October 16, 2006	Monday	Ramazan 22, 1427

AT the end of 2005 in Hong Kong, a summit was held to break the deadlock over some of the key issues in world trade. Because of the significantly different stands of the key parties involved, these issues remained unresolved.

Instead only a symbolic deal for the ending of one type of agricultural subsidy, export subsidy which accounts for only two percent of total subsidies given by the West, was agreed to be phased out by 2013.

Since the end of the Hong Kong summit, the WTO has set a number of deadlines to come to an agreement over the issues, but to no avail. The key issue is how far the United States and the European Union will reduce their barriers to agricultural exports from developing countries, including both subsidies and tariffs.

In return, the rich countries want the larger developing nations, like Brazil and India to lower their barriers to import of manufactured goods.

But after four years, it appears that none of the key parties are prepared to compromise enough to push the talks to conclusion. For example Senator Charles Grassley, Chairman of the Finance Committee says: “I’ve always said that no deal is better than a bad deal and a ‘Doha light’ deal would be a bad deal. I am glad our trade negotiators held their ground.”

On the other hand, the Indian trade minister Kamal Nath believes that, “The US wants access for its subsidised agricultural products in India and other developing countries without cutting its huge farm subsidies…..The US brought nothing to the table. They stuck to their old position. Where India is concerned —- We will pursue our bilateral trade agreements.”

This trend of bilateral agreements, though not new, cannot be a substitute for global trade talks, as such deals are much less desirable than global agreements because the countries negotiating them have unequal bargaining power.

The US has negotiated free trade agreements with thirteen countries and is negotiating with ten more. It shows us that it was easier to negotiate thirteen FTAs, Free Trade Agreements, with countries bilaterally than a global agreement. Why? The answer is simple, because the US could use its clout to get a deal with a single nation than with the G110, one hundred and ten developing nations who stood firm in the recent talks against the developed nations. As Martin Luther King once said, “We must learn to live together as brothers or perish together as fools.”

The Doha Round was supposed to be a ‘free trade’ round for the developing countries specifically started with the aim of demonstrating that the West cared about the world’s poor.

The hypocrisy of the West can be seen by the fact that the only reason that the trade talks are not progressing is that, according to EU’s trade commissioner, “The US was unwilling to accept, or indeed to acknowledge, the flexibility being shown by others in the room and as a result felt unable to show any flexibility on the issue of farm subsidies……What they’re saying is that for every dollar that they strip out of their trade-distorting farm subsidies, they want to be given a dollar’s worth of market access in developing country markets…….The United States have been asking too much from others in exchange for doing too little themselves.”

The US trade commissioner on the other hand held that, “‘Doha Lite’ has never been an option for the United States; it is still not an option. There was no package on the table... that we could have recommended to the president or to the United States Congress…...Unless we figure out how to move forward from here, we will have missed a unique opportunity to help developing countries and to spur economic growth.”

So the only thing the West wants, according to them, is the whole pie so that not only can they correct present distortions but previous ones also.

The poorest countries have found it hard to make any headway in these talks because they have little to offer in return for their demand that the richest countries ‘level the playing field’. Their claim that the cuts would remedy inequalities of the past does not carry any wait at the negotiating table. But developing countries know that they have no way else to turn, after all they have already stuck themselves in a bad deal. Now the only way out is righting the wrongs done to them.

“In the first ten years of tariff reform and trade liberalisation we literally de-industrialized Zambia,” said the Zambian Commerce Minister Dipak Patel, “but now we are into it we have no other option. We can’t go it alone. We don’t have sufficient capital so we have to rely on multi-lateral trading system…..It is ironic that it has turned out this way but that is our only salvation.”

The WTO scenario seems to be a dog eat dog situation, whoever gets ahead of the line wins and whoever is left behind is left to perish. Is that what humanity has come down to? Are these rules, these iron chains representative of the evolution of human thought?

Most analysts agree that there is no point in resuming talks until two key election dates have passed – the American Congressional Elections in November and the French Presidential Elections in May 2007. It is believed that after the elections the administration will be better able to face down the farm lobby. The same situation exists in both countries. The government is reluctant to take away subsidies so close to the elections. This is the true facet of capitalistic ‘democracy’ where the good of a few comes before the good of billions.

The timescale is made even more complicated by the impending expiry of the ‘fast track’ negotiating authority by Congress in July 2007. Fast track, or trade promotion authority, means that Congress must vote the deal up or down as a whole, otherwise opponents could add wrecking amendments and force the US to renegotiate the whole deal.

In the current political climate, the US Congress facing mid-term elections and with trade deals already unpopular because of the huge trade deficit, an extension is unlikely to be agreed, and any trade deal without the participation of the world’s largest economy would be meaningless.

Support for free trade has been weakened all over the world including the rich countries, as many of their industries, particularly in manufacturing, have become uncompetitive compared to China. So now the question should arise in ones mind that where is their theory comparative advantage? Why now that they feel, that they cannot compete, are they backing out on free trade? When earlier they had competitive advantage in most goods, they coerced the developing countries in their game of getting rich over night.

Even now, that the West has lost its comparative advantage over some of its industries, a study by the World Bank shows that the gains from opening up trade, is not a “win-win” situation. The widely-quoted study suggests that complete trade liberalisation could increase, world wide economic growth by $287 billion per year by 2015. But two-third of these gains would go to the industrialised countries.

And while big agricultural exporters, like Brazil, would be big winners, many developing countries like Pakistan, Bangladesh, Cameroon, and Mozambique would lose out, in the early years of any deals, with most of our industry and agriculture being hit the hardest.

If the talks fail, they will collapse on their roots.