AS the crucial make-or-break talks resumed at the WTO headquarters in Geneva last month with negotiators finding themselves pitted against the heavy odds of achieving in three months what they have failed to do in more than three years, there is a visible anxiety among the stakeholders to break the deadlock although the divisions remain deep.
The United States and European Union, who hold the key to the success of the talks, have announced to work to break the stalemate and made it clear that they would not impose “tablets of stone” on the rest of the world.
Their ‘resolve’ came in a statement after EU Trade Commissioner Peter Mandelson and US Trade Representative Rob Portman met in Washington in mid- September. Earlier, President Bush and Prime Minister Tony Blair indicated in separate statements that the farm subsidies must end by 2010.
Latest reports say the United States, which is pressing the European Union and other importers to open up their markets has spelled out to the full 148-state
membership proposals already floated in talks with a small group in Paris late last month. It says the tariff lines should be divided into four bands for the purpose of setting cuts. The bands would run from 0-20 per cent, 20-40, 40-60 and above 60 per cent.
The EU, on the other hand, has detailed its ideas on domestic support, or subsidies, but the US gave no indication of what it was prepared to do in an area in which it is under pressure to make concessions. The chairman of the farm talks, New Zealand ambassador Crawford Falconer, told members that he was heartened by the way the talks were proceeding, but that much remains to be done to secure an accord in Hong Kong.
A US official, meanwhile, hinted last month that there was about a 40 per cent chance of success of WTO talks. Ken Roberts, associate administrator of the US Agriculture Department, told farmers in Washington that an agreement between the United States and the European Union on cutting farm subsidies and tariffs could improve chances of success to around 60 per cent.
But an equally important development has been a blunt warning by global corporate leaders to the WTO leaders that the trade talks must not be allowed to fail. “We are deeply concerned that the Doha Development Agenda is on the verge of failure,” a joint statement issued by leading business groups from the United States, the European Union, Australia, Canada, Japan and Mexico said on September 6. It is rare that corporate sector expresses its concerns in such a frank and anxious manner.
“Time is running out for members to agree on key negotiating issues. The Hong Kong Ministerial conference is at risk of becoming the next Cancun or Seattle,” the business groups said. The signatories to the joint statement are the US Business Roundtable, the European Round Table of Industrialists, Japan’s Nippon Keidanren and business groups in Australia, Canada and Mexico. They asked all WTO members, “especially the major players,” to “demonstrate the political will” needed to move the agricultural talks forward even though that will involve making “politically painful decisions.” They should push for “deep and comprehensive” tariff cuts in the negotiations on industrial and consumer goods. They are more concerned about lack of progress in talks on the services sector which have fallen much behind other areas of the talks.
Although the US and EU negotiators, at the end of their crucial talks in Washington, decided to do away with the agricultural export subsidies for their farmers, they did not specify when or how. Their emphasis was on a time frame of “intensive consultations” in the run-up to the Hong Kong ministerial.
The US and EU have been playing a game of verbal ping pong in the recent months, each calling on the other to move first. They did not reveal the substance of their discussions on agriculture and, it seems, they have yet to thrash out how they propose to increase market access for foreign produce, and how to reduce the generous domestic support subsidies.
The question is when will they show their hands? In fact, all eyes are set on the kind of offer the envoys of the US and the EU come up with on the contentious issue of farm subsidies. The Doha round, launched in 2001, missed its end-2004 target date and the member states are now required to complete most of the hard bargaining by the time ministers meet in Hong Kong in mid- December. The G-20 seeks a time-bound phasing out of domestic support, elimination of exports credits and suggests a linear tariff reduction formula within bands preserving the overall proportionality between the developed and developing countries.
Although President Bush and Prime Minister Tony Blair have categorically stated that the farm subsidies must end by 2010, they have not made it clear if it was the beginning year of the phase-out or its completion year. Bush made the statement in July on the eve of G-8 summit. It was an important statement but did not evoke any response from the developing world because the latter knows that Bush’s desire is not shared by US Congress.
Senior Republicans in both the House and Senate are willing to concede only small reductions in farm subsidies, not any deep cuts as sought by Bush. The president wants to lower the maximum subsidies that can be collected each year by any one farm operation from $360,000 to $250,000.
Apparently, the signs are hardly encouraging, if not discouraging, for an early breakthrough. The talks are taking place in an atmosphere of fatigue and disappointment caused by member states’ failure July last to produce any accord.
Although the negotiators have been talking to each other since January, they have actually been waiting for an unambiguous signal from the two leading trading powers to go ahead. The developing countries have heard much about these powers’ readiness to end farm subsidies and also of accusing each other of reluctance to do so which they believe is a ploy to avoid a commitment.
The EU, which helped unblock farm talks in 2004 with its offer to end export subsidies, now finds little room to manoeuvre on import duties because of political opposition inside the 25- nation bloc, particularly from big food producers such as France. Brussels’ plans for reform of its Common Agricultural Policy (CAP) mean it can offer subsidy cuts of some 70 per cent compared to its current WTO limits, but the United States has yet to say what new disciplines it will accept on its farm spending.
According to the US agriculture department, Washington has been spending following amounts on farm subsidies in recent years: 2000: $32.3 billion; 2001: $22.1 billion; 2002: $15.7 billion; 2003: $17.4 billion; 2004: $10.6 billion; 2005 (projected): $24.1 billion; 2006 (Bush administration proposal): $19.8 billion.
Meanwhile, in United States Congress, cuts in food programmes for the poor are getting support as an alternative to President Bush’s idea of slicing billions of dollars from the payments that go to large farm operations. Republicans are not opposed to modest cuts in farm programmes, but do not favour any major cuts to cotton and rice growers in the South and California.
The European Union also intends to overhaul the Common Agricultural Policy (CAP) in a manner that it reduces farm subsidy payments to individual farmers and, in its place, increases payments for regional rural development.
