Web articles

Out of the Doha deadlock?

By Biswajit Dhar

The collapse of Doha shows that the developing world will no longer accept a US-dominated trade regime

The Doha round of multilateral trade negotiations, which began in 2001, seemed to mark a watershed. For the first time, the negotiations witnessed the emergence of Brazil and India as powerful actors. This seemed to suggest a fundamental change from previous rounds of trade negotiations where only the US and EU had dominated. Also for the first time, development concerns were to be the focus of negotiations during this round. This demonstrated the rising collective influence of developing countries in the WTO agenda-setting process and hopes were high that a deal for development could be achieved. Yet, the negotiating process has witnessed disappointment after disappointment, and now the consensus seems to be that the round is virtually dead.

The breakdown in the latest round of negotiations in July occurred as developed countries failed to agree on the need to provide relief to vulnerable farmers that dot the agricultural landscape in developing countries. The negotiations collapsed after the United States rejected the demand made by India and China that developing countries should be allowed to make effective use of special safeguard measures (SSM), which allow for temporary emergency actions such as an increase in tariffs, in order to insulate their farmers from a sudden decline in international prices or surge in imports of agricultural commodities. Many would therefore argue that the recent stalemate in the Doha negotiations was the result of a technical disagreement ie an inability to formulate an appropriate regulation on SSM due to disagreements on the threshold for utilising these measures.

In my view, the malaise runs much deeper than a mere technical disagreement on a specific regulation. The underlying cause for the stalemate was the inability of the developed countries to accept an outcome that serves the interests of the majority of the WTO membership. The issues raised by the developing countries were, in fact, the cornerstone of the mandate for agricultural negotiations in the Doha round. The negotiating mandate, which provided for the establishment of a fair and market-oriented trading system through a programme of fundamental reform, included two key issues. First, the negotiating mandate spoke of reducing trade distorting subsidies granted by the large subsidisers in the developed world. Secondly, the mandate instructed the WTO members to negotiate rules that would enable developing countries to effectively take account of their development needs, including food security and rural development. SSM, which would function as a safety net to protect vulnerable farmers in the developing world within an international market distorted by farm subsidies, was clearly within the negotiating mandate.

However, the negotiations saw developed countries, in particular the US, focus almost entirely on tariff reduction issues. The demand that developed countries need to reduce farm subsidies so as to minimise distortions in markets for agricultural commodities was met with much resistance. Indeed, the US only agreed to cap its farm subsidies at $15bn, which is actually more than it spent in total on farm subsidies last year. It is evident that the US was seeking to pry open the markets of its trading partners through tariff reduction commitments that would have provided larger market access to its subsidised agricultural products without undertaking any substantial reforms in its own subsidies regime. Developments in the US domestic policy arena also indicate that it is not inclined to reduce farm subsidies. The 2008 farm bill, which provides the blueprint for US agricultural policies until 2012, has promised even more subsidies.

Despite the reluctance of the US to reduce agricultural subsidies, developing countries were still willing to compromise during negotiations on non-agricultural market access (NAMA), dealing with tariffs and non-tariff barriers for non-agricultural products. These negotiations witnessed considerable erosion of the special and differential treatment provisions for developing countries. In this area, "less than full reciprocity" in reduction commitments had been the cornerstone of the negotiating process, but this was effectively abandoned as the process wore on. Under the current tariff reduction formula proposed by Don Stephenson, chairman of the NAMA group, advanced developing countries would accept disproportionately high cuts in their bound tariffs.

Clearly, developing countries have accepted a dilution of their negotiating position in the interest of progress towards the conclusion of the Doha round. Besides a steep reduction in tariffs on non-agricultural products, the Stephenson paper included contentious issues such as the elimination of tariffs in a wide range of sectors within a stipulated period, and the liberalisation of trade in "remanufactured" products. Developing countries have argued that trade in "remanufactured" goods would be tantamount to giving unhindered access to used products from developed countries, which could sound the death knell for their domestic producers. Despite these drawbacks, however, the NAMA proposal would also benefit developing countries. With developed countries agreeing to reduce tariffs across the board, their products would no longer have to face extremely high tariffs in developed country markets. Nonetheless, there remain a range of issues other than agriculture and NAMA that were barely discussed during the recent negotiations. The lack of significant movement in the services negotiations is of particular concern for developing countries since many of them are seeking enhanced market access in a number of service sectors in major markets, particularly through cross-border transactions and the movement of natural persons.

The discordance between major participating countries on agriculture, NAMA and other issues indicates that the global community may have to wait for a while longer before the Doha round is concluded. The key reason for this is that although this round was ostensibly for development, in reality, developed countries and especially the US were unwilling to accord primacy to development concerns. Although developed countries believe that they can continue to dominate multilateral institutions, developing countries will no longer be coerced into signing agreements that are not suited to their interests. The Doha round has demonstrated that developing countries have become major stakeholders in multilateral trade negotiations. Their ability to assert their position in the face of US opposition exhibits the increase in their relative bargaining power as compared to the Uruguay round and other previous negotiations. As economic power becomes more dispersed, the US must realise that it can no longer expect that the WTO will serve only its own interests. At the same time, developing countries need to evolve a more cohesive strategy for collaboration. It is only when both of these processes occur that it may become possible to find a way out of the current deadlock and formulate an agreement that brings beneficial opportunities for all players.

Professor Dhar is head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, New Delhi