Wednesday, July 30, 2008

For the fourth time in five years, global trade talks collapsed Tuesday, dealing what could prove to be a fatal blow to the nearly seven-year-old Doha round of negotiations.

Negotiators met for nine days in Geneva, home of the World Trade Organization (WTO), where talks collapsed in a cloud of acrimony after India and China refused to budge from their demand for the right to impose “special import safeguards.”

“We were so close to reaching a deal on Friday night,” U.S. Trade Representative Susan C. Schwab said Tuesday.

The “safeguards” demanded by India and China would have allowed them to sharply raise their import tariffs on agricultural products, especially rice, sugar and cotton, in response to a surge in imports. Since the purpose of the Doha round was to allow poor countries to develop by exporting farm products, the demand for safeguards by India and China violated the spirit of Doha, food exporters insisted.

That was all it took to derail the talks.

“Because the scope of overall trade liberalization … was so constrained at Geneva, there wasn’t much on the table when countries began demanding exceptions,” explained Jeffrey Schott, senior fellow at the Peterson Institute for International Economics in Washington.

As a result, when India and China demanded special safeguards, there was a sense they were pulling off the table more than what was on it.

“China isn’t interested in liberalizing,” said Peter Morici, a University of Maryland professor who was chief international economist at the U.S. International Trade Commission during the Uruguay round, the last multilateral trade agreement reached in 1994. He described China’s economic policy as “state-directed, big-city mercantilism” that ignores the plight of Chinese farmers.

“I’m not risking the livelihood of millions of farmers,” said Indian Trade Minister Kamal Nath, who is known as “Dr. No” in international trade circles.

By refusing to concede to the Indian and Chinese demands, Mr. Morici said, “America was rejecting China and India’s rigged markets.”

On Friday night, when the talks appeared to be teetering near collapse at their scheduled conclusion, Ms. Schwab offered to lower U.S. trade-distorting farm subsidies to $14.5 billion from the $15 billion level she had offered three days earlier.

The current ceiling is about $48 billion, but last year, because world farm prices were high, the United States paid out trade-distorting subsidies of only $7 billion to its farmers.

Developing countries complained that even the revised offer would have permitted the United States to double its subsidies if prices fell.

Nevertheless, Ms. Schwab’s offer elicited a counteroffer by Brazil to limit its industrial tariffs. That extended the talks through the weekend and into this week.

“There should be no question, we made important progress,” Ms. Schwab said. “Even today, five of the seven countries in the leadership group were prepared to accept the Friday proposal by [WTO] Director General [Pascal] Lamy.”

Whether the Doha round has collapsed for good remains to be seen. Officially, it’s still alive.

“I’m not saying the talks are dead,” Mr. Schott told The Washington Times. “But you can only go to the same well so many times before people start drilling a new well.”

Edward Glesser of the Washington-based Progressive Policy Institute, a Democratic think tank, suggested where trade negotiators should drill their new well.

WTO members “should move agricultural reform out of the center for a few years and focus instead on big, newly emerging industries, including energy-environmental industries, where attitudes are less entrenched and emotional.”

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