Opinion

Behind the crisis at the WTO talks

By Martin Khor (China Daily)
Updated: 2011-05-18 14:12

The World Trade Organization's (WTO) trade talks, known as the Doha Development Round, are in crisis. The differences among key countries are so wide that they appear to be "unbridgeable". This became evident from the WTO's latest 600-plus-page report, which was issued last month.

At a meeting on April 29, WTO member states agreed to try again in May to find a political solution, so that a deal could be struck by the end of this year.

The deep impasse has not been caused by technical issues alone. There is a clash of paradigms, too.

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Developing countries want to stay true to the development objectives of the Doha Round. Doha started as a "development agenda" and the pledge that developing countries' interests would occupy center stage. The round was supposed to correct the imbalances in many WTO's rules.

But rich countries have given the developmental aspects a not so silent burial. Instead, they have made opening up developing countries' markets the main aim of the talks, while using the many loopholes to escape serious obligations of their own. Needless to say, they have mainly succeeded in this, as can be seen from the WTO report issued in April.

According to the report, developed countries would be allowed to continue granting high subsidies to their agriculture sectors. The only change would be in name and type. They'd be allowed to shelter their "sensitive products" from steep tariff cuts, too.

In contrast, developing countries would have to cut their farm tariffs more steeply (by up to 36 percent on average) than they did during the Uruguay Round (24 percent on average). While they'd be allowed to have a new special safeguard mechanism aimed at avoiding rapid increase in imports that could damage local farm productions, the proposed mechanism would be difficult to use and of very limited benefit.

Worse is the proposed text on industrial tariff cuts. Under a specific formula, developing countries would have to cut their bound tariffs on industrial products very steeply. The developing countries hurt by the formula would end up with average applied tariffs of 11-12 percent and thus risk cheap imports damaging their domestic industries.

Some major developing countries like India, Brazil and Indonesia have to cut their industrial tariffs by 50-70 percent, while developed countries have to cut only about 25 percent.

As if those were not enough, the advanced countries, led by the United States, are now demanding that major developing countries, especially China, undertake super-liberalization by cutting their tariffs to zero (or near zero) in at least three sectors - chemicals, industrial machinery and electronics.

This is an unreasonable demand, especially because it had been agreed that participation in this "sectoral tariff elimination" would be voluntary. China, which would be under the heaviest of pressures, has argued that it already reduced tariffs heavily when it joined the WTO.

Beijing has said that though it is willing to contribute more in the "sectoral tariff elimination", it could not be done on the extreme terms demanded by Washington, because its industries cannot take the strain of the already low tariffs being reduced further. Similarly, Brazil, India and South Africa have resisted these demands.

Besides, the US said at the April 29 meeting that it also wants China and other developing countries to open their agriculture and service markets further.

The developing countries resent being made the beasts of burden for the Doha Round, more so because it was originally meant to benefit them and they are already contributing more than the rich countries.

A frustrated Brazilian ambassador said that if the rich countries continued to put unreasonable pressures on their developing counterparts, then the Doha Round would not reach its "end-game" but "the end of the game".

There are doubts whether Washington can stand by its own obligations, because US President Barack Obama does not have "fast track" authority, and it is uncertain whether Congress will support a WTO agreement the administration enters into.

Thus, the impasse looks unbreakable. At the April meeting, the member states and WTO Director-General Pascal Lamy agreed to make yet another attempt to get political leaders to break the deadlock. The next meeting, at the end of this month, will assess whether the situation has improved.

The author is executive director of South Centre, a think tank of developing countries, based in Geneva.