Complex trade details kill WTO deal
When talks aimed at getting a new global trade deal began back in 2001, officials might not have believed it would take seven years for the countries in the World Trade Organization to reach an agreement.
But you can bet no one would have predicted that, at the end of this tortuous process, the 153 nations of the global group would be walking away from the bargaining table empty-handed.
Yet that is exactly what happened at the WTO talks this July.
WTO director general Pascal Lamay announces the trade talks had failed.(Salavatore Di Nolfi/Associated Press)"There is no escaping the fact that the intensive efforts the whole membership has been putting in over the last days have failed," WTO director general Pascal Lamay said after a meeting in Geneva failed to make any progress on a number of outstanding issues.
In July, a smaller group of influential nations met, hoping to reach a deal on the provisions governing trade in agriculture and services, details that were standing in the way of a final WTO pact.
However, after a week of talks, they called off the discussions even though the negotiators had made progress on 18 out of 20 areas of difference, according to Lemay.
But the differences concerning the agricultural sector were too big to bridge, officials said.
Doha distressFor now, no one is publicly giving up hope that a deal in what is known as the Doha Development Round of the WTO can be reached.
But, with a new U.S. president due to be elected this year and an Indian prime minister barely surviving a recent non-confidence motion at home, officials are privately writing the epitaph for these talks.
As a result, both developed and developing countries are throwing away $130 billion US in tariff relief, two-thirds of which would accrue to poorer nations, Lemay told reporters in Geneva.
Interestingly, the same differences that the countries faced at the start of the talks, begun at Doha, Qatar, were the reasons that these negotiations ultimately failed.
While the countries could not break the deadlock concerning agricultural protection, the growing economic clout of India and China irreparably changed the underlying dynamics of the discussions.
The WTO talks floundered over something called the "special safeguard mechanism," a relatively obscure device designed to protect smaller farmers from surging foreign competition.
WTO floundered on protection for farmers in developing countries such as India.(Rajesh Kumar Singh/Associated Press)On the surface, most governments accepted the need for some sort of import help for small-scale farms.
Approximately 100 nations, led by India, China and South Africa, wanted to make sure their farmers would not be swamped by imports from large American and European agri-companies.
Protection soughtThese countries proposed that they be allowed to protect their producers if the amount of foreign farm imports grew too fast or if the prices these commodities fetched dropped too low.
The European Union and U.S. negotiators appeared to agree with that portion of the proposal. Where they disagreed was the point at which such help would be triggered.
The developed nations wanted a high threshold, or "trigger," that would not interfere with normal trade. The poorer countries wanted a lower trigger point to provide greater assistance for their agricultural industries.
Ultimately, the developing and developed countries were not willing to change their positions to get an agreement.
The intellectual struggle between the two sides might have been about the protection trigger, but the real fight was about bare-knuckled politics.
China and India have grown in economic stature in the past decade, making the two nations more willing to exercise their diplomatic muscle.
"China is practising a kind of major power diplomacy. It expects its interests to be respected," said Joseph Cheng, chairman of the Contemporary China Research Center at City University of Hong Kong.
Farm voteIn addition, more developing countries are democracies than was the case when the Doha round opened in 1991 — and their farmers vote.
Thus, in these emerging economies, governments risk getting chucked out at the ballot box by small-scale producers afraid of fighting foreign competition in their own markets.
Take India as an example.
The number of people who farm or work in its agricultural sector had jumped to 234 million by 2001, up from 97 million 50 years ago.
That means approximately one Indian in five works in a sector that might be seen at risk in a WTO deal.
With the government of Prime Minister of Manmohan Singh in trouble, this voting calculus likely cooled India's interest in making any more concessions in order to get a trade deal.
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