Stalemate

By Seymour Klierly

The news of the collapse of the Doha Development Round talks has rippled across the globe. What started in November 2001 as an ambitious effort to open markets and bring developing countries into the global market place has now come to an abrupt halt. The finger-pointing has ensued.

Prompted by the directive from the leaders of the G-8 Summit to return to the negotiating table and settle on an agricultural framework agreement by mid-August major players made their way back to Geneva, Switzerland. Trade negotiators from the United States, Australia, Brazil, the European Union (EU), India and Japan met this past weekend for the first of two meetings for what was to be an intensive go at break-through negotiations on establishing agriculture modalities. After the first set of meetings, it became clear that the differences were too great and member-countries remained entrenched. This failure resulted in World Trade Organization (WTO) Director-General Pascal Lamay suspending the Doha Round talks indefinitely. But, truth be told, the inability for major players to find common ground comes as no surprise. One only needs to look at the given the history of missed deadlines for guidance.

Two of the three ag pillars, market access and domestic supports, were the largest road blocks in negotiations. For background, the U.S. offered a generous proposal in October 2005 that lowers average tariffs on ag imports by 61 percent and reduces the most trade distorting subsidies. Up until just before the July 23 meeting, a proportional offer on market access had yet be put on the table. The EU counter-offered a proposal that would increase their average farm tariff cut to approximately 50 percent. However, after a closer look, many of key commodities, such as beef, could be labeled as "Sensitive Products" and thus exempted from the tariff reductions and limiting market access.

Another barrier to negotiations were the continual efforts of countries such as India, China, and Brazil to hide behind their "developing country" designation to retain the protections afforded to countries with third tier economies (i.e. designate "Special Products" and exempt certain products from tariff reductions). The reality is that these three countries are already aggressively competing in a global market along side the big power houses. If the G-33 proposal went through, it would result in a developing country's ability to protect 95 to 98 percent of their ag market while the U.S. market would be wide open. One-sided market access is not an incentive for USTR put forth more concessions on domestic support.

At this point, the long term outlook of resuming the Doha Round talks is unclear. The expedited voting procedure on trade agreements (Trade Promotion Authority-TPA) expires in July 2007. The slowly closing TPA door that prodded and pressured USTR and others in during negotiations is now locked. When and if the Doha Round talks are taken out of the deep-freeze, upcoming elections in various countries, including the U.S., and evolving trade goals will likely change the political climate surrounding multilateral trade talks.

Aggies will be most interested in how the lack of results at the Doha Round impacts the 2007 farm bill discussions. Will policy makers use the suspension of negotiating talks as justification to support a simple extension of the 2002 Farm Bill? Or will the law makers view current farm programs as more vulnerable to WTO challenges? It's a matter of wait-and-see at this point in the game.

Date: 7/26/06

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