So what happened? Well, the proximate cause of the failure was the hang-up on India’s and China’s insistence that they and other developing countries be able to break their WTO tariff bindings if they felt they had to protect themselves against surges of food imports if prices fall.

Why was that such an important issue? Because tariff bindings are one of the pillars of the GATT-WTO system ever since 1947. A binding is an inalterable promise that you will never ever raise tariffs above that bound rate. You exchange concessions with other countries and bargain on rates, and what you end up with is the rate at which you will lock your tariff in.

If the Doha Round had permitted bindings to be violated for some food products, it would have meant loss of market access for existing food exports, but would also have meant that a basic premise of the WTO had been undone - with the inevitability that this undoing would spread.

The issue was so central that it really consumed full attention, a fire so intense that it drew the air out of other issues. Everything else halted. And in the end, the two sides could not agree. Those wanting protection just would not be satisfied with something within the present rules.

But more broadly, there was little meeting of minds here. Pascal Lamy, the Director-General, took a real risk in calling this meeting. He figured if there was any chance of doing a deal this year, the agreement on terms of negotiation had to be done now. If the basketball was going to go through the hoop, there had to be a backboard off which to bounce it - and that was this meeting of ministers.

But, to be trite, it was a bridge too far. Issues just weren’t ready, whether they were in manufactured goods or agriculture. Ministers were being asked to make decisions on matters on which their deputies had been unwilling to agree - and based on my experience, just because you bring in someone with a higher title, that country’s position is not going to change.

On NAMA - Non-Agricultural Market Access - we actually made a little progress. The non-tariff barrier text was so non-controversial that no one even mentioned it. On tariffs, we have known the tariff cutting formula is too weak to open markets for us, so we had to look for deeper cuts in major industrial sectors. The goal here in Geneva was to move Brazil, China, and India away from absolute refusal to even talk about sectorals and to a position where they would at least be willing to enter into beginning to negotiate sectorals.

This was the NAM’s bottom line. I don’t know if, had the Ministerial gotten to that point, we would actually have achieved that objective, but all three of the countries were moving somewhat in that direction. On the other hand, the terms were weakening somewhat, so we don’t know what would have come of this.

Where do we go from here? NAM President Governor Engler has called for a cooling-off period. Everyone must recognize that there is now no way to conclude these negotiations before the end of this Administration. The new Administration needs to come on board and begin looking at this, and there will also be a new EU Commission.

There is no point in picking up where we left off. People need to think about what they really want and what they are willing to give up for it. But we must resist the wags who can’t wait to pronounce this the end of the WTO. Absolutely not. And here I am going to agree with Indian Trade Minister Kamal Nath, who said, “My confidence in the institution of the WTO remains intact, and we will take this up and move forward.”

The World Trade system should actually be viewed the stronger for having just gone through a difficult process of disagreement. It is flexible enough to withstand this, so long as we do not become its enemies and accuse the institution of failure, rather than a failure of some large new countries to realize that it is give and take, not take and take.

The NAM will certainly be looking at ideas on how to move ahead. One excellent idea that perhaps can gather traction is that of an environmental sectoral that would reduce or eliminate tariffs on products meant to help clean the environment. There are other possibilities as well. Since non-tariff barriers were non-controversial, maybe some of those could move ahead - so long as we get away from the idea nothing can happen outside a huge round.

I want to end my last blog from Geneva by saying how proud I am of Amb. Susan Schwab, Presidential Assistant Dan Price, Commerce Under Secretary Padilla, Ambassadors John Veroneau and Peter Allegeier, and the entire U.S. interagency negotiating team. They worked ceaselessly, with little sleep, looking for ways to make this thing work. If anyone could have made it happen, it was them. But even they couldn’t make it work when others just said no.

Thanks for reading these blog posts, and I look forward to coming back to Washington and to home.
NAM’s Man in Geneva
Frank Vargo

For the previous reports from Frank Vargo, NAM’s vice president for international economic affairs, please click here.

Statement from Ambassador Susan C. Schwab, U.S. Trade Representative

“While we made good progress during the past week, it is clear that despite our best efforts we will not be able to reach a breakthrough at this time.

“There should be no question, we made important progress. Even today, 5 of the 7 countries in the leadership group were prepared to accept the Friday proposal by Director General Lamy. We gained insights into what members are prepared to offer on services at the signaling conference this weekend, greater clarity on what a modalities package might look like, and saw a constructive attitude in attempting to solve many other issues that have been preventing progress in the negotiations.

“To ensure that the advances we made this week are not lost, the United States will continue to stand by our current offers, but we maintain that they are still contingent on others coming forward with ambitious offers that will create new market access. So far, that ambition is not evident.

“Regrettably, our negotiations deadlocked on the scope of a safeguard mechanism to remedy surges in imported agricultural products.

“Any safeguard mechanism must distinguish between the legitimate need to address exceptional situations involving sudden and extreme import surges and a mechanism that can be abused.

“In the face of a global food price crisis, we simply could not agree to a result that would raise more barriers to world food trade.

“Certain members sought increased flexibilities that would have allowed them to apply tariffs that, in some cases, would exceed their current WTO bindings. This would have moved the global trading system backwards – exactly contrary to the purposes of a negotiation intended to expand trade and economic growth.

“Throughout these negotiations, the United States has been strongly committed and willing to make the tough choices necessary to achieve an ambitious breakthrough. Since the launch of the Round, we have worked tirelessly, traveling hundreds of thousands of miles, spending countless hours negotiating in good faith, all to sustain the Round and bring together a development outcome that would open new markets and create new trade flows.

“The United States remains committed to demonstrating the leadership necessary to achieve an ambitious result. I look forward to conferring with my counterparts in the coming weeks as we work to achieve that outcome.”

-# # #

Updated and bumped to the top.

From a statement from NAM President and CEO John Engler:

I regret to say that, despite incredible efforts on the part of U.S. Trade Representative Susan Schwab, Assistant to the President Dan Price and the entire U.S. negotiating team, WTO members declined to agree on terms that could have provided greater opportunities for trade of manufactured goods.

Time and again at the Geneva meetings, China and India reiterated how they could not lower their barriers, but insisted we must lower ours. Revealing the sort of negotiation he had in mind, Indian Trade Minister Nath, for example, remarked that cars will no longer be made in Detroit and Düsseldorf but in Asia, a process he seeks to foster by maintaining India’s impenetrable barriers against U.S. cars while having virtually open access to our car markets.

The “Special Safeguard Mechanism” demanded by China and India for their agricultural sectors was the final straw. That mechanism would have violated one of the most basic tenets of the world trading system: nations do not violate their tariff bindings by raising tariffs above the legally-bound levels. Once an exception is made, no matter how small, the entire world trading system could begin to unravel. The Doha Round was supposed to move world trade forward, not backwards.

 It is regrettable that China and India in the end refused to stick with the rules and wishes of the majority of countries. However, we must face the reality of what they did. It is important to note, however, that other developing countries, especially Brazil, made it plain during the Geneva talks that they were prepared to enter into give and take negotiations, and that is a positive development.

For Frank Vargo’s reports from Geneva, please go here.

See also USTR statement, news coverage.

From Genf:

Statement of Ambassador Susan C. Schwab on conclusion of Green Room meeting

July 25, 2008

“We have a tentative agreement on a path forward. There are a number of significant issues to be resolved, and each one of us have to see how the final modalities package concludes before we can pass judgment on whether to support a final modalities package but I think the biggest concern we have is that a handful of large emerging markets threaten this round for the rest of us and for the other developing countries who are so critically dependant on a successful development outcome of this development round.

“Tomorrow we take a next, vital step in the direction of what we hope will continue to be a successful modalities process, and that is in the services signaling conference. That is another basis on which the United States will assess the success of a modalities package. We look forward to that development tomorrow.

“And in the meantime, the United States will continue to play a leadership role that we have played this week. We will work with our trading partners and work with the WTO Secretariat to be a part of the solution. I look forward to seeing you over the weekend and into next week.”

USTR passes on the tip that the WTO is webcasting the Doha sessions in Geneva this week. Go here, logically enough: www.wto.org

Director-General Pascal Lamy opened the sessions at an informal meetings of the heads of delegations where the talk turned to the establishment of modalities in Agriculture and NAMA, “modalities” being the “nuts and bolts—such as formulas or approaches for tariff reductions—that underpin each country’s final commitments.” (From a USDA set of trade definitions.) NAMA is the Non-Agricultural Market Access talks, the portion of the negotiations that manufacturers are focusing on.

That being explained, here’s Lamy:

I can think of no stronger spur for our action than the threats which are facing the world economy across several fronts, including rises in food prices and energy prices and financial market turbulences. There is widespread recognition that a balanced outcome of the Doha Round could in these circumstances provide a strong push to stimulate economic growth, providing better prospects for development and ensuring a stable and more predictable trading system. Heads of State and Government across the world have repeatedly expressed their overwhelming commitment to this endeavour, and we must not let this opportunity slip.

And from Barron’s, two apt and accurate paragraphs:

U.S. EXPORTS ARE AT AN ALL-TIME HIGH, thanks to a weak dollar. But keeping exports growing will require more than a flabby currency. This is why Ambassador Susan Schwab, the U.S. trade representative, will be in Geneva this week to urge the world’s fastest-growing economies — China, Brazil, India, and Taiwan — to reduce their high tariffs in key sectors like machinery, electronics, medical devices, cars, chemicals and agricultural goods. A final agreement is far off — as long as seven to 10 years, according to trade experts.

As a crucial first step, Schwab will try to get the developing economies simply to agree to negotiate deals sector by sector in the years ahead. That could be a hard sell. Frank Vargo, vice president for international affairs at the National Association of Manufacturers, says that thus far, the developing countries have only showed an interest in lowering tariffs on chemicals.