Business   

Glimmer of hope after trade ministers' Geneva meeting

No country has given up its commitment to multilateral agreement

IN RETROSPECT it seems that the recent meeting of trade ministers — to take the Doha round of discussions substantially forward — did not have much of a chance of success. Trade issues that the WTO members have been grappling with are by nature technical as well as complex. The really constructive work of trade negotiators is behind the scenes and seldom accessible to the public at large.

Far too many differences in negotiating positions remained on the eve of the ministerial. That was clearly visible in the negotiating texts circulated ahead of the meeting. These, essentially discussion papers, are prepared after the differences on various issues have been substantially narrowed down during previous negotiations, so that political leaders meeting subsequently (at the ministerial) are in a position to make the final compromises and clinch an agreement.

Divergent positions

That happy position did not prevail at Geneva. In agriculture — the most contentious area — there were as many as 760 "bracketed'' sections, indicating a substantial divergence in the trading positions of members. As a result, it was perhaps inevitable that the talks would fail at Geneva. Indian Commerce Minister Kamal Nath's action in returning to India ahead of the closure of the meeting was meant to convey India's acute displeasure over the intransigence of the leading trading blocs, the U.S. and the EU. One may find fault with his action but one must acknowledge the fact that at Geneva the differences were seemingly irreconcilable.

The key divergences are over agricultural subsidies and tariff reduction and in non-agricultural market access (NAMA). There are major differences between the U.S. and the EU on the one hand and between developed nations and developing nations on the other.

The U.S. has faced pressure from both the EU and developing countries to reduce its massive agricultural subsidies. In return it wants 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 all export subsidies by 2013, will reduce protectionism only if other countries including the developing ones agree to a reciprocal reduction in manufacturing and services. India, Brazil and other developing countries want the developed world to act first. Inevitably the talks are deadlocked. The key question is who will move first and break the impasse.

With the WTO members missing an earlier deadline of April 30, the list of missed deadlines is disappointingly long. What is especially worrying is the lack of progress in narrowing the differences since the Hong Kong ministerial meet (December 2005).

Not hopeless

As is well known, the ministerial was held amidst considerably reduced expectations. As against the hope that two-thirds of the Doha agenda could be wrapped up there, the meet achieved far less, leaving a number of loose ends to be tied up in subsequent discussions. Its most significant achievement might well be the unanimous declaration by all 149 countries to continue with the talks.

That position has not changed radically even after successive failures in April and in early July. The outlook from now on may appear bleak but is by no means hopeless. No country has given up its commitment to multilateral negotiations.

Plenty of political vision is needed, however, to salvage the Doha round. The WTO Secretary General, who has admitted to a crisis in the negotiations, has been given the task of brokering a deal within the next month or so.

The odds seem to be against him but then the Secretary General may be banking on the fact that no country wants to come out of the trade talks. That is because while trade talks bring substantial economic gains, failure to reach an accord under the WTO framework will have some serious consequences too.

No alternative

For most countries including India multilateral trade agreements are the preferred option. Bilateral and other forms of preferential agreements are becoming popular everywhere only because the WTO framework has not delivered quickly. Bilateral agreements between developed countries and less developed ones have been inherently unfair to the latter. Besides, as recent Indian experiences with ASEAN suggest, negotiating a just and mutually acceptable trade treaty calls for utmost skill and diplomacy.

Though beneficial over the short-term, they may stand in the way of a broader multilateral trade treaty.

Also, the WTO has, through its successful disputes settlement mechanism, brought the rule of law to world trade. Failure of trade talks over the Doha round can, therefore, have catastrophic consequences. Although by no means spectacular, multilateral trade talks have in fact progressed considerably.

Among important trading countries there might have been frequent disappointment over the slow progress of the Doha round but none of them has countenanced abandoning multilateral negotiations.

C. R. L. NARASIMHAN

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Strategy to ensure better profitability
Goldrattspeak ... . and Theory of Constraints
Glimmer of hope after trade ministers' Geneva meeting
Capital gains bonds for tax relief on sale of assets notified with retrospective effect
New challenges for the government

Copyright © 2006, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu