The collapse of the WTO mini-ministerial at the end of June 2006 in Geneva confirms that all is not well with the Doha Round, widely touted as the development round of multilateral trade negotiations. The recent failure to move ahead makes the prospects of concluding the round by next year bleak, given the time left for the fast-track authority with the Bush administration in the US.
The blame game is now on. And there are diverging reactions. Some see it as an opportunity missed for attacking poverty; others feel gratified that further damage to the cause of development has been prevented, as they find it a bad deal that would have perpetuated the growing asymmetries in the trading system.
The Doha Round was launched in late 2001 as not just another trade round, but as one that would address the concerns of developing countries, who felt short-changed in the Uruguay Round. The negotiations taking place over the past five years have, however, confirmed that ?development? was just a rhetorical term used to convince the developing countries around and get the Round launched.
The Cancun ministerial had collapsed due to the resistance of developed countries on pursuing their agenda in utter disregard of developmental concerns. The process was revived with the July 2004 package. The Hong Kong ministerial, however, failed to push the development related issues, except for a deal on duty-free, quota-free access for the least developed countries for 97% of their tariff lines. It is clear that only a lip service has been paid to development.
For instance, in the key area of agriculture, countries like the US and EU are resistant to cut the agricultural subsidies that distort the sector. Yet, they seek ambitious commitments in market access on agricultural products. For developing countries like India, with 600 million people dependent on it, agriculture is a livelihood issue rather than a trade one. The small and resource-poor farmers of India can?t be expected to compete with highly subsidised western farmers.
Obviously, developing countries need flexibilities to protect livelihoods, while taking the commitments on tariff liberalisation in agriculture. Therefore, developing countries under the coalition G-33, led by Indonesia and India, have been seeking flexibilities in the form of the Special Products and Special Safeguard Mechanisms (SP and SSM).
? June?s mini-ministerial collapse shows all is not well with the Doha round ? Developing countries must protect their policy space in tariff flexibility ? They should also exploit South-South trade through stronger regional pacts |
Industrialised countries like the US and EU are resisting such flexibilities for developing countries. They were willing to offer only five products to be designated as special products against G-33?s demand that at least 20% of agricultural products be treated thus. A development-friendly round would be sensitive to the concerns of developing countries, while seeking to rationalise the US-EU agricultural subsidy regimes.
On the issue of non-agricultural market access (Nama), the Doha mandate was for bringing down the high peak tariffs on goods of export interest to developing countries and modalities of tariff liberalisation imposing less onerous obligations (less-than-full-reciprocity, in Doha parlance) on developing countries, if at all. However, this mandate is being used to make developing countries deliver more-than-full-reciprocity, with the help of a non-linear Swiss formula that will bring about greater reduction of higher tariffs as a leveller. The US and EU are willing to allow only a five percentage point difference between the coefficients used in the formula for developed and developing countries. That means the maximum difference between tariffs applicable in developed and developing countries will be only 5%.
Tariffs have been widely used as a tool of development policy by most developed countries in the early phases of their development. It has been documented that US tariffs were four times the Chinese tariffs at the same level of development. Developing countries need flexibility to pursue trade liberalisation in a calibrated manner rather than an across-the-board or indiscriminate liberalisation.
Indiscriminate trade liberalisation can be devastating for fledgling economies and can lead to de-industrialisation and marginalise them further, as has been the case with sub-Saharan Africa. Therefore, a development-friendly outcome of the Doha Round will address the tariff peaks in developed countries, but will leave considerable flexibility or policy space for developing countries to employ tariff policy to develop their industries to create jobs and income to fight poverty and hunger.
It would appear, therefore, that developing countries need not shed any tears on the failure of the Doha Round to move faster. Unless developed countries show leadership in delivering the promises made in Doha in letter and spirit, there is hardly any prospect to get a development-friendly outcome from the negotiations. The focus should be on protecting the policy space by retaining the flexibility to use tariff policy to protect their small farmers and infant industries.
This policy space should not be compromised at any cost, especially because prospects of reciprocity in terms of real market access from industrialised countries are very dim, if at all, as indicated by a recent RIS policy brief suggesting negligible welfare gains from the Doha Round for developing countries. Developing countries could also exploit the potential of South-South trade by revitalising their global system of trade preferences (GSTP) and by strengthening their regional trading arrangements.
Studies show the bulk of gains from trade liberalisation in Asia can be realised by regional trade liberalisation alone. Further, intra-South trade liberalisation could also help attract investments and build supply capabilities.
?The writer is DG, Research and Information System for Developing Countries (RIS). The views are personal
