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POLICY FORUM


December 1, 2003    


REPORT ON MEETING…

Getting the Doha Round Back on Track

GOVERNMENTS should prepare to re-launch the Doha Round negotiations in 2005 at the World Trade Organization’s ministerial conference in Hong Kong and aim to complete them early in 2007, suggests Clayton Yeutter, chairman of the Cordell Hull Institute in Washington.

Ambassador Yeutter, like many other experienced observers, says that the Doha Round negotiations cannot be completed during a U.S. election year if the results are to be meaningful. The WTO General Council must acknowledge that reality now and plan accordingly. Otherwise, he adds, the round will be in even more trouble when U.S. “fast track” negotiating authority is up for extension early in 2005. The Hong Kong ministerial should therefore be held in July 2005 or thereabouts – after the authority has been extended.

Extension of U.S. Negotiating Authority

The former U.S. Secretary of Agriculture and onetime U.S. Trade Representatives, who played a major role in the success of the Uruguay Round negotiations, reviewed the options in the stalled WTO negotiations at a roundtable meeting last week in Washington, concluding a series convened by the Cordell Hull Institute on the Cancún debacle. Click here (Adobe Acrobat) for the papers discussed at the meeting.

The meeting on November 25 dwelt on the significance in the current WTO predicament of the deadlines imposed by U.S. trade-negotiating authority. The authority expires on June 1, 2005, but there is provision in the Bipartisan Trade Promotion Act of 2002 for a two-year exten-sion. The extension, though, is by no means automatic.

If the President of the United States decides to seek the extension, he must submit to the U.S. Congress by March 1, 2005, a report setting out what has been achieved in negotiations by then and why he needs more time. Any member of the House of Representatives or Senate can challenge the extension by introducing a “resolution of disapproval”. If either house passes such a resolution before June 1, 2005, the authority will expire on that date. If neither house does so, the authority will run for another two years, expiring on June 1, 2007.

Securing a two-year extension is not going to be easy, Ambassador Yeutter warns, given the state of the WTO system, the magnitude of the U.S. trade deficit and the protectionist pro-clivities of a number of U.S. industries and labor unions.

Need for a Consensus-building Effort

Harald Malmgren, who was closely involved as Deputy U.S. Trade Representative in the launch of the Tokyo Round negotiations of 1973-79, assesses in another paper the hurdles to be cleared in resuming the Doha Round negotiations. Ambassador Malmgren points out that secur-ing the extension of U.S. trade-negotiating authority will require a political consensus in Washington prior to the President submitting his request to Congress. That will require the formation of a consensus among business, financial, agricultural and other economic interests in the country. And for that consensus-building effort to be effective there will need to be clear signs of a meaningful consensus forming at inter-governmental level.

Ambassadors Yeutter and Malmgren conclude that, with confidence in governments so low, it will be very hard to make progress in the Doha Round negotiations unless an intensive consensus-building effort is undertaken over the next twelve to fifteen months not only in the United States but also in other major trading countries around the world.

Four Imperatives for Progress

To build support for re-launching the WTO negotiations in nid-2005, Ambassador Yeutter calls for a conscious effort to clarify the purpose of the WTO by going back to first principles, to think again about the principles, rules and procedures on which the multilateral trading system is based, not brush them aside as if they do not matter.

He identifies three further imperatives:

• reaffirm the U.S. commitment to an openly competitive, liberalized trad-ing system – and make sure other major trading countries are prepared to step up and be counted;

• remind developing countries that they, too, have a stake in the WTO system and are expected to participate in multilateral trade negotiations on a reciprocal and non-discriminatory basis; and

• build consensus and support for a range of objectives that are ambitious enough to generate the political commitment required to achieve a durable and worthwhile result.

On this last, in effect making the case for extending U.S. trade-negotiating authority, Ambassador Yeutter argues that the current objectives of the Doha Round negotiations, includ-ing the development theme, need to be reconsidered with a view to:

• advancing the liberalization of trade and investment in the agricultural, manufacturing and services sectors of the world economy,

• extending the WTO system to trade facilitation, transparency in govern-ment procurement and investment, as well as laying the groundwork for extending it to competition policy;

• removing discriminatory measures that impede the integration of devel-oping countries into the world economy and

• achieving coherence and consistency among WTO “escape clauses” so that each of them is used for its intended purpose.

The success of the Doha Round negotiations, Ambassador Yeutter says, will still depend heavily on reaching agreement on the liberalization of agricultural trade. But it is too much to expect negotiators in Geneva to settle issues that ministers and senior officials in capitals have not been able to resolve. Technical deliberations can only go so far. As much as ever, agricul-ture remains a deep-seated political problem, requiring a response at the highest level.

In the next year or two, Ambassador Yeutter continues, the G-7 heads of government have to devote serious attention to the issue because of its bearing on the growth and develop-ment of the world economy, which is what the annual Economic Summits are about.

Response to the EU-US Duopoly

In November last year, however, Ambassador Malmgren recalls, France undermined the multilateral negotiating process when President Chirac formally announced his strong opposition to any fundamental change in the European Union’s common agricultural policy until after 2013 and his opposition, too, to any public discussion of possible changes until after 2006. His stance was endorsed by Germany’s Chancellor Schroeder, even more firmly blocking multilateral trade-liberalizing negotiations on agriculture.

This severely circumscribed efforts by the European Commission to make meaningful proposals on agriculture. Without meaningful progress on agriculture, Ambassador Malmgren states, little can be accomplished on non-agricultural questions – on manufacturing, services or institutional issues – as the Cairns Group countries, fed up to the gills, have repeatedly said.

On the struggle to reach agreement on the modalities for negotiations on agriculture, Rubens Barbosa, the Brazilian Ambassador to the United States, traces in his analysis what led to the Group of 20 being “suddenly” formed on the eve of the Cancún ministerial meeting. He concludes “what the G-20 really did was question for the first time the duopoly of the European Union and the United States in the multilateral trading system”.

After the collapse of the Cancún ministerial, the reaction of the major trading powers, he says, was not an answer to the G-20’s proposals, which, after all, were similar to those of the United States earlier in the year. “Their reaction had more to do with power politics,” he goes on to say, “as it became clear to the European Union and the United States that the G-20 had put down a challenge to the long-established and untouchable farm-subsidy policies of developed countries worldwide.”

Interests of All Competitive Exporters

Creating the G-20 before the Cancún ministerial meeting, Ambassador Barbosa says, was a crucial step in the direction of fundamental reform in agriculture and thereby allow for the establishment of a truly fair and market-oriented multilateral trading system that will help to promote economic growth in many agricultural-based developing countries

It is important to emphasize, he adds, that the trade-liberalizing endeavor launched at Doha in November 2001 represents a long overdue collective commitment to do away with protectionist barriers and trade-distorting subsidies in an area of vital importance to internation-ally competitive exporters in both developed and developing countries.

“No other area of trade is subject to such blatant discrimination,” he asserts. “Distortions in agricultural trade not only harm efficient exporters by denying them market opportunities. Domestic and export subsidies in developed countries depress prices and incomes around the world, cut into export earnings and increase food insecurity in developing countries. Their addic-tive nature does not contribute to gains in productivity or to the creation of wealth. They only generate dependence, on one side, and deprivation, on the other.”

Continuing Role of the Cairns Group

Ambassador Barbosa stresses that, although their membership overlaps, the Group of 20 and the Cairns Group are working together.

The chairman of the Cairns Group, Mark Vaile, the Australian Minister for Trade (in town for talks on a bilateral free trade agreement with the United States), looked in on the Institute’s meeting and made a short statement. He reiterated that a WTO agreement is still Australia’s number one goal since it would provide the “broadest and deepest benefits”. Mr Vaile recognized that completing the Doha Round negotiations by the end of next year is now “super-ambitious” and “becoming increasingly difficult”. The next Cairns Group ministerial meeting is being brought forward to February 2004, he said, in another attempt to “inject momentum” to the WTO negotiations.

Earlier in the meeting, Joanna Hewitt, Deputy Secretary of the Australian Department of Foreign Affairs and Trade, spoke on the role of the Cairns Group and its part in the Doha Round negotiations, having just completed a trip around the capitals of Cairns Group countries in Latin America with Allan McKinnon, Australia’s chief agriculture negotiator.

Tackling Resistance to Subsidy Reductions

On tackling resistance to the reduction of farm subsidies, Andrew Stoeckel, the Executive Director of the Centre for International Economics in Canberra, suggests it is time to build on the various developments over the last two decades to put farm-support policies in perspective.

Among those developments have been (i) international comparisons of levels of support and protection via “producer subsidy equivalents” and “consumer subsidy equivalents” (ii) pro-posals in the Organisation for Economic Cooperation and Development and the GATT to focus on the economy-wide costs and benefits of government interventions in the market process, (iii) the introduction of the Trade Policy Review Mechanism during the Uruguay Round negotiations and (iv) the tariffication of non-tariff measures in the Uruguay Round agreement on agriculture (even if reversed to some extent by tariff quotas in the Blair House accord).

Dr Stoeckel proposes that economy-wide analysis be made a part of the WTO’s Trade Policy Review Mechanism, which at present only records the facts about the trade policy of the country being examined, such as the level and incidence of tariffs and other barriers. The TPRM contains no analysis of the costs and benefits of the trade-policy regime in question.

The WTO Director-General could extend the TPRM “at the stroke of a pen”, Dr Stoeckel says, to include economy-wide analysis of the costs and benefits of trade-policy interventions in the market process. That improvement could begin during the Doha Round negotiations and would be timely in helping to promote, in particular, a better public understanding of the inter-sectoral effects of agricultural support and protection.

Challenge to Canadian Agri-Food Policies

There can be no minimizing the difficulties in reducing farm subsidies. Farm-support policies are almost continuously subject to public criticism, and fundamental reform always seems to be just around the corner, but they somehow survive and continue unloved and assailed as much as ever.

The European Union’s common agricultural policy is a case in point. The CAP is ex-pected to change with the Eastern enlargement and, indeed, there is growing public revulsion over its excesses and its impact on other sectors of the European economy, on the environment, on development and on international relations. At a political level, Dr Stoeckel notes, environ-mental and related groups appear to be making a difference, while in the business community there is growing interest in markets outside Europe (with all its limitations), especially in the developing world.

There is evidence of change in other countries. In Canada, agricultural trade policy has long been ambivalent, with the supply-managed segment of the agri-food sector chiefly located in the eastern provinces set against the export-oriented segment in the western provinces. But groups in the latter, as Edward Menzies, President of the Canadian Agri-Food Trade Alliance, describes in the fifth paper, have recently coalesced to challenge the heavy protection afforded to the dairy, egg and poultry industries.

HUGH CORBET
President
Cordell Hull Institute
Washington, DC
December 1, 2003



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Clayton Yeutter, former U.S. Secretary of Agriculture: “Representatives of the major trading nations concluded [before the Uruguay Round negotiations] that strengthening the multilateral trading system was imperative. They realized that for trade agreements to be durable they must be underpinned by a framework of internationally agreed rules that are respected by governments.”

 

Mark Vaile, Australia’s Minister for Trade and chairman of the Cairns Group countries, with Clayton Yeutter (left) and William D. Rogers, senior partner at Arnold & Porter, who chaired the conference. Mr Vaile spoke on the continuing role of the Cairns Group in trying to restore momentum in the WTO negotiations.

 

Edward Menzies, President of the Canadian Afri-Food Trade Alliance: “The market and export dependent industries in Canada’s agricultural sector, by far the largest and most important to the economy, but with a history of silence, are now demanding that Canada aggressively pursues an ambitious, trade-liberalizing result from the Doha Round negotiations.”

 

Joanna Hewitt, Deputy Secretary of the Australian Department of Foreign Affairs and Trade, who discussed the basis on which inter-governmental discussions in WTO negotiating groups in Geneva might be re-started – following her recent tour of Cairns Group countries in Latin America.

 

Robert Rogowsky, Director of Operations at the U.S. International Trade Commission, who expressed support for greater use to be made in public discussion of economy-wide analyses of the costs and benefits of protection and support of selected industries.

 

Richard Newfarmer, Economic Adviser with the Development Prospects Group at the World Bank, Washington, who had questions for the Australian trade minister.

 

Jose Salazar (left), Chief Trade Adviser at the Organization of American States in Washington, takes in an aside by Sherman Robinson, a senior fellow at the International Food Policy Research Institute, also in Washington. Mr Salazar spoke of the Cancun failure and the new pro-active stance of many developing countries being anchored and heavily influenced by perceptions of the unbalanced “grand bargain” in the Uruguay Round negotiations. Dr Robinson spoke dwelt on the effects on developing economies of farm-support policies in the industrialized countries.