Friday, March 7, 2008

Doha Trade talks: They ain't dead yet

I wish I knew more about trade and its complexities. But then, some days I wish I played guitar. The Doha round of trade talks – beginning in 2001 and suspended in 2006 – still has a long way to go. Back in 2001, it was hoped that this latest round of trade agreements would unlock global trade in sectors where many tariffs and other barriers still exist: agriculture, services and manufacturing. Also, says the Council on Foreign Relations, negotiators dreamed of “correcting distortions that have effectively barred poor, rural nations from a share in world agricultural markets.”

Of course, negotiations have hit major bumps. But that hasn’t stopped two major committees working under the auspices of the World Trade Organization to attempt to tackle the biggest stumbling blocks – agriculture and non-farm trade goods. The have been busily creating a blueprint to reopen the discussions.

I have to think that part of the difficulty of this round is the growing influence and power of the second world, those former developing countries like Brazil and India and China that will drive the world’s economy in the future. On top of that, African countries are also gaining momentum – the continent’s high growth rate, the importance of its oil and other natural resources, the fact that most parts of the continent is better run than ever – and this is what causes so much consternation from the rich world.

More than a few observers point the finger of blame at that same developed world – especially the United States – for putting the brakes on the Doha round. Farm subsidies were the culprit. Or more tellingly, the U.S. Congress, and to a lesser extent, the White House’s inability (and/or unwillingness) to begin to pare down its multi-billion dollar agriculture support program.

In response, both Europe and the U.S. have tacked downwind, away from broad trade agreements and began concentrating on single country (or, block of country in the case of Europe) free trade agreements: US-Jordan, for example. Or the EU’s Economic Partnership Agreements with, say, the African Great Lakes States. These smaller agreements, says Brookings Institution, are expensive to broker and not too terribly beneficial. And the EPAs of the EU seem to be more than mildly decisive on both continents.

However, like Keith Richards, the Doha Round is not dead yet. The World Trade Organization still thinks negotiations finished by the end of 2008, which would be just a few days short of George W. Bush riding off into the sunset. (U.S. Democrats appear to be keener on protectionism than free trade.) Major stumbling blocks remain, but at least a few are guardedly optimistic.

Where does Africa fit in all this? recently sat down with WTO head Pascal Lamy, who is in charge of referring the talks.

Here are a few excerpts.

What are the sticking points for Africa in each of those areas – agriculture, industry and services?

Well, it's as difficult to speak about Africa as a whole as it is to talk about Asia or Latin America as a whole. South Africa is not Kenya, Kenya is not Senegal. And in WTO we don't have one-size-fits-all. We have tailor-made solutions depending on the level of development.

On agriculture, African countries are mostly on the offensive. They want the United States, the European Union and Japan to reduce their subsidies [paid to farmers to produce certain types of crop]. They want the U.S. and EU to reduce their tariffs [on agricultural imports] and they will get that. The question now is exactly how much they will get.

On industrial tariffs, African countries are more on the defensive. But only very few of them – South Africa, Egypt, Tunisia, Morocco – will have to take tariffs cuts according to a general formula. All the other African countries, because they are LDCs or have a low number of fixed tariff rates will be exempted from cuts in industrial tariffs.

Overall… the conclusion of the LDCs' conference which took place in Lesotho – and the majority of African countries are LDCs – is that they are pushing for a deal as they are the ones in this negotiation who will gain the most from a success while paying a very modest price.

LDCs would benefit from duty-free, quota free treatment on 97 percent of their exports. Rich-country cotton export subsidies would be eliminated straight away and other forms of trade-distorting support would be reduced by an even higher percentage that the cuts on support for other crops. Cotton exports from LDCs would receive duty-free, quota free treatment.

If the round fails, it will be bad news for LDCs. This is why a Doha agreement is so important.

How do the regional Economic Partnership Agreements (EPAs), over which there is currently so much controversy, relate to Doha? Would the potential for conflict be reduced if Doha was concluded?

International trade is regulated by different sources. WTO does the multilateral part, not the bilateral part. If South Africa decides to have a free trade agreement with India or the EU, it's not for the WTO. But there is a simple medical check that the conditions laid down in multilateral rules for bilateral deals – which is that they are really seriously trade-opening – need to be met. So EPAs are beyond the WTO remit.

Then you have the systemic issue of what the right cohabitation is between bilateral trade agreements and multilateral trade. On this there are various sides of the coin. Bilateral agreements are sometimes good because they acclimatize an economy to being more open than it is multilaterally. But it is sometimes is a big problem because you create a preference between two countries… and then in order to keep this preference, people will resist WTO tariff reductions, which is very bad for the multilateral trading system because it creates what [economist Jagdish] Bhagwati calls a spaghetti bowl of preferences… So it's a mixed bag.

I think that the way ahead is probably to reinforce the multilateral discipline by which bilateral deals have to abide.

If you were an African trade minister, what would you be doing now?

The rules of the WTO on farming have not been that development-friendly because they were drawn up at a time when the weight of developing countries around the table was not that big… Those [who subsidized their agriculture] had the upper hand for a long time in the international system. Agriculture has taken such a prominent position [in negotiations] because of the politics of the international system….

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