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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

WTO talks collapse over farm trade

Tuesday, July 29, 2008 > 15:24:31
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(Source: International Herald Tribune article  by Stephen Castle and Mark Landler

July 29, 2008)

 

GENEVA: After seven years of on-again, off-again negotiations, world trade talks collapsed in rancor on Tuesday, ending hopes of a deal to free up global markets, cut farm subsidies and shore up the international trading system.

Discussions here reached an impasse after nine straight days of high-level talks when the United States, India and China failed to compromise over measures to protect farmers in poor countries.

Despite exhaustive efforts, Pascal Lamy, director general of the World Trade Organization, failed to bridge differences between a group of newly-confident developing nations and established Western economic powers. In the end too few of the real power-brokers proved committed enough to make compromises necessary to deliver a deal.

"It is a massive blow to confidence in the global economy," said Peter Power, spokesman for the European Commission, the executive arm of the European Union based in Brussels. "The confidence shot in the arm that we needed badly will not now happen."

Supporters of the so-called Doha round, started in Qatar in 2001, say a deal would have been a bulwark against rising protectionist sentiments that are now likely to spread as economic growth falters in much of the world.

Its failure also delivers a blow to the credibility of the WTO, which sets the rules of global commerce, and could set back efforts to work out other complex agreements involving many nations, including those intended to reduce the threat of global warming.

The collapse of the talks will not bring an end to global trade, of course, which will continue under current rules.

But it is a big setback, particularly to the hopes of developing countries like Brazil and India, and the poor nations of Africa, which were counting on gaining greater access to rich consumers in the United States, Europe and Japan for their farm goods and products of their basic industries.

Economists and trade experts predicted that having gotten this close, the conditions for a deal among the 153 members of the WTO might not recur for years, if ever again.

"The feeling went from 'who cares?' to a surge of excitement and sense of breakthrough to 'Oh no, not again,"' said Rory Macrae, a partner at GPlus Europe, a lobbying firm in Brussels. He was on the sidelines of the negotiations in Geneva until Tuesday evening.

The sticking point this time, Macrae said, was the stance of countries like China and India, which have become more aggressive in advancing their interests against those of the United States and Europe. "Maybe they're now thinking, 'we're big enough that we don't even need the process,"'

Like the United States and Europe, he said, China and India might find it more advantageous to negotiate bilateral agreements where they can apply more pressure on a single trading partner.

On Tuesday night ministers were still discussing whether any of the agreements reached in principle could be salvaged.

But there seemed little prospect for that anytime soon, in part because the coming presidential election in the United States makes it all-but-impossible for Washington to participate further until a new administration takes over next year.

Talks foundered on the right of India and other developing countries to protect sensitive agricultural products from competition in the event of a surge of imports.

The United States argued that such protection, which is not permitted at present, would involve moving backwards on existing world trade commitments.

Mari Pangestu, the Indonesian trade minister, said that the failure reflected the inability of the rich industrial powers to deal with the growing influence of China, India and Brazil in the global economy.

"It is the nature of the organization having so many members," Pangestu said. She complained that what she called "a reasonable request" had been blocked because "a key country is not going to show flexibility."

Asked if she meant the United States, Pangestu replied that it was "one of the countries" she was referring to, adding that she did not understand Washington's position on the issue on which the talks foundered.

Susan Schwab, the U.S. trade representative, said that success had been "so close" Friday, adding: "The U.S. commitments remain on the table, awaiting reciprocal responses."

Schwab challenged the claims of India and other developing countries that the United States was the chief obstacle to sewing up the deal.

"It is unconscionable that we could have come out with an outcome that rolled the global trading system back not by one year or five years but by 30 years," she said.

Schwab added that it would be possible to help developing nations address sharp increases in imports that could not "be used as a tool of blatant protectionism."

One official said that the relatively technical nature of the cause of the breakdown underlined the lack of political will to reach an agreement that would a tough sell to voters in several important countries.

Throughout Monday night, and then Tuesday morning, talks were on the verge of collapse. One diplomat likened them to a patient whose life support mechanism had been switched off only to be turned on again.

"With the briefing and counterbriefing," said one European official speaking on condition of anonymity because of the sensitivity of the topic, "this was not people moving to the middle ground."

For the Indian trade minister, Kamal Nath, the European official added, "going back home with U.S. headlines proclaiming victory, saying they made the Indians back down, makes it impossible for him."

Nath, he said, comes from "an electoral region that is completely opposed to the idea of a deal."

Nath, during a briefing with reporters, said he was "very disappointed" but that developing countries were "deeply concerned about issues which affected poor and subsistence farmers."

But elsewhere, too, a Doha deal was difficult to sell to voters hit by a slowing economy and rising commodity prices.

Washington's negotiating team was under pressure from the powerful U.S. farm lobby.

The European Union was under pressure from its own farm lobby, with nine of the bloc's 27 nations forming a "group of the willing" and demanding improvements in the text on the table.

Lourdes Catrain, a trade partner at Hogan & Hartson law firm, said the real risk of the failure of this last-ditch effort to salvage the trade talks meant "that the seven years of hard negotiations will be lost and there will be no guarantees on the starting point of a future round."

The proliferation of bilateral deals and the continuing expansion of exports from both developing and developed countries has raised doubts among some Doha skeptics about the necessity of a global agreement. But experts said it was important, particularly to hold back a rising tide of protectionism.

"There are people who argue that no Doha outcome is better than a weak Doha outcome, but I don't agree," said Katinka Barysch, the chief economist at the Center for European Reform in London.

"With the world economy slowing, you have growing protectionist pressures in many countries," she said. "You want to bind the hands of governments to what they have already agreed to."

Deep skepticism about the advantages of open trade with China and other rising economic powers, on vivid display during the Democratic primaries in the United States, is a growing threat in Europe as well, particularly as France, Italy and other countries have fallen into an American-style economic swoon.

A trade deal, economists said, would have been a valuable tonic.

"It's important to move forward when the world is in a slowdown, and is tempted to think of protectionism rather than opening up," said Norbert Walter, the chief economist of Deutsche Bank.

Soaring food prices provided another rare opportunity for deal, he said. European and American farmers are prospering, even without state subsidies. It may never be easier to reduce those subsidies, which is always one of the most sensitive issues in trade talks.

Celso Amorim, the Brazilian foreign minister, said, "It is unbelievable, unbelievable, that we have failed on one issue when many other issues that seemed much more intractable were overcome."

"An outside observer, someone from another planet, would not believe," he said, "that, after the progress made, we could not conclude."

Mark Landler reported from Frankfurt.

 

 
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