July 31, 2006	Monday	Rajab 4, 1427

THE collapse of a crucial round of trade talks last week between influential six nations – apparently a last-ditch effort to hammer out a compromise deal — at the World Trade Organisation seems to have sealed the fate of five-year old Doha development round. It may not be the Doha round alone to suffer a demise, the WTO may not be the same any more.

The six majors comprising Australia, Brazil, the European Union, India, Japan and the United States were deemed to be a representative caucus of basic interests of 149 members. A similar attempt was made last year too to break the impasse but there was no progress.

Since 2001 when the current trade round was launched in Doha in an optimistic atmosphere, there has been a series of talks failures, disagreements, missed deadlines, manipulations, threats and an endless blame game.

As before, it was the farm subsidies again that caused the collapse. And it was the United States which, according to the EU trade commissioner Peter Mandelson, was unwilling to show any flexibility on the issue of farm subsidies.

The way the US pursues distribution of subsidies among its farmers, some of them leading corporations, is simply not understandable. And the way it creates conditions that tend to destroy agriculture of poor African countries is too offending to developing states. The Washington Post, commenting on its reporters’ stories on farm subsidies, last week raised the question: “Why does the nation tolerate this waste?”

It reveals how subsidies are handed out. The American government, it says, paid out $1.6 million in earthquake compensation to Washington state farmers who hadn’t suffered earthquake damage. It foisted $39 million in storm compensation on bewildered Wisconsin farmers who were unaware that they’d suffered any loss.

And it gave $400 million worth of powdered milk, which it had bought to support milk prices, to supposedly drought-stricken ranchers — only to find that ranchers and middlemen sold the milk back onto the world market, driving milk prices down again while clearing a fast profit.

The Post calls it, “the theatre of the absurd” and says it has long been clear that the lion’s share of the $20 billion-plus annual farm payments has gone to rich farmers who don’t need the cash; that the payments promote environmental damage; and that they harm farmers in poor countries. But even with the most cynical view of politics, in which one assumes that these substantive problems with farm programmes don’t count, there’s still something of a mystery.

The mantra is that the farmers who receive the cash will vote for whoever provides it. But farmers are a tiny minority of the electorate. “Why doesn’t the majority, which pays for all this waste, rise up in revolt against the sheer gluttony of it?” asks the leading American newspaper. The problem is that when push comes to shove, the rich West is not prepared to face down their farmers and cut tariffs and subsidies to level the playing field for the developing world.

Two weeks ago, US trade representatives were told by Congress it would not countenance giving further ground on farm subsidies ahead of the mid-term elections looming in November without more concessions from other participants. That compelled the US to adopt a non-compromising stance which ultimately derailed the talks and Pascal Lamy, the WTO chief, then took the crucial decision to suspend the process, putting Doha into what The Guardian called “deep freeze.”

The indications are that the trade talks would remain frozen for at least two years and may not resume before the Bush administration ends its tenure and and Congress gives the next president new negotiating powers.

It seems that the zealous campaign over linking world trade and high growth with poverty alleviation, initiated by James Wolfehnson, is losing its steam. A protectionist tide has already raised its head in Washington, Brussels, Berlin and Paris as is evident from recent moves lacking commitment to free trade.

In its annual World Trade Report, published shortly before the last week’s failed meeting, the WTO reveals that total amount of annual subsidies that the West doles out has reached $300 billion, of which about $250 billion is spent in 21 rich countries.

It says that the absence of systematic information about spending is aggravated by the lack of common definitions of what constitutes a subsidy. Governments use subsidies as tools to build up infrastructure, help struggling industries or foster new ones, promote research, protect the environment, share out income and help poor consumers, the report says

It is interesting to note that the WTO has most of time since its birth been on the brink of collapse. The Seattle ministerial in 1999 had seen a revolt by the developing countries from inside while being besieged by protesters from outside and the trading body had a narrow escape from being eternally damaged.

The Cancun ministerial in 2003 ended without any agreement. The Hong Kong ministerial in 2005 tried to salvage some ground by keeping many issues open for negotiations.

Matters had reached a flashpoint in 2003 in Cancun when a large number of African countries walked out of the negotiations saying “enough is enough”. In fact, the WTO has never been able to recover from that setback that caused loss of confidence among the Third World states in the West.

Another problem is the elaborate procedures and a strange system of holding meetings. The fact remains that the WTO has always functioned through backroom deals and arm-twisting by developed countries. This has often made a mockery of the much-vaunted democratic decision making process in the WTO, where technically each country has one vote.

The issue for developing countries has always been that at what terms should they agree to be part of the global trading system. The WTO had been created from an earlier framework called GATT in 1995, in order to provide an impetus to global trade. It is natural that there are differing perceptions regarding how global trade should be regulated, depending on which side of the divide one comes from.

The developed nations see the expansion of global trade as a way to prise open markets in developing countries while restricting the ability of these nations to develop their independent capabilities in manufacturing and services.

The developing countries see global trade as the means of having access to the markets of rich countries. They committed a blunder during the Uruguay Round negotiations when they agreed to the terms that placed onerous conditions on them through the WTO agreement. Having been sucked into this system, the developing countries are now looking for ways to negotiate fair and favourable terms of doing trade with the rich states, not acceptable for the latter.

Only now they have realised that being in majority in the WTO, there is no reason why they should not be able to aggressively seek better deals and concessions. Hence, the birth of G-20 and intensive lobbying campaigns have created a difficult situation for the West to impose its terms on the non-western countries. The question, however, is : can the West afford to lose the WTO?