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Wednesday, Aug 04, 2004

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REVIVAL OF DOHA ROUND

FOR THE FIRST time since its launch in 2001, the Doha Round of negotiations of the World Trade Organisation has yielded a reasonably balanced agreement that should satisfy both rich and poor countries. Yet to describe the deal as a victory for India and the developing countries would be premature. The July 31 pact only lays down the framework for a final set of agreements on a large and complex agenda. Difficult negotiations will have to be conducted over the next two years to flesh out the details on agriculture, industrial products, services, and a number of other trade issues. There is, however, no doubt that the WTO round has been resuscitated from the collapse in Cancun in September 2003. It is clear that developing country unity has, by and large, continued to hold and this has forced the developed countries, mainly the United States and the members of the European Union, to climb down from their intransigent positions. The surest sign of change from the past is that the 2004 Geneva accord is far more accommodating of developing country interests than the proposals placed on the table at Cancun.

The gains are most obvious in agriculture, the most contentious subject. The developed nations, which hand out an estimated $350 billion of farm subsidies every year, have agreed to eliminate export subsidies (which hold down global prices), reduce a variety of domestic subsidies (which give their farmers an unfair advantage), and make disproportionate cuts in high import tariffs (which keep out exports from poor countries). The developing nations, on the other hand, can make less than proportionate reductions in import duties on farm products, take emergency measures to control imports, and, if they can afford to, continue to provide financial support to domestic agriculture. The flexibility on customs duties is something India fought hard for and can justly be satisfied with. There are, of course, caveats, ambiguities, and uncertainties. The rich countries will have the freedom to control imports of so-called `sensitive products', an escape clause that can neutralise the impact of tariff cuts. The commitments to reduce subsidies are sufficiently vague for Washington and Brussels to be able to continue with their massive support programmes. And neither timeframe nor numbers have been inscribed in the agreement, leaving the crucial details to be settled in future talks. A positive outcome is that the European Union has agreed formally to the deletion from the Doha agenda of three extremely controversial `Singapore' or new issues — foreign investment, competition policies, and transparency in government procurement. Only trade facilitation — harmonisation of customs procedures — remains out of the original four new issues that just a year ago threatened to wreck the Doha agenda.

With the focus on agriculture and the Singapore issues, the WTO has had little time to tackle the important area of industrial tariffs. This could turn out to be the new `deal breaker' of the round, for the Cancun proposals — which call for huge reductions in customs duties in the developing countries — will be the basis for further negotiations. Services, another important item on the agenda, is a silent controversy waiting to erupt. The developed countries have not given up on demands that the developing countries should open their health, education, and many other social services to foreign suppliers. There is much work to be done before the Doha round lives up to the claim of being a `Development Round'. But for now, the developing country majority can take credit for demonstrating — for the second time in a year — that the WTO cannot always function as a rich country club.

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