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Salvaging the Doha round

The failure of trade negotiators, who met at Geneva recently, to narrow their differences on the modalities of compiling detailed cuts in tariffs and agricultural subsidies is no doubt a setback to multilateral trade negotiations. After missing the April 30 deadline, member countries were exhorted to negotiate with a "heightened sense of urgency." But as the rather abrupt termination of the talks showed, differences have remained, and even widened in certain cases. The draft texts on modalities for agriculture and industrial products circulated ahead of the Geneva meet merely reiterated the differences. Among the major impediments to a possible deal has been the reluctance of the United States and the EU to climb down from their fixed positions on farm subsidies and non-agricultural tariffs. Faced with mounting pressure from both the EU and the developing countries to reduce its massive agricultural subsidies, the U.S. demanded more ambitious reductions in EU farm tariff and deep cuts in industrial tariffs by India and other developing countries. The EU, which had agreed to eliminate export subsidies by 2013, will reduce agricultural protectionism only if other countries, including the developing ones, agree to a reciprocal tariff cut in manufacturing and services. This is in direct contrast to the position taken by India, Brazil and other developing countries. With each side wanting the other to move first, the talks are deadlocked. An agreement on the modalities before the end of this year paving the way for a wrap up of the Doha round seems highly unlikely.

Even though the odds are lengthening, all does not seem to be lost as yet. The WTO Secretary General, Pascal Lamy, who has admitted "to a crisis" in negotiations, has been given the task of evolving a compromise as soon as possible. There is even talk of holding another ministerial meeting in 15 days, which will naturally be preceded by intense negotiations. All member countries have, despite their obvious disappointment over the outcome at Geneva, reiterated their commitment to strengthening the multilateral trading framework. There is also an increased awareness that, despite the grim prognosis, the Doha round has shown considerable resilience in the recent past and can move forward, given the right type of political leadership. The developing countries did achieve some success at Hong Kong, although not enough. While the likely economic gains from a freer, more orderly global trade are well known, the consequences of a failure can be catastrophic. All countries will hasten the process of entering into preferential agreements, especially bilateral ones. Recent experience of India and other countries suggests that this is only a second best arrangement and could make any future multilateral agreement difficult to achieve. Most important perhaps, a failure will undermine the WTO's highly successful dispute resolution mechanism, which has brought the rule of law to world trade.

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