On 24 July the Doha round of WTO negotiations was suspended indefinitely due to the deep divisions among major countries and groups of countries, particularly over agriculture. The decision to suspend negotiations was made by the WTO Director General, Pascal Lamy, and the informal G6 steering group (comprising Ministers from Australia, the US, the EU, India, Brazil, and Japan) after their meeting failed to narrow the differences. The suspension was subsequently noted by the General Council of the WTO.
Lamy indicated it could be months or years before negotiations resumed. Indias Minister for Commerce described the state of the round as being somewhere between an intensive care unit and the crematorium. The US and EU blamed each other for the collapse, with the US also criticising the level of protection sought by developing countries.
At the meeting the EU raised its offer on agricultural liberalisation to a 50% average tariff cut, subject to a list of exempt sensitive products. It demanded in return that the US improve its offer on cutting agricultural subsidies. The US refused on the grounds that the offers from the EU and developing countries were of little value in terms of a substantial increase in US agricultural exports.
The EU offer was to cut tariff rates as specified and bound in existing WTO agreements, which are well above the actual tariffs it applies. The EU reinforces the protection offered by the applied tariffs with quotas on the volume of imports of a given product for which the preferential tariff rate is payable, and there is usually a sharp increase in the tariff for goods above that quota. Consequently the US and Australia want the EU to increase the quotas as well as reducing the applied, not just the bound, tariff rates. The other concern about the EU proposal was the risk that major US and Australian exports would end up on the exempt list of sensitive products.
On the other hand the existing offer from the US to reduce its level of subsidies has the major loophole of applying only to particular types of subsidies. Detailed analyses and simulations of the US offer have concluded that, by shifting monetary payments so that they are classified as falling under other categories of subsidies, the US could maintain and even increase its current $19billion level of support.
Technically the Doha round could have been suspended without affecting the GATS negotiations, as the latter are mandated in the text of the GATS regardless of whether negotiations are underway for industrial and agricultural goods. However the suspension decision expressly includes the services negotiations. The importance of this for service sector unions is that, while little progress was being made with respect to new offers of liberalisation for particular services, the Working Party on Domestic Regulation was due to consider draft text, prepared by the Chairperson of the working party, that explicitly introduced a least trade restrictive test for licensing requirements.
Various meetings outside the WTO structure, including a scheduled Cairns Group meeting in September this year, could be used to try to create momentum for a resumption of negotiations. Some of the Trade Ministers that argued that no agreement is better than a face-saving Doha Lite outcome may reconsider their position. Informal consultations between key countries will also happen. Moreover, the EU has proposed that certain interim decisions seen as favourable to developing countries that are technically in limbo in the absence of a final Doha agreement should be locked in as part of an Early Harvest agreement.
On the other hand, August is a holiday period for EU bureaucrats and in November this year there are mid term congressional elections in the US. The Farm Bill that provides for agricultural subsidies in the US is due to expire in the first half of next year, as does the legislation that streamlines Congressional consideration of free trade agreements and precludes Congress from amending as distinct from rejecting proposed agreements. The current betting is the former will be extended, thus making the US negotiating position less flexible, while the latter will not be renewed. Presidential elections in the US, France, and Brazil add to the assessment that the next two years is crowded with events that will overshadow trade negotiations and make it politically too difficult for the major players to make trade concessions that would anger domestic constituencies.
The expectation of media commentators is that a prolonged suspension of the WTO negotiations will lead to more bilateral and regional negotiations. While there is some truth in this, it should be borne in mind that the industrialised countries have already concluded, proposed, or are negotiating bilateral and regional free trade agreements with many of the countries that are neighbours, former colonies, or of interest in terms of trade or geopolitical considerations. Further, in respect of those negotiations underway or proposed, the onus that their outcomes deliver liberalisation above that embodied in the WTO agreements is likely to be measured against the existing Uruguay round WTO standard.
APEC meetings have increasingly focused on security rather than trade issues but an extended suspension of Doha negotiations could mean that the balance will be different with the November 2006 meeting in Vietnam, and the 2007 APEC series of meetings in Australia. The APEC Trade Ministers are due to meet in Queensland in early July next year, followed by a Heads of Government meeting in Sydney in September.
Read also: "A new global agenda", joint letter from Greenpeace International, International Confederation of Free Trade Unions (ICFTU), Oxfam International and WWF International published in the International Herald Tribune.