The recent failure of talks aimed at expanding international trade and reducing global poverty has raised a host of questions – Who wins and who loses? What are the implications? What’s next?
The negotiations launched in Doha, Qatar, in November 2001 collapsed as trade ministers from the United States, the European Union, Brazil, India, Japan and Australia, the core negotiators, failed to reach an accord.
There has been plenty of finger-pointing – the U.S. at the European Union, the EU at the U.S., and the developed countries against the emerging economies of Brazil and India for not making sufficient concessions. Eventually responsible for the impasse were U.S. farm subsidies, Europe’s tariffs on agricultural imports, and the developing countries’ demands that some of their agricultural goods be protected from imports and that they be permitted to provide farm aid and price supports.
As Pascal Lamy, director-general of the World Trade Organization, said after the breakdown, there are no winners, only losers. Nearly $20 billion in annual U.S. farm subsidies will remain intact, for there is not a prayer that the multiyear farm bill due for renewal next year will reduce the subsidies. No more foreign markets will open to U.S. farmers; neither the European Union nor the U.S. will provide better access to agricultural products from poor countries.
Perhaps equally important is that in the non-agricultural sectors – insurance, financial services and telecommunications, for example, as well as manufactured goods, for which the developed countries were seeking better market access in the emerging economies – the doors will remain shut. World trade expansion, anticipated to create $300 billion of wealth and lift millions out of poverty, will not materialize. And litigation at the WTO, especially against U.S. subsidies and European tariffs, will become commonplace.
The 149-member WTO will be adversely impacted as the global trading system is further fragmented by a patchwork of bilateral and regional trade agreements, perhaps leading to increased protectionism. The U.S., Europe and India have aggressively sought these arrangements in the recent past and will undoubtedly redouble their efforts.
Lamy said the talks were only suspended and that U.S. trade representative Susan Schwab will explore avenues to successfully conclude the talks. There is precedent, as negotiations during the last Uruguay Round had also initially failed but ultimately succeeded after a period of reflection by the major participants.
This time, however, the story is different. Europe and the United States are no longer able to dictate the shape of the future world trade regime. The irony is that they are even sniping at each other. Brazil, India and China have sufficiently flexed their muscles to sit at the head table, and the farm lobbies, especially in the U.S. and Europe, will not budge without getting reciprocal concessions from the developing countries which seek flexibility.
Trade talks will not likely resume before the U.S. congressional elections in November and perhaps not until a change in the White House more than two years hence. Congress is not likely to extend President Bush’s negotiating authority, due to expire next July, under which Congress must give the trade accord negotiated by the executive an up- or-down vote, without amendments.
This leaves the most vulnerable, poorest countries out in the cold. The promises made to them by developed countries of lower tariffs and better market access under the Doha Round have vanished.
As international challenges mount, world trade included, the questions of who leads and with what kind of vision are not theoretical. The difficulty here is compounded because the leadership and the vision are both lacking. The U.S. and Europe are often at odds on crucial issues. And the U.S. is overextended in Iraq, with the weight of an almost unbearable trade deficit and national debt.
The failure of the talks is indeed a major disappointment. Enlightened self-interest demands that the prevailing protectionist tide in the U.S. and the EU be halted and aid-for-trade plans be explored to help poor countries. The fallback regional trade blocs and bilateral agreements – nearly 250 at present – are discriminatory, create tensions and are no substitute for an effective multilateral system that alone provides a win-win situation.
Ved P. Nanda (vnanda@law.du.edu) is Evans University Professor and director of the International Legal Studies Program at the University of Denver. He just returned from giving lectures on international trade law in Austria, France and Luxembourg.
