The WTO Doha Development Round

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After six years of troubled negotiations, the Doha Development Round, aimed at freeing global trade and at extending the benefits of globalisation to developing countries, has yet to come to a successful conclusion.

 

Background

The DDA was launched by Ministers of WTO member countries in November 2001 in the Qatari capital, Doha and subsequent meetings were held in: 

  • 2003 in Cancún: Talks were intended to forge agreement on the round's objectives but collapsed due to strong North-South divide on agricultural issues. Developing nations gained in strength, forming 2 new negotiating groups - the G-20, consisting of middle-income developing countries, and the G-90 group of poorer developing countries - and finally rejecting the deal which they viewed as unfavourable. 
  • 2004 in Geneva: WTO Members agreed to a framework for continuing talks, the so-called ‘July Framework Agreement’. The EU, US, Japan and Brazil agreed to eliminate all agricultural export subsidies, reduce trade-distorting subsidies and lower tariff barriers. Developing nations consented to reduce tariffs on manufactured goods, with the right to protect key industries. 
  • 2005 in Hong Kong: The initial objective was to conclude a final agreement at this conference but progress made up till then was too feeble to do this. Instead, a deal was reached in which rich nations agreed to allow quota and tariff-free imports from all Least Developed Countries (LDCs) and 2013 was set as the deadline for eliminating agricultural export subsidies (EURACTIV 19/12/06). 
  • 2006 in Geneva: Last resort talks in July 2006 failed to bring an agreement on reducing farm subsidies and lowering tariffs, leading WTO chief Pascal Lamy to formally suspend the Doha Round (EURACTIV 25/07/06). 
  • 2007 in Davos: Trade ministers from around 30 key nations agreed, on 27 January, to restart negotiations (EURACTIV 29/01/07).

The six-month suspension of the Doha Round in 2006 was not the first time one of the WTO negotiation rounds has broken down. Negotiations are inevitably complicated as each member has a veto over the final deal. The Uruguay round, which began in 1986 and led to the replacement of the General Agreement on Tariffs and Trade (GATT) by the WTO in 1995, was frozen for over a year in 1990, due to antagonism between the EU and the US; although it was never formally suspended. 

Although ministers have agreed to restart negotiations, it remains unclear if and when the Doha Round will be concluded. The broad trade authority granted under the Trade Promotion Act (TPA) of 2002 to US President George W. Bush expired in July 2007 meaning that Congress has resumed its power to make amendments to any trade deal presented to it. This makes it less attractive for other WTO members to participate in negotiations as they are unsure of obtaining any real commitments from the US. The US administration has signalled that it could attempt to renew the TPA to make an agreement more feasible, although so long as a Republican government is in place along with a Democratic Congress, this will prove difficult. 

Issues

The key players in the negotiations, known as the G6, are Brazil and India (representing the G20 group of developing countries), the EU, the US, Australia (representing the Cairns group of agricultural exporters) and Japan (representing the G10 group of net agricultural importers). The major sticking points in their discussions are: 

  • Agricultural market access: 

The US currently has much lower agricultural tariffs than the EU or advanced developing economies. It therefore wanted a 90% reduction of highest farm tariffs and an average tariff cut of 66% for developed countries. While the EU agreed to raise its initial offer (of a 39% average tariff cut) to close to the G20 proposal of 54%, this was deemed insufficient by the US. 

The US also accused the EU of using sensitive products to counterbalance the level of new market access it was offering, because the EU wished to maintain higher protection levels for 8% of its farm products. The EU insists that it is already very open to agricultural exports from the developing world, providing tariff and quota free access to the 50 LDCs through its Everything But Arms system and absorbing more farm goods from LDCs than the rest of the developed world combined. 

  • Agricultural subsidies: 

Although agriculture makes up only 8% of world trade, it represents the main income source for about 2.5 billion people, mainly in developing countries. However, farmers from poor countries are unable to compete with vastly subsidised exports from the EU, US and Japan. 

The EU agreed to slash its overall trade-distorting subsidies (OTDS) by 75%, as the G20 group of developing countries were requesting. This would have seen EU OTDS levels reduced from €58.1 billion in actual spending in 2004 to a future cap of around €28 billion. 

The US proposal to reduce its OTDS by 53% would have cut its WTO-permitted spending limit from $48.2 billion to roughly $22.7 billion, but the EU and G20 complained that this could actually lead to an increase in US farm subsidies as the latter actually only paid out $19.7 billion in such payments in 2005. They demanded minimum cuts of 60% and 75% respectively, but the US refused to give in. 

  • Industrial market access: 

Negotiations on non-agricultural market access (NAMA) were pushed forward by the EU and US who were looking to gain access to the huge markets of emerging economies like China and Brazil. Meanwhile, developing countries were keen to protect their infant industries and maintain their preferential access to rich countries. 

Negotiators finally agreed that industrial tariffs should be cut according to the so-called ‘Swiss formula’, entailing higher cuts for the highest tariffs and the introduction of a tariff ceiling; but they failed to agree on the actual structure of the reduction formula or on the level of the cap. The EU and the US had suggested that maximum rates on manufactured goods should be 10% for developed countries and 15% for developing countries. Developing countries, on the other hand, wanted a tariff cap of 30% for themselves, which would entail softer average cuts. 

While the EU was prepared to permit an intermediate tariff cap of 20% for developing countries, the US continued to call for a maximum difference of 5 percentage points between developed and developing country coefficients. 

  • Services: 

An ambitious deal on service liberalisation was of key interest to the EU because trade in services makes up 75% of its economy. Increased trade in services would also contribute to development goals as improved transport, IT and telecommunications, banking and insurance sectors form the backbone of a growing economy. 

However, trade in services faces considerable restrictions, mostly based on national regulations, such as technical standards or licensing requirements and procedures. 

According to a study by CEPII, more could be gained, for developing and developed countries alike, from a 25% cut of the barriers in services than from a 70% tariff cut in agriculture in the North and a 50% cut in the South. The World Bank estimates that developing countries could gain nearly $900 billion in annual income from elimination of their barriers to trade in services. 

Discussions in the WTO focused on establishing disciplines to ensure that domestic regulatory measures do not create unnecessary barriers to trade. Significant progress was made in this area but negotiations on market access stood still as a result of the lack of movement on agricultural and industrial market access. 

  • Trade facilitation: 

Numerous studies show that trade facilitation is a ‘win-win game’. Greater transparency and procedural uniformity at country borders could generate twice as much gain to GDP than tariff liberalisation, especially for developing countries because of their comparatively less efficient customs administrations. 

Despite the suspension of the DDA, EU Trade Commissioner Peter Mandelson has called for WTO Members to pursue negotiations on a trade facilitation agreement and on an Aid for Trade package to address developing countries’ capacity constraints and help them deal with the costs of customs modernisation. 

Positions

WTO Director-General Pascal Lamy  said that failure would represent a lost opportunity to show that multilateralism works and to integrate more vulnerable members into global trade - "the best hope for growth and poverty alleviation". After the Davos meeting, he expressed his feeling that "the landing zone is now in sight," but remained vague as to the timing: "In my view we should not attempt to set ourselves any false deadlines. We are all very much aware of the urgency of the task ahead, but it is also important to reach a substantive outcome which is acceptable to everyone."

EU Trade Commissioner Peter Mandelson warned: "It would be a terrible misjudgement if we allow what we have now to slip away," adding: "The alternative is not a better deal, but no deal at all." 

US Trade Representative Susan Schwab  said she was now more optimistic about the outcome but highlighted the remaining challenges: negotiators will now have to achieve a breakthrough that can convince Congress as well as US farmers that there is enough in the package for them. "It has to be more than a lowest-common-denominator deal that doesn't generate trade flows," she insisted, saying that the real debate on whether Congress would renew the President’s fast track negotiating authority would begin only once the outlines of a deal emerge.

However, France is sticking to its hardline position that the EU's initial proposal of a 39% cut in farm tariffs is a "red line" and French Trade Minister Christine Lagarde played down the significance of the decision to restart talks. "We're going back to the table, period. Nothing is resolved,'' she said.

Brazil's President Luiz Inácio Lula da Silva warned: "If we want to give a signal to the poorest countries that they will have a chance in the 21st century, the United States, the United Kingdom, France and Germany must make concessions," adding: "We have to get them to understand, or there will be no accord." 

Reinhard Quick, vice-chair of Business Europe’s WTO working group, warned that there is "still a real danger of failure", adding that this would be "terrible" for all areas of the economy, from large-scale industry to services businesses and SMEs. 

Foreign Trade Association (FTA) Secretary General Jan Eggert said that if no deal is reached at the WTO, "it may not be 'the end of the world' but it would be the end of the multilateral trading system, at least for a few years", adding that he was "frankly not optimistic" but thought that there was "still a fair chance of getting a decent agreement". He explained that a multilateral deal was more important than a bilateral agreement because it would give companies "one picture" rather than a complex "spaghetti bowl" of trade rules that would raise their operating costs. 

Oxfam  stressed the enormous cost of further delay, as “the EU and the US remain free to subsidise their biggest agricultural producers and continue dumping, while developing countries continue to struggle to ensure survival of subsistence farmers and break into rich Northern markets”. Oxfam UK Director Barbara Stocking  said the move to get the Doha Round back on track was welcome but that the US and EU must “make fundamental changes to their offers” in order to contribute to the development goal. 

Other NGOs more critical of free trade viewed the collapse of talks as good news for the world’s poor and the environment, calling on world leaders to use the opportunity to build a “new global trade system based on equity and sustainability”. Aftab Alam Khan, head of ActionAid's trade campaign said that whatever the final deal, it will be bad for developing countries: "However the new talks are framed, poor countries will still be asked to throw open their economies in return for peanuts from the trade superpowers," he said, reiterating his call for them to "stay away from the negotiating table and resist pressure to sign up to a final deal that will only decimate jobs and exacerbate poverty".

Timeline

  • 27 Jan. 2007
    : Trade ministers from around 30 key nations, meeting in Davos, agreed to restart negotiations.
  • 4 Jan. 2008: The Chair of the WTO agriculture negotiations, Ambassador Crawford Falconer, sent members eight new working documents on modalities for market access.
  • 26 Jan. 2008: World political and business leaders meet in Davos for World Economic Forum.
  • 5-6 Feb. 2008: Meeting of the WTO's General Council, which includes representatives from all member government.

 

Further Reading

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