July 17, 2008: THE ABSURDITY OF DOHA: how can ministers accept this deal?

Geneva Update

17th July 2008

THE ABSURDITY OF DOHA: how can ministers accept this deal?

By Carin Smaller and Anne-Laure Constantin, TIP/IATP

CONTENTS

I. MR. LAMY'S GAMBLE: what are the chances of a Doha deal?

II. A LOST VISION: how did things get so complicated?

III. DISCONNECTED FROM REALITY: will trade ministers turn their backs on the global crises?

IV. LOOKING FOR SOMETHING DIFFERENT: the need for new leadership

V. IMPORTANT DATES TO REMEMBER

VI. DOCUMENTS

I. MR. LAMY'S GAMBLE: what are the chances of a Doha deal?

WTO Director General Pascal Lamy will convene a mini-ministerial meeting in Geneva starting July 21, 2008. Lamy has invited around 30 trade ministers for an intensive phase of negotiations expected to last for up to one week. The negotiations will take place as a Green Room process, named after a room in the WTO where the most exclusive trade negotiations have taken place. The aim is to reach agreement on modalities (concrete commitments, including numbers) for liberalizing trade in agriculture and manufactured goods.

Lamy's decision to invite ministers now, he says, is based on political declarations in support of reaching a Doha deal by the end of 2008. If members are serious about this objective, says Lamy, then they need to agree to modalities by the end of July. But Lamy has ignored reality. The domestic context in a number of WTO member countries paints a different picture-there is no real desire for a Doha deal. Pascal Lamy's bet seems to be that by raising the stakes of this deal he can convince members to compromise on their deeply entrenched positions. Over the past few months, he has embarked on a world tour aimed at portraying Doha as an essential part of solving the global food, financial and climate crises.

Both the timing and the process of this meeting are raising serious questions in Geneva. First, it is obvious to all WTO members that the four remaining months of 2008-August being a vacation month at the WTO-will not be enough to finalize the highly technical "scheduling" phase that follows the establishment of modalities. So the end of July deadline is already too late for a deal in 2008. But everyone keeps pretending.

Second, there is deep concern about the way Lamy will handle the process. Will the 120 WTO members that are not part of the Green Room be involved in the decision-making? Will they have the right to reject a deal if it does not take into account their interests? Is there any role for the General Council (the highest decision-making body of the WTO outside the Ministerial Conference)?

Lamy has promised to uphold transparency at all times (see the link to Lamy's June 27 speech below). Lamy has said that the Trade Negotiations Committee (TNC)-which supervises the Doha negotiations under his authority-will meet every morning next week and give members who are not in the Green Room a chance to comment on the smaller group's progress. But it is not clear how their specific concerns will be taken into account. It is not clear how modalities, if they are agreed to in the Green Room, will be presented to the rest of the membership.

The chance of success for the ministerial meeting depends on whether Lamy can convince ministers that a highly technical deal is worth some compromise at this time. If what is on the table gets agreed to, then technicians will have won over politicians. If ministers fail to come to an agreement this time around, it will be the third high level failure in a row (the two previous failures were in June 2006 and June 2007). The WTO secretariat will do everything possible to stop this happening. Given the obvious lack of enthusiasm from members, a middle-ground solution is now being talked about: another interim deal, where some progress is locked in, but the conclusion of Doha is left to later. This seems to be a minimum if Members are to keep the Doha Agenda alive.

II. A LOST VISION: how did things get so complicated?

When the Doha Round was launched in Doha, Qatar, 2001, WTO members pledged to reform the trading system to improve economic development and to alleviate poverty. The needs of developing countries were to be at the heart of the reform process. Member states strongly reaffirmed their commitment to sustainable development and to the establishment of a fair and market-oriented trading system.

Access to markets for agricultural and manufactured goods and for service providers were important, but the Doha vision was broader. The ministers agreed that the priorities for the Doha Agenda included redressing imbalances in existing WTO agreements, strengthening special and differential treatment (SDT) measures for developing countries, reforming the Agreement on Agriculture to address structural inequities in agricultural trade, and making fundamental changes to the rules on intellectual property rights, particularly in relation to public health, to ensure the rules did not exacerbate poverty.

The Doha Round in 2008 is radically different from the one envisaged in 2001. The latest negotiating texts on agriculture and manufactured goods are a complicated mess, reflecting a narrow set of commercial interests rather than a vision for how to reform the WTO. The ideological obsession with trade liberalization, which drives the overall imperative of agreeing a round of agreements, coupled with countries' deepening concern that trade liberalization might not be so great after all, at least not for all countries and all sectors, has given the negotiations an almost farcical bent.

The agriculture and manufactured goods texts number over one hundred pages each. The bulk of the pages contain formulae for cutting tariffs and subsidies, accompanied by a series of exemptions or special treatment for individual WTO members or for groups of WTO members, or for particular goods, depending on a range of different circumstances. Almost every WTO member has an objection to the tariff and subsidy formulae for one or more products. As a result, there are general formulae, exemptions to formulae, additional disciplines on exemptions to formulae, and qualifications on disciplines.

For example, the U.S has negotiated an amendment to what was article 5.6 (known as the Blue Box) so as to accommodate its own agricultural interests and avoid having to make significant cuts in its domestic support spending. The U.S. is also demanding (and being allowed) its own base period to calculate the new round of subsidy reductions.

Almost all members have negotiated exemptions to the agricultural tariff reduction formula, using the "sensitive" and "special" products categories. The sensitive products category is predominantly for developed country members. Rice, wheat, dairy, sugar, beef, poultry and pork are some of the products that are expected to be listed for special treatment, taking into account the commercial interests of exporters (such as the U.S., Australia, New Zealand, Brazil, Argentina and Uruguay) but also protecting the producers and firms in the major importers (again the U.S., and the EU, Japan, and Canada).

The special products category is designed to help developing countries shield agricultural products important for food and livelihood security and rural development. The special products category divides developing countries into sub-groups. Small and Vulnerable Economies (SVEs) and countries with uniform tariff structures, are given the choice of a higher number of special products or of applying a different type of formula to their tariffs, known as the Uruguay Round formula.

The main element in the negotiations on manufactured goods, known as non-agricultural market access or NAMA, is the formula to cut tariffs. The formula is so unpopular among developing countries that almost all of them have negotiated some additional exemptions. There is an exception for Botswana, Lesotho, Namibia, South Africa and Swaziland, which are organized in a regional bloc called the South African Development Community (SADC). Another exception is given to Argentina, Brazil, Paraguay and Uruguay, which are organized in a regional bloc called Mercosur.

Then there are countries that did not think the tariff cuts were big enough. These countries proposed complete tariff elimination for particular products of export interest to them-known as sectoral initiatives. Participation in these initiatives is not mandatory, but strongly encouraged. There are sectoral initiatives for automobiles, clothing and textiles, electronic goods, chemicals, forests, and fish. A list of the different sectoral initiatives is included in the most recent NAMA text (see the link below).

The compromises required to reach agreement on the Doha Agenda have effectively killed the Agenda itself. It has been clear for several years that the development angles were gone: the commercial imperatives trumped any interest in rectifying the important mistakes made under the Uruguay Round, or in developing better rules from the perspective of developing countries, particularly the perspectives of least developed countries. Now the agenda is a mess from any perspective, including that of free traders.

The task of WTO member states is to keep working at the framework for multilateral trade rules to improve its performance in efforts to alleviate poverty, increase employment, strengthen economies and ensure the sustainable use of natural resources. This means making sure trade rules between countries are fair, that commerce is properly regulated, and that procedures are democratically agreed, transparent and inclusive.

It is within such a framework that the pursuit of specific commercial interests could happen. Negotiations could take place bilaterally or plurilaterally under the framework of a new multilateral trading system, so long as they did not jeopardize governments' efforts to realise the right to food, for example, or their obligations under the U.N. Framework Convention on Climate Change.

Today's trade rules are skewed to reflect the interests of developed countries. There are no rules to discipline the anti-competitive behaviour of the most powerful commercial actors. Over the past few years, steps have been taken to improve procedures to make them more transparent, democratic and inclusive, but there are still enormous hurdles to overcome.

III. DISCONNECTED FROM REALITY: will trade ministers turn their backs on the global crises?

The world is facing a series of crises in food, water, energy, and finance. There is an urgent need for leadership at the global level, not least from trade negotiators, to cooperatively address these crises.

The model of trade promoted and implemented by most governments exacerbates the crises we face. And the current Doha negotiations continue on the same irresponsible trajectory, ignoring the realities people face today and for the future. If concluded, the Doha Round is likely to make food prices more volatile, increase developing countries' dependence on food imports, and strengthen the power of multinational agribusiness in food and agricultural markets. (See IATP "Seven Reasons Why the Doha Round Will Not Solve the Food Crisis" link below.)

In the framework of the negotiations on trade in services, developed countries are pressing developing countries to further liberalise their financial services sectors. But the global financial crisis that started last year precisely demonstrated the damage that the deregulation of financial markets has caused. Governments should not at this time give up their ability to regulate financial actors. (See Myriam Vander Stichele, "New efforts to move GATS negotiations ignore negative impacts on financial and food crises," link below.)

Finally, and partly as a result of the various crises that are affecting everyone's daily lives, public opinion around the world-from the U.S. and Europe to India and South Africa-is growing increasingly sceptical of the benefits that the trade deals governments are negotiating can bring (See "The Changing Global Context for Trade" Geneva Update 15th February 2008.).

IV. LOOKING FOR SOMETHING DIFFERENT: the need for new leadership

In 2008, with the world confronting an unprecedented set of global crises, a strong and fair set of multilateral trade rules is more important than ever. But existing Doha proposals fall far short. Over the past two years, members have been pondering what to do with them. Now is the time for the tough choice: either finally close the deal or open the door for something different. Although there is a real risk they will simply choose to postpone the decision once more, the truth is that time has run out for this agenda.

Building a new set of trade rules, responsive to emerging challenges requires strong political leadership. That leadership has been lacking at the WTO in recent years and will likely take some more time to develop. But when a senior government official from India recently stressed that a global trade deal "should ensure fair trade, not just free trade", he was going some way towards revising the narrow mandate that most WTO members have adopted. In the U.S, the presidential campaign is opening the door to some rethinking on trade. The Obama campaign stresses that future trade agreements should "focus on workers, jobs, farmers and on ensuring that we are lifting standards of living overseas". If world leaders were serious about adopting a "people-centred policy framework", as they pledged to in their declaration on Food Security last month in Rome, that would mean significantly reforming a trade and investment regime that has benefited corporations and turned farmers into farm workers, eroding their economic and social independence.

In the eyes of many, the question is no longer whether we need an alternative path to Doha, but rather how to initiate it. Civil society has been at the forefront of this battle. In the U.S., progressive Democratic Members of Congress, together with fair trade and labor groups, have presented proposals for fairer U.S. trade deals. The draft legislation is called TRADE (for Trade Reform, Accountability, Development and Employment) Act. The bill lays the ground for a new trade policy by a new U.S. administration.

Developing countries stand to lose most from a bad Doha deal and, more broadly, from the climate and food crises. Their resistance to business as usual at the WTO has increased significantly in recent years. They are stepping up efforts to collaborate in the face of the food crisis at different regional levels. They also decided to move forward with fostering South-South trade at UNCTAD XII. They should not remain at the rear of the alternatives train. If others take the lead, they will once more be put on the defensive: it is time for them to lead instead.

V. IMPORTANT DATES TO REMEMBER

21-26 July: Mini-ministerial consultations at the WTO Headquarters in Geneva with daily meetings of the Trade Negotiations Committee

24 July: Signalling Conference on services at the WTO

26 July: Closing Trade Negotiations Committee

29-30 July: WTO General Council

1 August: WTO breaks for summer holidays

24 - 25 September: WTO Public Forum

VI. DOCUMENTS

New draft agriculture modalities, July 10, 2008:

http://www.tradeobservatory.org/library.cfm?refID=103162

New draft NAMA modalities, July 10 2008:

http://www.tradeobservatory.org/library.cfm?refID=103163

Pascal Lamy's speech at the June 27 meeting of the Trade Negotiations Committee

http://www.wto.org/english/news_e/news08_e/tnc_dg_stat_june08_e.htm

Resources about proposed 2008 U.S. TRADE ACT

http://www.citizenstrade.org/

Declaration of the high-level conference on world food security: the challenges of climate change and bioenergy, 5 June 2008

http://www.fao.org/fileadmin/user_upload/foodclimate/HLCdocs/declaration-E.pdf

"Seven Reasons Why the Doha Round Will Not Solve the Food Crisis," IATP

http://www.tradeobservatory.org/library.cfm?refid=102666

"New efforts to move GATS negotiations ignore negative impacts on financial and food crises", Myriam Vander Stichele

http://www.tradeobservatory.org/library.cfm?refID=103194

"The Changing Global Context for Trade" Geneva Update 15th February 2008, IATP

http://www.tradeobservatory.org/genevaupdate.cfm?messageID=123444

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Carin Smaller Trade Information Project Institute for Agriculture and Trade Policy, Geneva Office 15 rue des Savoises Geneva 1205 ph: +41 22 789 0734 fax: +41 22 789 0733 csmaller@iatp.org www.iatp.org www.tradeobservatory.org