Stalemate at WTO

When the Doha round was initiated nearly 7 years ago, it was promised to be a “development round” that would address the concerns of poorer countries through “special and differential treatment” in respect to import tariffs. Never in the past was this promise kept, and the latest ministerial in Geneva broke down once again on the rocks of Euro-American adamancy in these matters.

The immediate cause of the collapse lay in the controversy over the precise point at which developing countries could use the Special Safeguard Mechanism (SSM) to check a sudden surge in imports of farm products. While India and China wanted SSMs to kick in if imports increased 10 to 15 per cent over the base period, the United States demanded the limit to be set at 40 per cent at the minimum. Developing countries argued together that such a higher trigger would seriously affect the livelihood of a huge number of their peasants. Farm subsidies in the U.S. and Europe were already squeezing their own farmers out of the market -- they pointed out -- thereby reducing indigenous food production and endangering food security; they simply could not allow the situation to deteriorate further. There were other sticking points, too; the most important being US unwillingness to reduce cotton subsidies. The US Farm Bill 2008 having promised that cotton subsidies will be maintained or increased in the next five years, its trade representative was obviously in no position to agree to any meaningful reduction.

In this context it will be recalled that the U.S. is the only country in the world where people who farm (two per cent) constitute a lower proportion of population and compared to those who are behind bars (three percent). By contrast, three-fourths of the world’s poor survive on agriculture and 95 percent of the world’s small and marginal peasants live in developing countries. By seeking to subsidise a small section of Americans, the U.S. pitted their interests against those of nearly 90 per cent of world’s population. The EU and Japan stood by it. If things worked out according to their plans, they would have been able to retain much of the huge subsidies while developing countries would have been forced to undertake steep cuts in agricultural and industrial tariffs. To this end sweeteners were offered, there was behind-the-scene arm-twisting, and special deals with individual countries were sought to be struck. But all this went in vain. Developing countries said a firm “no” to what they saw as a very unjust, unequal deal.

Crucial in this respect was the role of China. The world's major trading powers had forced the country to lower or eliminate most of its trade barriers in exchange for letting it into the WTO in November 2001. China accepted this because its membership compelled others including OECD countries to eliminate quotas and cut tariffs on Chinese exports. Now after gaining a very strong foothold in world trade, it is in a position to do a hard bargaining and take better care of its farmers' interests. As for India's resistance, Kamal Nath could ill afford to betray the Indian farmers once again after the continuing SEZ onslaught and in the midst of galloping price rise and that too in an election year.

The failure at Geneva bears out our Eighth Party Congress observation that the present world situation is marked above all “by a desperate attempt by the US in particular and imperialist countries in general to reinforce their economic, political and cultural domination and opposite endeavours on the part of developing countries as well as resurgent and emerging powers to shape up a multipolar world order” and that “ compared to the past the Doha round witnessed a better level of unity among underdeveloped countries.” Now the aborted talks have pushed the deadline for completion of the ‘Development’ Round to much beyond the previously contemplated December 2008. Reasonable doubts have also been expressed as to whether it will at all come to fruition. In the least, fresh talks must wait until after US Presidential election because the lame duck Bush administration can not finalise a trade deal.

American economist Fred Bergsten once compared trade liberalization and the WTO to a bicycle: they collapse when they are not moving forward. Given the fact that with the rise of a growing number of bipartite and regional trade blocs the WTO has already lost much of its relevance and command over international trade, today the question is: if Doha dies, can WTO be alive and kicking?

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