Tags: Global Trade, Jason Simpkins

Doha Discussions Could Take Another Seven Years

By , Money Morning •

By Jason Simpkins
Associate Editor

For seven years, the Doha Development Round has been the staging ground for the World Trade Organization’s push for liberalizing global agricultural trade, but if this week’s round of discussion in Geneva, Switzerland is any indication, a global trade deal is nothing more than a pipe dream.

The Doha round of global trade negotiations began in November 2001, with the goal of liberalizing agricultural trade and encouraging growth. The World Bank estimates that a deal would add $100 billion a year to a weakening global economy, while others say an international compromise would stabilize food markets, lower tariffs, and spur food production.

However, time and again discussion has been derailed by the reluctance of wealthier countries to reduce government farming subsidies, and the unwillingness of poorer countries to open their markets to U.S. goods and services.

Talks began Monday in Geneva, with a preliminary outline previously agreed upon by participating delegations and revised on July 10 by the committee’s chairman, Crawford Falconer, New Zealand’s WTO ambassador. The Geneva talks were designed to address three main points of contention:

  • Domestic support (subsidies),
  • Market access (tariffs),
  • And export competition.

Two of the most contentious topics, biofuels and export controls, were left off the table.

Falconer’s July 10 draft placed the United States in a category of countries that offer between $10 billion and $60 billion in subsidies. Countries in that category are being asked to reduce the amount of government assistance offered by 66%-73%. The European Union, which is in a class of its own with more than $60 billion in farming subsidies, would have to cut its aid by 75%-80%.

Peter Mandelson, the European trade commissioner, opened this week’s talks by pledging the EU would reduce its agricultural tariffs by 60%, the highest and most specific figure so far. But the offer was brushed aside by developing nations, led by Brazil, who don’t think the wealthier countries of the West have gone far enough.

“It's typically Mandelson,” a diplomat from one developing country, who was not authorized to speak publicly told the International Herald Tribune. “He is trying to sell something that is not new, saying it is the maximum he can do. This 60% is the consequence of what they have accepted in the course of negotiation.”

European officials insist that the figure was reached by combining an existing offer of a 54% reduction in tariffs with new estimates for the impact of tax cuts on tropical goods. Regardless of the figure’s origin, developing countries were not impressed. And the United States didn’t fare any better.

Susan Schwab, the U.S. trade representative, was determined to take a positive approach to the discussion, insisting the United States was “willing to do [its] share.” On Tuesday, the United States offered to lower its ceiling on farm subsidies from $48 billion a year to $15 billion.

The reduction of 69% fit nicely into Falconer’s established 66%-73% goal. However, opposition was quick to point out that that figure is still comfortably above the nation’s $7 billion in subsidies currently being offered by the government.

“This is a nice try but it is not enough,” said a spokesman for the Brazilian foreign minister, Celso Amorim. “It is not the final offer they can do.”

Schwab countered by pointing out that soaring commodities prices have already reduced a wide array of price-linked subsidy payments and the $15 billion cap would have meant real cuts in spending in seven of the past 10 years.

“Anyone suggesting a number outside the ranges in [negotiating] text is not serious about achieving an agreement,” she said. The negotiating text stipulated a range of $13 billion- $16.4 billion.

EU trade spokesman Peter Power came to the defense of the United States.

“This is a reasonable offer at this stage,” he said. “It is not the furthest the U.S. could go, but we assume this depends on remaining negotiations and a balance being achieved in other sectors.”

Still, other assessments were far more scathing. The Institute for Agriculture and Trade policy called the offer “absurd,” and Oxfam International describing it as “vastly inadequate.”

“Fifteen billion [dollars] is around twice what the U.S. is [really] spending at the moment. They would not have to cut a penny off current subsidies as a result of this offer,” Jeremy Hobbs, executive director of Oxfam International told Agence France-Presse.

While the United States and European Union may not have put their best offers forward, opposition at the talks has responded with little more than righteous indignation. Both parties have failed to breach even a jumping off point for further negotiations and the Doha may require another seven years of debate before any progress whatsoever is made.

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