WTO: collapse of Doha round of talks - full text
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On Aug. 12, the World Trade Organisation (WTO) issued a report detailing the points of convergence that had emerged from the Doha round of trade negotiations despite the breakdown of the talks in July. The WTO noted accord on policies favouring least developed countries (LDCs) and on so-called "modalities" (formulas used to cut tariffs and agricultural subsidies, while affording some flexibility to protect industries harmed by high food and energy prices).
Immediate context
In late July, WTO trade negotiations in Geneva, Switzerland, failed to reach an accord on a package of agreements aimed at increasing global trade flows. Every element of the package of agreements had to be accepted for final approval. The "deal breaker" was the long-standing conflict between developed countries (including USA and the EU) and developing countries over access to agricultural markets.
Countries were required to reach agreement on 20 points across several sectors before the accord could be signed. Eighteen of 20 elements were agreed upon, but the USA clashed with the Indian and Chinese negotiators over the details of a "special safeguards mechanism" designed to protect poor farmers in developing countries from surges in agricultural imports from developed countries, The Economist reported on July 31.
Reaction and outlook
WTO director general Pascal Lamy on July 28 compared the overarching treaty, encompassing agriculture, manufacturing industry, services, and intellectual property rights, to the design of a cathedral that had become "too complex". Had the treaty been ratified, he estimated that it would have led to US$130 billion in tariff reductions on agricultural and industrial goods.
The new treaty would have reduced the extent to which countries could increase tariffs and subsidies, and introduced mechanisms favouring raw commodities and imposing higher tariffs on value-added goods. Rising prices for food and energy, decelerating economic growth, and instability in international markets, were expected to lead to an increase in protectionism around the world.
Although agriculture was responsible for only 8 per cent of world trade, it represented the main income source for some 2.5 billion people, mainly in developing countries. However, farmers from developing countries were unable to compete with subsidised exports from the EU and the USA.
Historical Context
After World War II, creating global economic stability became a major international political concern. Protectionist policies were widely thought to have exacerbated internationals rifts that had led to war and there was a consensus that eliminating barriers to trade would promote international harmony and prosperity. The General Agreement on Tariffs and Trade (GATT) was established in 1947 and played a leading part in the attempt to develop a framework for international trade. Attempts were also made to introduce international co-operation in the monetary sphere. The GATT, the IMF, and the World Bank were intended to ensure that trade blocs and economic spheres of influence would no longer be a means by which countries simply promoted their national interests.
However, these institutions could not always prevent the governments of various countries resorting to protectionist policies. National trade policies with regard to agriculture, and other so-called "strategic" or "infant" industries, stood in opposition to the adoption of trade liberalisation measures.
Under the concept of comparative advantage, during the 20th century countries typically specialised in the industries that created the best value through trade, and relied on imports from other countries to supply other products. However, the agriculture sector was generally considered by developed countries to be too politically and strategically important to be allowed to decline and protectionist policies were implemented to defend farmers against competition from abroad. For example, concern over security of a national food supply prompted support for the notion of "food independence", which, along with a desire to preserve farming as a viable way of life, led the EU to adopt the protectionist Common Agricultural Policy (CAP) in 1962.
For more than 50 years, GATT was dominated by, and its agenda set by, industrialised western countries, while a number of "rounds" of trade negotiations were held. These were the Geneva (1947), Annecy (1949), Torquay (1951), Geneva (1956), Dillon (1960-61), Kennedy (1964-67), Tokyo (1973-79), and Uruguay (1986-93) rounds. The number of countries involved in the negotiations increased steadily, from 23 in the Geneva round of 1947 to 123 in the Uruguay round, and the negotiation process became lengthier and more complex. The Uruguay round led to the transformation of GATT into the WTO in 1995. The WTO's Doha round of negotiations was launched in 2001.
By the end of the Tokyo round of GATT talks, developing countries had started to complain that their concerns were not being heard. In 2003 in Cancn, Mexico, during the WTO's Doha round of talks, developing countries formed two new negotiating groups in an attempt to increase their influence: the G-20 (Group of Twenty), consisting of middle-income developing countries, and the G-90 (Group of Ninety) of low-income developing countries.
The Doha round of talks stalled in July 2006 after disputes over how to reduce trade barriers in farm goods and industrial products and services. Developing countries like China, Brazil, and India had called on the USA and the EU to offer deep cuts in farm subsidies, while rich countries wanted the larger developing countries to lower their barriers to imports of manufactured goods. Attempts to revive the Doha round in 2007 were unsuccessful.
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