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Rhetoric about trade overshadows reality as multilateral negotiating faces its nemesis
Alan Beattie

          IN two months ministers from the 148 countries that make up the World Trade Organisation (WTO) will gather in Hong Kong with a heavy weight of expectation on their heads.
The Doha round of trade talks, launched in the Qatari capital in 2001, is entering what is highly likely to be its final stages. The US's ability to negotiate a trade deal without having it picked apart by Congress expires in mid-2007, and with Capitol Hill currently in an unforgiving and often protectionist mood, it seems unlikely to be renewed. That means December's biennial ministerial meeting is the last time that all members are scheduled to gather.
Ministers and officials insist that a broad, ambitious deal to cut goods, services and farm tariffs under Doha is at the top of their agendas. But the rhetoric about the importance of getting a deal done has not been matched by the reality of the negotiations. The dominant countries in the negotiations, particularly the European Union (EU) and US, are only now getting down to the kind of detail they originally envisaged having agreed by the end of July for the WTO's traditional summer break.
The two have edged closer to each other in recent weeks, beginning to explore the possible parameters of a deal that will have to be at the heart of a successful trade round - cuts in EU farm tariffs in return for reform of US agricultural subsidies. But both also face tough domestic constituencies who are strongly opposed to giving away the farm.
Rob Portman and agriculture secretary Mike Johanns have been warned by US farmers not to pre-empt discussions over the next US farm bill, which will start next year and set US farm spending for the next five years.
"We will not be writing the farm bill in the WTO," Mr Portman said recently after talks with the leading players in the round.
The most likely outcome at the Hong Kong ministerial is at best a weak deal. Even when the EU and US have managed to hammer out a common position, the rest of the membership may have very different ideas.
At the previous ministerial meeting in Cancun in 2003, the developing countries showed they were perfectly prepared to let a meeting collapse rather than sign up to an unsatisfactory deal on agricultural liberalisation, the issue that matters most to them.
And in turn the developing countries, particularly India and Brazil, which have assumed a representative role in the negotiations, have been dragging their feet on the quid pro quo for cuts in the rich world's agricultural subsidies and tariffs -- liberalisation of their services and goods markets.
Indeed, one thing the round will have great difficulty in living up to is its official label: the "Doha development agenda". Although the primary focus of the round so far has been on agriculture, the subject of great concern to developing countries, it seems likely that any gain will be concentrated among a small and not particularly badly off subset of them.
With the exception of cotton, which is grown by a group of west African countries, the poorest nations in the WTO generally do not compete directly with the crops and products subsidised by the rich ones.
Accordingly, the least developed countries have concentrated their efforts on trying to get the rich countries to open their markets further through special preference schemes outside the WTO negotiations while limiting the extent to which they themselves will have to liberalise. Some trade experts point out that this traditional "mercantilist" approach -- promoting exports and keeping out imports -- is highly unlikely to deliver many development gains.
"A development round would focus on those areas where freer trade would contribute most to poverty reduction, and that means focusing on the needs of individuals in the poorest countries," says Grant Aldonas, a former senior US commerce department official, now at the German Marshall Fund of the United States think tank.
For example, he says, the rich countries could reduce agricultural subsidies and eliminate particularly high tariffs on items like clothing and footwear where developing countries do have competitive producers, in return for the poor countries no longer taxing imports of drugs and other healthcare goods and services.
"This would require the developing world to give as well as get and so everyone would feel they owned the WTO rather than opting out," he says.
If the Doha round does either fail or settles for an unambitious outcome, the impetus will swing even more heavily towards bilateral and regional trade agreements.
This is already happening in Asia, where Japan and China have all been busy sizing up, and in some cases signing up, potential bilateral trade partners, and the US has shown interest in agreements with trading partners such as Korea.
Most trade economists dislike these agreements, which they say distort rather than liberalise trade.
But if the traditional function of a multilateral trade round -- for each country to be able to gain from one part of the negotiations, such as agriculture, what they lose on another, such as services -- is no longer able to deliver, trade ministers may well wonder why they put so much time and effort into multilateral talks.
And if the Hong Kong talks collapse as ignominiously as the previous meeting at Cancun, disillusionment with the multilateral route is only likely to grow.
FT Syndication Service


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