Real Trade Negotiations Still Lie Ahead

The weekend deal on the Doha global trade round has restored impetus and direction to the World Trade Organisation, just when it seemed in danger of losing its way. But despite the efforts to achieve the breakthrough, it only clears the way for the long-delayed start of a marathon to come.

When trade ministers launched the round in November 2001, they assumed they would by now be entering the last lap of the negotiations to open markets for agriculture, industrial goods and services. Instead, the project originally supposed to last three years has at best reached the half-way stage.

The agreement, reached after five days of round-the- clock bargaining in Geneva, will bring no immediate cuts in trade barriers. Rather, it marks the end of talks about talks and sets broad guidelines for the conduct of future negotiations.

Its biggest achievement is to entrench the European Union’s commitment to eliminating its agricultural export subsidies, long blamed for distorting farm trade by encouraging the dumping of surplus production on world markets.

The US has in principle accepted curbs on its food aid and export credit programmes, which have a similar impact. Washington and other rich WTO members have also agreed to negotiate reductions in the domestic subsidies they use to prop up their farmers’ incomes.

Those decisions go some way to fulfil their pledges to make the Doha talks a “development” round that will raise living standards in poor countries, for many of whose populations agriculture is the main livelihood.

However, no date has been set for dismantling farm subsidies, while the compromises needed to conclude the weekend agreement have left much of it vague and ambiguous. Resistance from both rich and poor countries has resulted in only a sketchy blueprint for cutting agricultural tariffs. Plans for liberalising industrial products are equally skeletal.

The provisions liberalising trade in services the fastest-growing sector in many economies amount to little more than an exhortation to governments to negotiate harder. Years of wrangling will be needed to sort out these and the many other unresolved issues. However, the agreement’s political significance lies less in its content than in the fact that it was concluded at all.

The first attempt to launch the Doha round collapsed amid acrimony and violent street protests in Seattle in late 1999. After it finally got under way largely in response to the worldwide shock created by the September 11 terrorist attacks it nearly foundered at the WTO’s Cancun meeting in September.

Most trade experts believe another debacle could have sunk the project and damaged severely, perhaps fatally, the already dented credibility of the WTO and the rules-based multilateral trade system it manages.

That could have prompted the US whose chief trade official, Robert Zoellick, has led recent efforts to revive the talks to withdraw from an active role in the organisation, and unleashed a barrage of legal challenges, overloading the WTO’s disputes settlement tribunals.

Many observers think failure would also have spurred a worldwide stampede into discriminatory bilateral and regional trade deals, undermining multilateral disciplines, fragmenting the global market and raising the costs of doing business across borders. That those risks have been averted, at least for now, is due partly to governments’ collective fear of failure. The outcome also owes much to the efforts of Mr Zoellick, Pascal Lamy, EU trade commissioner, and Celso Amorim, Brazil’s foreign minister. Setting aside past disagreements, they jointly drove the talks forward.

Mr Lamy and Mr Zoellick both badly wanted a success in Geneva before they leave office in a few months. ‘Although France had sought the right to block the deal, claiming it was contrary to European interests, Mr Lamy and an overwhelming majority of other EU governments squashed its objections.

For Mr Amorim, the negotiations are a vital component in Brazil’s strategy of positioning itself as a world power and leader of the Group of 20 developing countries, a loose coalition whose members include China, India and South Africa.

But those pressing for an agreement would have made little headway if other governments had not shown greater readiness than in the past to negotiate constructively.

The WTO’s Seattle and Cancun meetings failed partly because of the tactics of poorer countries. Many were ill equipped to negotiate and seemed more interested in using the organisation as a forum for political grandstanding than in engaging seriously in a drive to remove trade barriers.

The resulting impasses led some observers to despair of ever making progress in an organisation with 147 mainly poor members, most of which do little international trade. Mr Zoellick said after Cancun that the WTO risked degenerating into empty posturing reminiscent of the United Nations General Assembly.

This time, poorer nations came better prepared and disciplined. African countries, which precipitated the final collapse in Cancun, fielded a capable and level-headed negotiating team headed by Rwanda. It kept the continent more or less united while reining in its more militant representatives.

In contrast to previous WTO meetings, many poorer countries bargained hard on the nuts and bolts of international trade policy. Although they won only part of what they wanted for example, on US cotton subsidies they kept their tempers and threatened no mass walkouts.

That suggests a learning process is under way that may reduce an important stumbling block in future negotiations. However, it is unlikely to be enough to ensure that the talks move ahead when they resume sometime after November’s US elections.

This weekend’s result should make it easier for the next US president to persuade Congress next year to extend until 2007 his authority to negotiate international trade agreements. But that is only a necessary condition for keeping the Doha round going. Political commitment and leadership will also be required, and it is unclear where they will come from. Much of the momentum so far has depended on the determination of Mr Zoellick and Mr Lamy to push ahead.

It is too early to know who their successors will be, still less whether they will be prepared to invest as much time and energy in the Doha talks. Some observers fear that if John Kerry becomes US president, opening world markets will rank low on his administration’s agenda.

The departure of Mr Zoellick and Mr Lamy will leave a big hole in a close-knit network of relationships among top trade negotiators that has taken years to develop. In a business where personal chemistry and mutual trust among a few key individuals are critical, they will have to be rebuilt from scratch.

Furthermore, despite ritual expressions of support for the Doha round from some business associations, few top managers of large companies in the US and Europe appear enthusiastic or willing to expend much political capital lobbying for global trade liberalisation.

Perhaps their attitudes will change if the talks make sustained progress and start to offer tangible commercial gains. But it will take until next year, and probably much longer, for that to become clear.