Doha merry-go-round on trade

Doha merry-go-round on trade

Three unrelated events over the past week have put the focus back on the Doha Round of trade talks. The first was the meeting in Davos of trade ministers from 25 countries, during which they agreed to finally end the Doha Round in 2011. The second was the report of an expert group set up by the governments of Germany, the UK, Indonesia and Turkey, underlining the tasks facing World Trade Organisation (WTO) members before they can reach an agreement this year. And the third is a move by two US senators to introduce a Bill that would give Barack Obama’s administration the Congressional mandate needed to negotiate trade deals.

Recent confabulations between the trade ministers of some of the world’s most influential countries have indicated continued political support for a quick conclusion to the Doha Round. However, differences have persisted among key players, not only on the substance of the negotiations, but also on the timeline for finalizing a deal.

On the former, developed and developing countries remain as far apart as they were when negotiations reached a stalemate in July 2008. This was clear from the statement by the trade ministers of Brazil, South Africa, China and India in Davos. From what available reports indicate, the four noted that developing countries were being asked to offer market access far exceeding that offered by any member in the past. They also agreed that developed countries were not reciprocating the developing world’s offers of market access; some developed nations were even seeking further exceptions and flexibilities to continue with their existing trade barriers and trade distorting policies, adversely affecting the developing countries’ interests.

The ministers insisted that any effort to clinch the Doha deal could neither ignore the trade-offs between the north and south, nor require developing countries to make disproportionate and unilateral concessions.

Regarding the time frame, European Union (EU) trade commissioner Karel De Gucht and US trade representative Ron Kirk differed on whether a new deal could be possible by July. But with countries aware of the problems with a deal in 2012— it’s election year for the US and a lame-duck administration could be in place in Washington—one cannot rule out the possibility of a serious attempt at reaching an agreement this year itself.

Thus, the message from Davos appears unambiguous: Getting a Doha deal in 2011 would need tremendous effort and huge political will on the part of the major players. It is in this context that the report of the expert group, co-chaired by economist Jagdish Bhagwati and Peter Sutherland, former director general of the General Agreement on Tariffs and Trade, must be read. The report, though optimistic about the possibilities of concluding the Doha Round later this year, does not make an ironclad case for an imminent, all-encompassing deal within the next few months.

Since the onset of the economic downturn in 2007-08, the dynamics of global trade have changed sharply. The US now demands greater access to markets, particularly in emerging economies. At the same time, developed countries have adopted protectionist measures, especially in the services sector, affecting the business interests of several developing nations, including India.

These developments have cast their shadow on the Doha negotiations on services, which showed little progress last week.

Consequently, the Doha Round itself has been reduced largely to negotiations on market access in agricultural and non-agricultural products. In fact, even the negotiations on agricultural subsidies were rendered ineffective as both the US and the EU used existing flexibilities in the WTO Agreement on Agriculture to preserve their farm support programmes. In other words, reining in the high subsidies granted by members of the Organisation for Economic Cooperation and Development (OECD) remains an unresolved issue.

Thus, in the absence of a reasonable deal in services, which requires developed countries to provide meaningful market access to developing nations in the services sector, the much-needed balance in the outcome of the Doha Round will not be achieved.

One of the key factors holding up progress is the inability of US negotiators to effectively participate in negotiations in the absence of a Congressional mandate. The Obama administration is yet to obtain the trade promotion authority (better known as the “fast-track authority") from Congress. But two senators, Rob Portman and Joe Lieberman, have now made a move to force the issue. Senator Portman, a Republican who was also the US trade representative in the Bush administration, and Lieberman, an independent, have introduced the Creating American Jobs Through Exports Act of 2011. According to sponsors, the legislation seeks to extend the administration’s trade negotiating authority, which is “especially crucial to opening (up) the rapidly growing Asian-Pacific region to (American) job creators", and is, therefore, “necessary to increase exports, create a more job-friendly environment for American job creators, and advance America’s national security interests". The implications of such a negotiating mandate from the US Congress on the future of the Doha Round are difficult to predict.

Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.

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