The Collapse of WTO Trade Talks and Their Implications
By Dr. Timothy Harris (Ph.D)
~~Adz:Right~~Basseterre, St. Kitts - The World Trade Organization (WTO) is an inter-governmental entity set up to regulate trade among countries. Undergirding the WTO programmes and activities, is the desire to achieve free trade, i.e., to remove hurdles to the free flow of goods and services across national borders. The philosophy is premised on the beneficial impact on trade of market forces working in a sensible manner.
On Tuesday, July 29, 2008, efforts by the world body to find consensus between competing power brokers in the developing and developed worlds collapsed. The collapsing of talks to achieve measured success may set back trade talks at least for a couple of years and may prove a long term burden for developing countries.
The Ministerial talks failed to achieve consensus because negotiating teams could not agree on how best to ensure the efficacious trade in agriculture and manufacturing. On one hand developing countries like Brazil, India and China wanted the developed world (for example, USA, Japan, EU) to open their markets to the agricultural products, for example, cotton, sugar, corn, dairy products and in turn the developed world wanted the developing countries to open up their markets to more manufactured and industrial products from the advanced countries. The talks hit a fatal snag when developed countries refused to concede on a major principle put forward by the developing world led by India. That principle was to accept the right of developing countries to protect their countries from a surge of agricultural products from the developed world. The threshold for invoking of safeguard measures could not be agreed among. The Lamy proposal specified that if import volume rose 40% above the average of the past three years, tariffs could be raised above the current ceilings (bound rate), by 15%. This proposal was unacceptable to both the US delegation, which requested a higher threshold while the Indian delegation on behalf of the G-90 requested a significantly lower figure. The talks broke down after India and the US could not agree to the thresholds that would trigger the safeguard mechanism. Developing countries drew a line in the sand and as a result the irreconcilable expectations met no agreement.
Additional problems came when the EU and USA could not agree on the level of reduction in subsidies to their agricultural product.
Implications
The collapse of the trade talks is a blow for the multilateral process. The WTO successes would certainly provide a framework for global trade. Without it, the burden of a plethora of bilateral trade agreements will be too disadvantageous for the majority of the developing countries. The disadvantage flow from their own lack of knowledge and resources to negotiate with their superior and more experienced trading partners.
CARICOM countries which need long time intervals to reduce their preference dependent exports may come under pressure. ACP products such as sugar, bananas, rum, and rice may suffer if the EU opens its market to all exporters of these products.
The suspension of the Doha Round has implications for the ‘gains’ achieved since the Hong Kong Ministerial in 2005. Among these are the following:
? Elimination of all export subsidies by the year 2013
? Significant decrease in the level of subsidies offered to farmers by developed countries (there is however a school of thought that the cuts are not deep enough to effect the type of relief required by developing country farmers).
? Progress in removing barriers to trade in services among WTO Members
? Increased market access (97 per cent of all tariff lines) in developed countries for LDC Members
St. Kitts and Nevis stands to achieve gains by offering its support to the strengthening of the multilateral trading system. The MTS calls for the progressive liberalization among members. This offers the option of longer transition periods to enable developing countries to adjust to the effects of further market opening. It also provides greater opportunity to our service providers to offer their services to the entire WTO Membership. We should therefore endeavour to participate fully in the GATS negotiations, particularly mode four (movement of natural persons).
We should also support all efforts to resuscitate the Doha Round of multilateral trade negotiations.
