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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.
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