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Apr 1st 2003 - From The EconomistGlobal Agenda
The Doha trade negotiations could founder if there is no progress on agriculture soon. A vital deadline has been missed with no sign of a breakthrough
"A SERIOUS setback". "Disappointed but not surprised". Just some of the reactions from key participants in the Doha round of international trade talks after a key deadline on agricultural negotiations was missed on March 31st. Negotiators at the World Trade Organisation (WTO) in Geneva are now so entrenched that they seem incapable of shifting their positions. The participants failed to reach agreement on a framework for the detailed talks on agriculture which will, ultimately, determine the success or failure of the Doha round. Stuart Harbinson, chairman of the agriculture talks, has said that the necessary compromises "remain elusive". Some observers are beginning to think the unthinkable: that the schedule will be delayed to such an extent that progress becomes extremely difficult, or that the round might even collapse.
European Union (EU) intransigence has been singled out by many participants as the main stumbling block. But though agriculture is at the heart of the Doha round's difficulties, it has not been the only issue causing trouble. As deadlines come and go, so the prospect of making substantive headway fades. Already, the agenda for a key ministerial meeting in September in Cancun, Mexico, is becoming unmanageably crowded. The stalemate on agriculture will make things much worse.
The battle lines are clear--and they are uncomfortably reminiscent of the transatlantic dispute about policy on Iraq. America wants to see agricultural export subsidies scrapped over a five-year period, to cut domestic subsidies to 5% of the value of farm production and to cap tariffs at no more than 25%. Such sweeping cuts horrify the EU. Europe is ready to cut subsidies, but by nothing like as much as America wants to see. Efforts to bridge the gap have so far failed: compromise proposals have been rejected by America as being too weak and by Europe as going too far.
There is no disguising the depth of transatlantic differences. But it is not just the Americans and Europeans who are at odds with each other. There is no doubt that the EU is deeply attached to its notoriously expensive Common Agricultural Policy (CAP) and no doubt either about the lengths to which France, in particular, will go to protect it. The French president, Jacques Chirac, stitched up a deal with his German counterpart, Gerhard Schröder, last October to ensure that the CAP would be protected for years to come. Efforts are nevertheless under way to reform the CAP, but if they fail, the chance of progress in the Doha talks will shrink.
Several other countries, including Japan, also provide generous support to their farmers and tend to hide behind European intransigence. And America's attachment to abolishing farm support sits oddly with the farm bill which President George Bush signed last year and which provides for massive new subsidies for farmers. Mr Bush's trade negotiator, Robert Zoellick, argues nevertheless that America is ready to slash subsidies if those countries with higher levels of support cut back proportionately more, to produce a level playing field.
The divide over agriculture threatens to undermine Doha because the developing countries, which object most strongly to the trade-distorting subsidies provided to farmers in the industrial world, were such reluctant participants in the first place. Many poor countries felt they got a raw deal from the earlier Uruguay round and were not convinced that they had much to gain from a new round. They were persuaded to go along with Doha because the rich countries held out the prospect of significant concessions in several areas, including agriculture.
So far, the poor countries' initial scepticism appears justified. The promised changes to existing trade agreements, aimed at helping developing countries, have yet to materialise--even though the deadline was the end of last year. A deal to improve poor countries' access to cheap medicines was also due to have been concluded by the end of 2002: America's refusal to go along with the deal agreed by everyone else scuppered that. Now it is clear that, for the time being, talks on farm trade are going nowhere.
In the current international climate it is hard to see how all these issues could be resolved at the September meeting. The Doha round was launched in November 2001, just weeks after the terrorist attacks on America. There seemed at the time a genuine desire on the part of rich and poor countries alike to strengthen international co-operation on a broad range of issues; and a recognition in the industrial world of the importance of ensuring that developing countries participate fully in the global economy.
Since then, of course, the atmosphere has soured: the war in Iraq, and the events that led up to it, have opened up fresh divisions, not least among the rich countries themselves. So far there have been relatively few attempts to link economic- and foreign-policy issues by the key transatlantic participants. But that might change, especially after the news of the WTO's preliminary ruling on American steel tariffs.
When Mr Bush imposed the duties to protect the American steel industry last year, he sparked protests from just about every steel-exporting country--all were outraged by what they saw as a flagrant breach of international trade rules. America has since made a large number of concessions--many products have been excluded, and many countries, including the poorest, exempted. But a WTO ruling on March 26th found in favour of those countries that have filed formal complaints, including Europe, Japan and China.
If confirmed, the WTO's finding will set the scene for yet another row. Some American lawmakers have already reacted angrily to the ruling and started to argue that the WTO is exceeding its authority. Talk of America leaving the WTO is likely to follow, even if it comes from a small minority. All this could, in turn, revive other bilateral disputes, subdued during the Doha talks: about unlawful tax concessions for American companies and about the EU's refusal to import genetically modified crops. It is hardly the context in which to encourage hopes of a breakthrough on agriculture.
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