What is the right way to gauge the recently concluded Hong Kong Ministerial (HKM) conference of the World Trade Organization (WTO)? Commentators and experts are coming up with various answers. Some (perhaps rightly) feel that WTO agreements should eventually lead towards poverty reduction and improvement of living standards around the globe. Thus, they argue, any ministerial meeting that does not positively impact efforts for poverty reduction is a failure. But the word ’eventual’ is quite vital in this line of argument because it does not allow this point of view to be applied to the output of a single ministerial meeting. This argument is only applicable once a final agreement is concluded and implemented.
Comparing the outcome of HKM with an assumed alternative (ideal or model outcome) is another way for gauging its success of failure. But this method may not work well in the world of trade negotiations where 149 members are at each other’s throat in order to protect their individual interests and country positions are often traded off. Agreeing to a hypothetical alternative acceptable to all concerned could well be unrealistic, incomplete, irrelevant or impossible.
Still another method focuses on the nature of commitments, whether binding or non-binding, the WTO member states agreed to in different phases of the negotiations. In this line of argument, binding commitments reflect success and the non-binding one failure. This method is also a bit problematic because what should be binding may depend upon our expectations but all stakeholders in WTO negotiations do not have similar level of expectations. Since HKM much has been written and said about the self-imposed deadlines of April 2006, July 2006, and December 2006 for negotiating and finalising various phases of the final agreement. Many find these deadlines non-binding and suspect that they will be missed as usual.
In the absence of any meaningful way to gauge the success of HKM, it will be more advisable to accept that Doha Work Programme is still under process and it will be too premature to judge its success or failure in terms of the outcome of a single ministerial meeting. Perhaps one should focus on what comes next. Contrary to WTO’s ministerial tradition, the venue or dates for the next ministerial meeting were not declared during the final plenary of HKM. At Hong Kong, it was said that negotiations would continue in Switzerland after New Year break and they did take place in that country. But instead of WTO’s headquarters in Geneva, the venue for the WTO mini-ministerial meeting was Davos, where it took place parallel to the annual session of the World Economic Forum.
Interestingly, the shared vision and team spirit that was evident among WTO members during HKM final plenary faded away in Davos. The parallelism between agriculture and non-agricultural negotiations in HKM has accorded agriculture a make or break importance within WTO. It seems any movement on agricultural trade will help conclude the Doha Work Programme.
In Davos, the United States and the European Union in particular remain divided over what needs to be done to move the talks forward. Washington believed, as do many other members, that the EU must come forward with an offer of deeper tariff cuts for farm imports. EU Trade Commissioner Peter Mandelson, however, summarily rejected this view and insisted, as he had before and during the Hong Kong ministerial, that Brussels would not consider doing so until large developing countries such as Brazil and India proffered greater access to their domestic markets for industrial goods and services. Mandelson claimed “no other member of the WTO has made offers or concessions that remotely match ours”. He said, “Europe cannot envisage a Doha Round that would be concluded on the basis of ’real cuts by Europe, paper cuts by others.’ Ambition for Europe, inhibition for everyone else.”
The US and the EU, the two major trading forces, keep blaming each other for not doing enough for the world’s poor. Apparently, the global north is working to build capacity of negotiators and representatives of the global south through various bilateral and plurilateral programmes. Similarly, many of the trade for poverty reduction initiatives are being sponsored in the global south by their northern partners. One wonders if northern governments are so sincere for the world’s poor, then why don’t they open up their markets for imports from developing countries. It is also logical to ask why the governments of the rich nations don’t put an end to their domestic subsidies as well as subsidised exports so that the producers and exporters of the developing countries can be provided a level playing field.
There may be many possible answers for these question. But to me the ’internal political pressures on those who can take a decision’ seems the best answer. None of the member governments of WTO can afford to cope with internal political pressure on trade issues and it will be a major contributing factor in missing all the deadlines set for 2006.
EU trade commissioner was never reluctant in HKM to express his inability to make a commitment on agricultural subsidies on behalf of the union’s 25 member nations. He was well aware of his limited mandate and intra-EU politics. His mandate was defined unanimously by the European General Affairs Council during October 2005 in these words: “The Council recalled as regards the negotiations in agriculture that the CAP (Common Agricultural Policy) reform is Europe’s important contribution to the DDA (Doha Development Agenda) and constitutes the limits of the Commission’s negotiating brief in the WTO Round”.
Currently 40 per cent of the EU budget is spent on CAP. While France, Ireland, Italy, Poland, Hungary, Austria, Greece and Portugal have time and again expressed their opposition to any cuts in budgetary support to farm sector beyond what was agreed in CAP in 2003, the EU’s major trading partners are demanding for drastic reductions. Intertwining of ’trade’ and ’budgetary’ politics partly contributed to the rejection of both the proposed European constitution by French and Dutch voters and the agreement on a multi-year budget proposed by Luxembourg in June 2005. (The United Kingdom during its presidency of the EU in the second half of 2005, however, managed to forge an agreement on multi-year budget). But this achievement notwithstanding, politics around EU farm support is expected to gain momentum in 2006 because the EU presidency has shifted from a proponent of open borders — UK — to Austria which still requires protection for its farm sector. Finland which takes over from Austria on July 1, 2006 is also a proponent of farm protectionism. Thus it is quite likely that the majority of EU members will oppose any further concessions on agricultural trade in 2006, making it difficult for WTO members to agree on the modalities for a final agreement on global trade during 2006.
This situation will be be even more complicated with French voters looking forward to 2007 presidential elections. Given the prominent role of agricultural subsidies in French politics, none of the presidential candidates will dare soften the hard stance that France has historically adopted in the EU towards WTO’s agriculture negotiations.
Brazil and India, major power broker in agriculture negotiations which emerged on the international trade arena with a bang during HKM, as the leaders of G-20 countries have turned international trade talks upside down. One can now say there are three major stakeholders in agricultural negotiations at WTO — the EU, the US and G-20 — not two as was the case in the past. With the EU’s limitations already identified, it will be interesting to note the developments in the United States and Brazil as well.
At the moment, all eyes are set on the US whose negotiation stance depends on at least three factors: mid-term Congressional elections to take place later in 2006, the renewal of the US agricultural support (a farm bill was enacted in 2002 and covers the fiscal years up to 2007) and the expiration of Fast Track negotiation authority (FTNA) on July 1, 2007. One can also add to these factors the US presidential elections due in 2008.
Under FTNA, the US administration is authorised to sign any Doha Round Agreement by April 1, 2007 with the US Congress suggesting no amendments. This was deemed necessary to preempt the emergence of any situation, like the one which led to premature death of ITO (International Trade Organization), the predecessor to WTO. The US government had joined ITO but the US Congress did not ratify the administration’s decision and ITO could never take off. Given the fact that trade reforms are quite un-popular among the US voters, renewal of FTNA before or during the Congressional elections is unlikely. If the deadlines set for 2006 are missed, the US Congress may be a major obstacle towards the conclusion of Doha Round.
Here it is pertinent to mention that trade protection in US farm sector has historically been played as a major electoral tactic. During President Bush’s first mid-term Congressional elections in 2002, US Farm Bill was passed to garner key ’swing’ Congressional districts for his Republican Party. That Farm Act is due for renewal but coincidentally of the 33 US Senate seats up for re-election this year, 27 voted for 2002 Farm Act. According to recent polls, 12 of the 19 Senators most likely to be re-elected were supporters of the 2002 Farm Act. It seems very unlikely that they will afford to annoy their voters by not backing the farm protectionism.
One may expect that if the EU and the US are not able to show flexibility on the WTO talks, then Brazil may do so in the interest of the multilateral trading system. Let us see if it is possible at all.
President Lula and his government have earned popularity due to his pro-poor policies. So, he will be looking forward to encash it in the next general elections to be held on October 1, 2006 (with a second round on October 29 if necessary). It is, therefore, very unlikely in an election year that the Brazilian government can afford to show any flexibility in its stance when it comes to negotiating a global trade deal.
It seems that internal political pressure will force all the key players to remain in a state of inertia and there will be no notable development on Doha Work Programme, at least in 2006.
Pakistan will be a net loser in this situation as a delay in the conclusion of this round is not in its favour. It is about time that we start thinking of alternative policy routes and bring our house in order while waiting for the WTO train that may not arrive before 2009.