Jan 2, 2009

Business - Difficult times for trade

The recent cancellation of a meeting of trade ministers on the Doha round of talks has come as no surprise. The seven-year-old Doha round has had a chequered history, dotted by more failures than successes. The biggest stumbling block has been the inability of member countries to reach a framework agreement on the modalities of reducing farm subsidies and cutting tariffs on agricultural and industrial products. At the July 2008 a mini-ministerial meeting in Geneva, a break through seemed within grasp but it ultimately proved elusive. Prodded by WTO Director-General Pascal Lamy, member countries decided to preserve the gains made at the Geneva meet and build on them through trade representatives at the WTO Secretariat. The idea was to narrow the differences in agriculture and NAMA (non-agricultural market access). Indeed, according to the revised drafts circulated on December 9, there have been some “degree of convergence” and “progress” since the July meeting but there are also a number of difficult issues to be tackled. Among them, in agriculture, are farm tariff simplification, the special safeguards mechanism for developing countries, and cotton subsidies. On the industrial goods front, one important question related to duty-free and quota-free benefits for the developing countries.

Given the nature of contentious issues, it is highly unlikely that they could have been resolved in the short time available and the prolonging Doha round wrapped up at the scheduled meeting. Moreover, the global political and economic environment has changed dramatically in the latter part of 2008. The odds against the completion of the Doha round have lengthened, despite the strong endorsement it got from the G-20 at its Washington meeting. It is certain that the Obama administration in its initial years will be focussed on alleviating the misery flowing from the housing-led crisis. Nearly all the developed countries are in recession, and opening up foreign trade may be the last thing their political establishments would chose to address at this juncture. Already, influential groups in the U.S. in agriculture and manufacturing, backed by legislators, have indicated their strong opposition to the Doha round compromises. Elections are to be held in India by May, and there will be a new European Commission by autumn. Most countries will be less inclined to demonstrate the kind of flexibility needed to clinch the deal. All this is unfortunate because the Doha round, by suitably emphasising its development dimensions, can boost multilateral trade for the benefit of all countries.

No comments: