Another
deadline has been missed in the perpetually "ongoing" negotiations
to further liberalise world trade. The 149 members of the World Trade
Organisation were to arrive at agreement on the "modalities"
for reducing various forms of support to agriculture and increasing market
access for non-agricultural commodities by the 30th of April. An end-April
mini-ministerial had been announced by Pascal Lamy, the organisation's
Director General, which was expected to clinch an agreement. But as deadline
day neared, all that came to nought. With no hope of agreement between
the US and the EU and the "leading" developing countries like
Brazil and India unsatisfied, everybody agreed that the deadline was best
left unmet. But the process continues. Director General Lamy has declared
that, "from now on, the process to reach modalities will be continuous,
Geneva-based, and focused on texts," with the aim of finishing this
work in a matter of weeks rather than months.
But the disappointment expressed is more symbolic than heartfelt. Nor
is there any deadline fatigue visible. Many deadlines have been set and
missed in the many rounds of trade negotiations that have contributed
to making global trade as liberal as it is today. And in many countries
the extent of liberalisation of trade is far more than that mandated by
the WTO. Not surprisingly global trade grew in real terms at 9.5 and 6.0
per cent respectively in 2004 and 2005, even while global GDP at constant
prices grew by just 3.9 and 3.3 per cent respectively.
The process continues because those pushing for a more open multilateral
trade regime have four broad objectives. The first is to use the multilateral
trade-liberalisation lever to deliver significant marginal gains in commodities,
regions and countries considered unduly protectionist: agriculture in
the EU and industry in some of the larger developing countries with a
long history of import-substituting industrialisation, for example. This
is seen by many governments as necessary to legitimise their support for
a multilateral agreement at home. The second is to extend multilaterally
agreed liberalisation to relatively new areas, like services, intellectual
property rights (IPRs) and investment, not all of which are directly in
the realm of international trade. The third is to legally bind countries
to an agreed level of liberalisation so as to foreclose any reversal of
the liberalisation process. And the fourth, is to use the WTO as an excuse
to defend unilaterlal liberalisation at home, on the grounds that it was
inevitable within the emerging multilateral regime.
These are medium or long-term goals and nothing would crack if agreement
is not reached today, as many advocates tend to argue. Why then are deadlines
constantly set, only to be revised? In the world of trade diplomacy these
deadlines are clearly seen as catalysts for movement. These catalysts
matter for those who are the key players in defining the pace of liberalisation.
If, in the view of those key players, initial expectations of the extent
of liberalisation are excessive, then "ambitions" must be lowered
for the sake of progress, however slow. But once lowered, deadlines must
be used to pressure countries into submission.
In the case of the Doha Round, the erosion of ambition started early:
the acceptance of the continuation of Blue Box (or moderately trade-distorting)
support to agriculture, the silence on Green Box (or ostensibly non-trade-distorting)
support, the implicit endorsement of the practice of Box shifting and
the restriction of dialogue to more trivial issues like export subsidies,
import tariffs and so-called trade distorting support. But the erosion
of ambition is asymmetric across areas. Nothing illustrates this more
than the "unbracketing" of the whole of the controversial Annex
C (dealing with services) at Hong Kong and the acceptance of plurilateral
negotiations in services, which many developing countries had resisted
to the very end. From the point of view of the developed countries, this
amounted to upping the stakes.
Seen in these terms, there are elements of continuity and change between
the Uruguay Round and the current Doha Round. Victory in the race to clinch
an agreement that would bring the Uruguay Round to a close was predicated
solely on agreement on issues of controversy within the Quad, especially
between the US and EU. This was achieved through secretive deals like
the infamous Blair House Accord that limited the extent of liberalisation
of agriculture. This tendency continues. Failure this time was principally
because of lack of agreement on agricultural trade liberalisation between
the EU and the US, with EU intransigence presented as the major obstacle
by the US and the EU trade commissioner declaring the US the biggest stumbling
block to progress because of its unrealisitic demands. But there is an
element of change this time. This is widening of the elite club to include
some developing countries like Brazil and India, reflected in the role
of the group of five (the US, EU, Australia, Brazil and India, named the
"five interested parties", as if none other was interested)
in arriving at the mid-2004 agreement called the July framework. Their
unwillingness to give more on NAMA without further concessions from the
EU, strengthened the US hand.
The implications of this new alliance at the top are clear from the sequencing
argument Lamy used in his effort to meet the April 30 deadline. An end-April
mini-Ministerial he held would be confined to resolving "key modalities"
which he had defined as those relating to agricultural subsidies, agricultural
tariffs and the number of sensitive products, and the NAMA tariff reduction
formula. This amounted to a postponement of discussions on issues of interest
to poorer countries such as special products and special safeguards in
agriculture, special modalities for "Paragraph 6" countries
(those with less than 35 per cent tariff bindings) in NAMA, and the problem
of preference erosion in both agriculture and NAMA. Not surprisingly poorer
countries, those in Africa in particular, objected to the sequencing approach.
But they may not have really mattered.
The expansion of the decision-makers club is obviously part of a strategy
being adopted by the Quad, partly in response to the failures at Seattle
and Cancun and the growing loss of credibility of the UR. That strategy
has many components, including: (i) making governments like those of Brazil
and India believe that they can get away with more in agriculture or services,
if they join the group of five, and would lose out if they are not there;
(ii) making special proposals like global duty and quota free market access
and introducing ambiguous issues like the aid-for-trade programme to "buy
out" the low income countries, as economist Jagdish Bhagwati has
put it; (iii) relying more on Regional Trade Agreements and Bilateral
Trade Agreements with Doha-plus and minus elements, especially with regard
to Non-Tariff Barriers, investment rules and IPRs; and (iv) declaring
and sending out signals that negotiations would collapse or be postponed
threatening uncertainty and chaos, if agreement is not in sight. The last
minute replacement of Rob Portman with Susan Schwab as US trade representative,
making it impossible for the US to make any further adjustments in its
negotiating stance, was a clear statement from the US that it did not
care what happened in Geneva this April.
All this transpires because of a belief among wealthholders (and those
who represent them) in both the developed and developing countries that
the only strategy which could ensure wealth expansion in the current global
conjuncture is one that involves a substantial increase in integration
into the world system. So the further integration goes the better. One
factor reflecting this new alliance of the rich is the growing exposure
of the world’s wealthholders to dollar denominated assets, making them
as concerned as the US government with ensuring the persistence of buoyancy
in the US economy. This concern has been compounded by the fact that the
US economy is the world’s locomotive, with growth elsewhere in the world
increasingly based on US-market dependence. In their view, if greater
openness elsewhere, even at the expense of the majority in those countries,
serves the cause of a tenuous stability in US growth, then so be it.
From the point of view of the majority in the developing world, however,
current trends in global trade and global growth are patently inequalising,
both internationally and domestically. Their stake in integration is small
and declining. They are, therefore, bound to be happy that the deadline
has been missed. But when and how they would be able to reverse trends
that are not in their favour is unclear. Till then, division at the top,
however temporary, is small solace.