprising Africa, Caribbean and Pacific (ACP) countries which he had created as EU trade commissioner immediately after the Cancun meeting in 2003 – has not had a positive effect on the negotiations, particularly on the US.

Lamy Sidelined

Trade commentators also remain sceptical about Lamy’s “top-down approach” and preference for “pressure-cooked outcomes”, which he deployed during the failed 2006 and 2008 meetings. His technocratic managerialism and the constant obsession with presentation in the media have failed to convince global leaders about his ability to conclude the Doha Round. In an embarrassing development last year, German Chancellor Angela Merkel and the British Prime Minister David Cameroon asked Peter Sutherland to work on a strategy to salvage the Doha Round. “He [Lamy] is neither late Arthur Dunkell who worked quietly with a small group of members without public glare to produce the draft Final Text, nor Peter Sutherland who was quintessential political mover and shaker of things”, says a negotiator who worked with all of them.

A joke doing the rounds at the Centre William Rappard in Geneva, which houses the WTO, captures the mood: For Lamy, “free trade is Christ and Christ is free trade” and he wants a third term in 2013 to conclude the Doha Round! Notwithstanding the intransigent positions adopted by the US, Lamy always worked hard to facilitate Washington’s positions on agriculture, industrial goods, environment goods, and fisheries subsidies. His continued emphasis on a “cocktail” approach was aimed at enabling the US to press ahead with the bilateral meetings with China, India, and Brazil. It is a different matter that the three countries refused to buckle under US pressure.

As NTO members proceed for a summer recess, there is a sense of gloom and doom that the WTO might never recover from the Doha damage. Even attempts to cobble a small “developmental” package involving duty-free and quota-free market access, cotton, and rules of origin for the ldcs is proving to be difficult. The US says it is difficult to accept these issues without first addressing its issues of interest – on environmental goods which is like a super sectoral agreement, fisheries subsidies, export competition, and trade facilitation. But a large majority of developing countries and LDCs are asking why they should pay the US for a package that intends to cater to the poorest countries.

The US says that unless China concedes on all the developmental issues, particularly complete market access for cotton and reduction of its cotton subsidies, on its part, it would not be able to address cotton where it stands guilty of providing huge subsidies to its farmers. Similarly, trade facilitation, which helps industrialised countries more than the developing countries and ldcs, can become truly developmental only if the long-pending rules of origin are first resolved. Since 1998, the US and some industrialised countries have blocked an agreement on non-preferential rules of origin on one pretext or the other.

In a nutshell, WTO increasingly reflects the drama that unfolded in Joseph Conrad’s “heart of darkness” – with its prized Doha project caught in an abyss!

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