Progress on Global Trade Negotiations – More Than Meets the Eye

By January 30, 2006Trade

You know, some people say that watching the Doha Round of global trade negotiations is about as exciting as watching grass grow. Others disagree and argue that watching grass grow is much more exciting.

They say this, of course, because progress in the World Trade Organization’s (WTO) global negotiations is so slow, and frequently it looks as though no progress is being made at all. When last we looked at the Doha Round, the world’s trade ministers were in Hong Kong where the WTO Ministerial meeting was being held. They agreed the next important meeting would be in Davos, Switzerland, at the end of January on the fringes of the annual World Economic Forum traditionally held there.

Reading the press, it seems like nothing happened in Hong Kong, and Davos was just more of the same. But that’s not true.

You have to know where to look.

And when you look at the key areas, it is plain that progress is really being made. Progress IS slow, that is true. But when you have 150 countries that all have to agree, you have to marvel that any progress can be made at all.

Readers of my Dec. 13-18, 2005, Hong Kong blogs know that the meeting ended with few decisions, and that the major issues were sidelined as everyone focused on the smallest and poorest countries, countries that account for about one percent of world trade.

But it is important to understand that the focus on the poor countries was an absolute prerequisite. If steps to help these desperate countries hadn’t been taken, no forward movement would be possible on other issues. The Doha Round of trade negotiations (named after Doha, the capital of Qatar, the Middle Eastern country where the current round of trade negotiations were kicked-off) is actually called “The Doha Development Agenda.” Helping the poorest countries develop, then, is essential.

And Hong Kong really did result in some accomplishments. The U.S., the European Union (EU) and others agreed that they would end agricultural export subsidies by 2013. Decisions were made to allow almost all exports of the poorest countries to have duty-free and quota-free access to industrial nation markets. And agreement was reached to negotiate “trade facilitation” – customs rules that affect trade. Also, participants agreed that the major issues that could not be agreed at Hong Kong should be resolved by the end of April (“April 31st,” as one weary U.S. negotiator said after being up for more than 48 hours straight).

The big issue – the King Kong of issues – is getting the EU to make big cuts in its huge agricultural protection and allow genuine market access for farm products. That’s the key to the whole enchilada because without that access, the United States politically cannot cut its own huge agricultural subsidies – and getting the United States and Europe to stop distorting global agricultural markets is what developing countries (especially the poorest ones) need more than anything else.

This issue has been stalemated for a long time. The United States tried to crack it open last year by making a major offer to cut U.S. agricultural subsidies – but only if the EU opened its market. The EU made an initial offer (well below what everyone believes is needed) and said it wouldn’t budge further unless other countries made offers to open up their manufactured goods and services markets. The EU insists that they have to get balance out of these negotiations; it wants to see others put money on the table – particularly the advanced developing countries like China, Brazil, India and about a dozen more (because that’s where the high tariffs are).

These countries, though, have insisted that they won’t put offers down until the EU moves much further. And the EU has said “no” (or, more properly, “non!”) until the high tariff countries offer to open their manufactured goods and services markets. This is the great standoff that has kept everyone in their respective trenches.

Now, it looks like – just maybe – the meeting at Davos may have broken this endless circle. With a lot of prodding from the Chief U.S. negotiator Ambassador Rob Portman saying that all issues have to move together, the advanced developing countries may now be willing to put some money on the table and show how far they are prepared to open their markets if they get what they are seeking. So instead of saying “you give us all we want and then we’ll decide whether we give you anything,” they may now be willing to do a simultaneous negotiation.

If so, the WTO negotiations will have taken a major step at Davos. April (whether 30th or “31st”) is coming up quickly, leaving little time for agreeing on negotiating methods. And December 31st, the hard deadline for completing the Doha Round, is racing towards us as well.

Keep your fingers crossed because American manufacturers have a big stake in the success or failure of these negotiations. In my next blog I will explain why.