The Hindu Business Line : Doha Round: A flicker of hope

One positive outcome of the recent World Economic Forum in Davos was that Ministers from 30 countries made "a commitment to put the Doha Round back on track." What is intended to be achieved is a broader, balanced package among key trading nations involving not only agriculture but also industrial products and services. But it is clear that developing country concerns have not gone away, says S. SETHURAMAN.

A WAY FORWARD for the Doha Round is what the Commerce Minister, Mr Kamal Nath, and the WTO Director-General, Mr Pascal Lamy, were devising when they met in Delhi in January, and the process was taken forward in Davos.

World businessmen revel annually in Davos, and this year's edition too ended with the usual platitudes. Importantly, however, it provided perhaps the last chance for revival of the moribund Doha Round, when Ministers from 30 key countries, including the US, the EU, India and Brazil, expressed "a renewed commitment to put the Doha Round back on track and to achieve a broad-based deal".

New Momentum

Specific issues were not discussed in Davos, at what can be called a mini-Ministerial. It was more in the nature of stock-taking, but it concluded with the understanding that official-level talks in Geneva would be resumed on a date set by the Director-General. No date has been set for the next meeting of Ministers to finalise modalities.

All reports from Davos make one thing clear: What is intended to be achieved is a broader, balanced package among key trading nations involving not only agriculture but also industrial products and services.

Based on the outcome of technical level discussions, there will be official level talks, after which the WTO Director-General, Mr Pascal Lamy, will consult the governments for Ministerial-level negotiations.

"It is a question of months," Mr Lamy said, and the assumption is that, if an accord in outline is achieved shortly, it would help the Bush Administration approach the Congress for an extension of the Trade Negotiating Authority, which expires in June, and the Round can be concluded by the end of 2007.

Missed deadlines

The Doha Round missed many deadlines and despite the expectations raised by the Hong Kong Ministerial of December 2005, there was no progress in 2006 and after the collapse of the Ministerial talks last July, the Doha Round remained suspended for several months.

In recent weeks, with directions from the US President, Mr George Bush, and the EU Commission President, Mr J. Manuel Barroso, the US and EU Trade Representatives, Ms Susan Schwab and Mr Peter Mandelson, respectively, met in Washington and announced that, "we are clearly making progress".

Ms Schwab insists that any further cut in US domestic support to its farmers (now at $2 billion ) would be directly related to how much market access (by the EU) is on the table.

Indications are that the US might agree to lower its support level to $17 billion if the EU cuts its farm tariffs by more than 50 per cent but Washington also wants a pruning of the list of "sensitive products" exempted from the tariff cuts.

Mr Mandelson has offered to expand cuts on agricultural tariffs to more than 49 per cent in a way that would give new market access to all exporters and products.

The US and the EU appear to be making common cause in extracting concessions from developing countries, especially India and Brazil, by cutting their own tariffs for industrial goods and offering greater opening for foreign service providers. Progress on agriculture, the key issue which had blocked any progress in the Round so far, is being made again dependent on other areas, as both the EU and Germany, independently, are insisting that agriculture should not be the only focus of concentrated efforts.

The EU does look for accelerated progress in services, that is, greater opening for itself including equal treatment of domestic and foreign investments.

Both the EU and the US maintain that, "we have a process and we can move forward" and the process would start with technical discussions. The statement, issued after the Davos meeting of Ministers, speaks of a "broad-based deal", which means that all the three areas — agriculture, non-agricultural goods and services - would be taken together for trade-offs.

The Commerce Minister, Mr Kamal Nath, who took part in the meetings in Davos, said development has to be at the centre of the deal. But from his remarks it is clear that developing country concerns have not gone away.

Pressure on India

It is also known that unlike the EU, the US wants India to open its agricultural market as well. It could mean lowering tariffs or keeping "special products" to the minimum or both.

Significantly, Mr Lamy, when he was in Delhi before the Davos meeting, had urged India to re-think its stand on agriculture, saying its exposure to international trade would be only a small part of major reforms needed to address concerns of the farming community. He also met the Agriculture Minister, Mr Sharad Pawar.

India has ruled out any concessions in agriculture what with the bulk of its population dependant on land and where food security and rural development are livelihood issues. But the US and, to a lesser extent, the EU are trying to make India and Brazil take on more market access commitments. Thus, the revival of the Round, which has been progress for five years without even modalities for negotiations, cannot be viewed with great expectations, unless leading developing countries come out with offers of their own.

Outlook Uncertain

Even while the developing countries have a hard task in salvaging the development dimensions of the Round, France is putting brakes on the EU Trade Representative from making more concessions on market opening than what he had offered earlier; it threatens to veto any deal which runs counter to the European Common Agricultural policy.

In a sense, the Doha Round still hangs in the balance irrespective of the degree of optimism that has been generated in Davos.

Mr Lamy noted that there would need to be "a new US offer on farm subsidies, a new EU offer on tariffs and a new offer from India and Brazil on manufactured goods." India will have to make crucial decisions on how far it wants to stretch its negotiating positions on the key issues without a domestic backlash.

Negotiating modalities

Negotiating modalities (in terms of top numbers providing a frame of reference for detailed negotiations) have eluded the Doha Round participants for over five years. I

t may be too much to hope that they will do the job in a matter of months. But the stakes are too high. If the Round ends in failure, it would be a severe blow to the multilateral trading system and a serious setback to the global economy.

A desperate Mr Lamy at one time reminded developing countries that what had been laid on the table — subsidy reductions, market access offers, phasing out of export subsidies by 2013, duty-free and quota-free imports — for Least Developed Countries and Aid for Trade should be grabbed lest they get forfeited if the Round is allowed to die.

(The author is a former Chief Editor of PTI.)