Hong Konga ministerial of vague promises

Updated: Jan 2 2006, 05:30am hrs
The Hong Kong WTO ministerial is over, amid strong protest and hard bargain. What did it achieve What have been its tangible gains As one probes, one finds no real progress, except that it has managed to keep the Doha development agenda negotiable, not allowing it to meet a natural death.

As usual, agriculture remained the focus of negotiations, consuming most of its time on export subsidy. The EU & US pledge on a new date to phase these out on farm products by 2013 may have displayed a concern, but was not appreciated much. For, three-fourths of WTO members feel they have to wait eight long years to realise the minimal gains, because of its small impact in the markets. All of them understand that export subsidy doesnt play that big a role in agricultural distortions as is done by domestic support. The $5 billion of such subsidies on farm products is minuscule compared to the domestic support given of $1 bn a day.

Export subsidy remains a major irritant to free trade, but the World Bank says its abolition will only yield 2% of theoretical gains to world agriculture. The total phase-out promise, then, looks like a small gesture towards pacifying the popular anger and discontentment of WTO members. What would have been noteworthy was to get a commitment for phase-out of domestic support, the real dampener, from US and EU by a realistic deadline.

Coming back to the pledge, nothing is committed as to how the sequencing and quantification of phase-out of export subsidies would commence. No formula is in sight. A closer look suggests no final decision has been made, as it is dependent on the completion of modalities, for which April 30, 2006 is the deadline. And, deadlines in WTO are hardly met.

The other issues which were at the heart of the negotiations, such as Nama and services, hardly witnessed any forward movement. On Nama, the Swiss formula has been preferred over the modified formula proposed earlier by India and others. The declaration also doesnt indicate anything about the coefficients, whether there are two or many, which would take into account the different requirements of poor economies as well. Similarly, in services, the growth engine of the post-industrialised world, nothing has been committed, in spite of India and other developing nations vociferously pitching for progressive liberalisation on Mode 4. Though the declaration makes a special mention of such allowance, yet it is all for least developed countries.

US-EU promise on farm export subsidies is of relatively little consequence
A promise on phasing out domestic support would have been more useful
As for Nama and services, hardly any forward movement was witnessed
Indeed, what Hong Kong witnessed was an appeasement of least developed countries. These countries were offered a set of goodies which would provide duty-free, quota-free access to rich countries markets of at least 97% of their goods. The US also promised West African cotton producers to reduce its cotton subsidies more quickly than other farm supports. Its further pledge of phasing out of cotton subsidies by the end of next year also formed part of the declaration. The point is, such a promise was made earlier, too, to African nations (an ear-lier WTO ruling), but nothing has fructified since. Whether such promises are real concerns or just promises in nature, the end of 2006 will tell.

Finally, being perceived as a development round, there was no mention even of other developmental issues such as progress on Trips or special and differential treatment. However, a remarkable aspect of this ministerial is that it gave birth to a group, the G-110. The unity of faith, purpose and togetherness allowed the G-20 and G-90 to mobilise the lesser economies to graduate to G-110, which stood firm in the common bargain despite EU and US efforts to break the unity.

The only other positive development one can perhaps sense out of this ministerial is that a feeling of acute cynicism or failure towards the multilateral trading regime governed by WTO hasnt set in. It hasnt been seen as a repeat of Seattle or Cancun. It hasnt triggered a thought towards forming regional trade arrangements, unlike immediately after Cancun. Still, for all its grandiloquence, Hong Kong hardly did the job of promoting free trade.

The writer is with IIFT, Delhi. These are his personal views