Tough Times Ahead For Harbinson & Smith

Published: The Financial Express, December 09, 2002
By Pradeep S Mehta

Last year, the suave Chairman of the General Council, Stuart Harbinson’s, task was to ensure the successful completion of the Doha Ministerial Conference. Again, as Chairman of the WTO’s negotiating group on agriculture, he is facing an even bigger challenge. His chairmanship is curious, as he now works for the WTO Director General. Perhaps, his skills as a clever chair has thrown him into this, when people expect that he can broker a deal between the EU and the Cairns Group (agricultural exporting nations) on the crucial issues of agriculture, which Ministers agreed at Doha.

On the other hand, Ambassador Ransford Smith of Jamaica, as chair of the Committee on Trade and Development (CTD), also has the enviable task of doing a Harbinson to resolve sticky negotiations on Special & Differential Treatment — an issue on which the Like Minded Group of Countries (India, Pakistan, Egypt, Malaysia etc) had created an agriculture type make or break situation at Doha.

If you don’t give this, we will not move an inch forward, threatened Murasoli Maran, India’s commerce minister at Doha. Agriculture has a deadline until end-March, while SDT deadline comes up at the end of this year. On agriculture, in fact, we have moved backward, instead of building upon what we had agreed at Doha. The EU refusal to reform its Common Agricultural Policy, coupled with the Cairns Group’s unwillingness to dilute its position, has added fuel to the fire.

It is crunch time for the WTO now. Progress in negotiations over the next two months will decide not only the fate of Cancun Ministerial Conference but also the entire Doha Round. A panic situation seems to be setting in, quite evident by Harbinson’s remarks. During the November 18-22 negotiating session on agriculture, he warned that Members face a “daunting” task ahead in trying to reach an agreement by the end of next March on the framework for carrying forward their mandated negotiations on the further liberalisation of farm trade. Before the March deadline of agriculture, a more important task before the Members is to complete the review of S&DT as the year-end is just three weeks away. Much ground remains to be covered in a very short period of time. WTO members have to display both political will and flexibility, else we are back at square ‘A’.

In the last week of November, various pow-wows have taken place — ranging from agreement-specific and cross-cutting issues to monitoring mechanism, and ‘the way forward’. Everyone knows that failure on S&DT coupled with failure of breakthrough in agriculture will seal the

fate of Cancun and the entire Doha Round.

In S&DT, the crux of the divergence between mostly developed countries and most of the developing countries is how to deal with the 85-plus proposals that have been submitted to the special sessions of the CTD till date. To add to the injury, last month, the EU circulated an informal paper on “differentiation and graduation”, i.e. SDTs should apply differently to LDCs and developing countries, and so. This was vehemently opposed by developing countries, because it would have meant driving in another wedge between the poorest and the poor countries, thus breaking their occasional unity.

Further, they argued that it would divert the S&DT review away from the mandate of strengthening these provisions and making them “more precise, effective and operational”.

Currently, all S&DTs in favour of developing countries, are, at best, endeavour clauses, without any teeth. On the other hand, S&DTs in favour of rich countries, such as in agriculture, textiles and clothing are binding. The Sydney “Mini-Ministerial” could not do anything on agriculture. It remained busy in bring out a political fudge on the issue of TRIPs and Public Health. This too, as I had commented in the last column, has become mired in the US pharma lobby seeking an extremely narrow definition of “diseases”, which is currently being debated at Geneva. Suffice it to say, that it is another example of the power play in the WTO, where the rich get what they want; the rest of the world can go to hell.

Following the Sydney ministerial, protectionist Japan has offered to host another mini-ministerial in February, in a bid to break the ‘deadlock’ over farm trade. This meeting, too, has little hope, which is echoed in the initial remarks of Japanese foreign minister, Yoriko Kawaguchi, when he said that the meeting is unlikely to yield any desired result. He said, “We don’t want to settle farm issues by giving into the Cairns Group; we will use the meeting to deepen their understanding”.

In the midst of all this, the US has thrown a spanner in the works, with yet another proposal, this time on industrial tariffs. US Trade Representative Robert Zoellick, on 26 November, unveiled a proposal to eliminate tariffs on virtually all consumer and industrial products in all WTO members by 2015. While most US manufacturers greeted the proposal enthusiastically, it met strong resistance from the US textiles and apparel industry. Criticism was also heard from the EU, Panitchpakdi Supachai, the head of the WTO, and several developing countries, including India.

The US proposal, which was submitted to the WTO Negotiating Group on Market Access, envisages a two-phase approach to eliminating tariffs by 2015. By 2010, all tariffs of 5% or less and tariffs on highly-traded goods would be eliminated, while remaining duties would be reduced to less than 8%. By 2015, the rest of the tariffs would be cut to zero. These efforts would be complemented by a reduction of non-tariff barriers. The US is planning to put forward a list of such barriers in January 2003.

A close look at the US proposal on industrial tariffs and earlier on agriculture, demonstrates that the ball will be lobbed into others courts. The proposal to end industrial tariffs by 2015 would put a greater burden on developing countries as many poor countries have high average tariffs of up to 40%, compared with 4% in the US and the EU. Similarly, in agriculture, its proposal of capping trade-distorting domestic support to 5% of the value of agricultural production would require no reduction in its actual current level of support, which is about $10 billion. The EU would be forced to reduce its support from the level of $47 billion to about $12 billion, and Japan from $33 billion to $4 billion. One can see who will have to move, if negotiations are to progress.

However, as regards the success of the Cancun Ministerial and the current Doha Round, it is not industrial tariffs, it is agriculture, which holds the key. Failure to reach a mutually amicable agreement in the past has often derailed trade talks, whether during the Uruguay Round or even at Seattle. Now, it is the turn of the Cancun to face this acid test. The progress on the Doha Development Agenda has been miserable. We have failed to meet the deadlines. The issues are not agriculture or S&DTs or industrial tariffs, but tariff peaks, tariff escalation and resolution of the TRIPs and public health debate, which need to be addressed first.

Clearly the burden for this lies on the world’s two largest trading powers: the EU and US. Otherwise Cancun may just turn out to be a miserable holiday!

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