WorldCity Business Magazine

Trouble at the WTO

by Jeffrey Sparshott

“I am afraid we have to face the facts. These negotiations are in trouble.” Supachai Panitchpakdi, director general of the WTO, July 8, 2005

Few Americans have heard of Supachai Panitchpakdi, and fewer still can pronounce his name at a glance. But the outgoing director general of the World Trade Organization has a unique vantage from which to observe and push negotiations for the Doha Development Agenda, the round of trade talks started in the wake of the Sept. 11, 2001 terrorist attacks and originally set for conclusion on Jan. 1, 2005.

Now the WTO’s 148 members are hoping to have the pieces in place for a broad agreement this December, when trade ministers meet in Hong Kong, and a final package in 2006. But Supachai, usually more of a diplomat than a rabble-rouser, is not sanguine.

“If we keep on like this the talks will be full of divergences and opposition as opposed to convergences this will be a recipe for disaster and failure,” he said on July 12 at an informal WTO meeting in Dalian, China.

The Thai politician knows that one of the best motivators for all politicians is crisis. But his warnings go beyond rhetoric. While the 2001 meeting in Qatar’s capital, Doha, was a success, its predecessor in Seattle in 1999 and its successor in Cancn in 2003 were unmitigated failures. The next few months will help determine whether Hong Kong is lumped in with Doha or with its more infamous counterparts.

The United States went into the Doha round with high hopes, great ambition and a clear mission. As the name implies, the Doha Development Agenda is supposed to be about economic opportunity for poorer nations. For the world’s biggest developing countries such as China, Brazil and South Africa that usually means access to U.S. and European markets. The United States already offers one of the world’s most open markets, and the Bush Administration is willing to go further as long as others reciprocate.

But Doha, even more than lowering trade barriers, also means leveling the playing field for developing countries, especially their farm goods. That means Europe, the United States, Japan and other wealthy nations will have to cut or radically alter the nature of their farm subsidies. And that entails massive changes to billions of dollars on popular programs. For the United States in 2005, the amount is estimated at $24 billion; depending on currency rates, the figure could be double that in the 25- nation European Union.

Developing countries say that the subsidies effectively lower commodity prices, making them unable to compete in world markets and robbing them of income. Brazil took its argument to WTO courts and won two separate cases against U.S. cotton and E.U. sugar payments.

The Bush Administration acknowledged the loss and proposed cutting cotton payment but, more broadly, President George Bush has suggested much steeper cuts in tandem with other rich nations.

“I think it’s very important for the world to hear very clearly the position of the United States, and that is that we want to work with the E.U. to rid our respective countries of agricultural subsidies. The best place to do that is at the Doha Round. I would hope that by 2010, that the Doha Round will achieve that objective,” the president said on July 7.

Such a signal is crucial to the talks, because agriculture is at the heart of the negotiations. Without progress on farm trade, other nations will not budge in areas where agreement might be easier such as manufactured and industrial goods and trade in services.

But the administration has to negotiate a Doha deal with one eye on the WTO’s 147 other members and the other eye on U.S. farmers and their supporters in Congress. U.S. farmers say they will accept cuts, but with conditions. If there is any doubt about the power of the agricultural lobby in the United States, just look at the fight over the Central American Free Trade Agreement, where one commodity sugar may derail the entire measure. Europe’s farm lobby has turned militant in defense of its programs.

So the haggling will continue this summer and fall in Geneva, with negotiators able to bargain only as far as domestic constituencies will allow them. That is the formula that has hindered progress so far.

“The crisis that threatens is all the more menacing because it is not a crisis of dramatic divergences or headline-grabbing conflict it is a crisis of immobility. I think there is still a slender chance of averting it, but every hour must be made to count,” according to Supachai.