World Trade Organisation members, at a ministerial meeting in Hong Kong, reached a compromise agreement on Sunday that averted a collapse of the Doha Round of multilateral trade negotiation. After six days of round-the-clock negotiations, only a modest package of aid and trade measures was agreed to.
The talks failed to heal the rift among major trading blocks, and a crisis was avoided only at the cost of postponing until next year all of the most difficult negotiations.
The meeting resolved to establish modalities by April 30, 2006 and submit a comprehensive draft based on these modalities by July 31, 2006.
On agriculture, this involves eliminating export subsidies amounting to $5 billion, recognising food aid as trade distorting and including export credits and trading by state-owned and managed entities.
While there is no commitment on the rest of trade-distorting agricultural subsidies and on tariffs and quotas, it was identified who should cut subsidies more against reciprocal concessions by G-20 for market access to manufactured goods.
Finally a task force has to be constituted to channelise aid enabling poor countries to take advantage of improved opportunities resulting from the reduction of trade barriers.
A jubilant WTO Director-General, Pascal Lamy, said that the talks had gone 60 percent of the way to their conclusion and he was now more confident than a month ago about the prospects though he was still not sure of success.
The biggest achievement was to keep the talks alive. Another, debacle after the collapse of WTO's meetings in Seattle in 1999 and Cancun in 2003, would have meant the end of Doha Round. It could have turned the WTO into a non-effective body like its predecessor, the UNCTAD.
Admittedly, last week's meeting was not expected to achieve much. The US trade representative, Rob Portman, openly commented that domestic political constraints limited the room for manoeuvre in several areas. The EU's Peter Mandelson, while offering cuts in farm tariffs and subsidies, portrayed Brussels as a friend of the poor countries, granting preferential market access, but was not willing to a quicker phasing out of farm subsidies.
The Group of 20 developing countries and 90 other poor countries failed to pressure the EU into agreeing to a 2010 deadline for ending farm export subsidies, due to internal contradictions.
While efficient agricultural producers would be the biggest gainers from freer global markets, a number of countries in the developing world fear the prospect as it would end the preferential treatment they presently enjoy.
Pakistan stands to gain from an end to preferential treatment on cotton apparels, while LDCs like Bangladesh now enjoying zero duty on apparel exports to the EU are opposed to the phasing out of the existing regime.
The Hong Kong declaration states that subsidy on cotton will be eliminated by developed countries by 2006 and they will allow 97 percent apparel imports duty free and quota free by 2008.
This would be a consolation for countries like Pakistan. Commerce Minister Humayun Akhtar and his team also deserve a pat on the back for blocking zero-rating access sought by some LDCs to the US market that could adversely impact Pakistan's apparel export to the US.
The 50 least developed countries have been bought off by allowing duty-free and quota-free 97 percent import lines by the EU, Japan and the US until 2008. It implies helping these countries at the expense of their competitions among the developing countries just above the qualifying line. Knowing that this is harmful, it was necessary to get their consent before Doha can be concluded.
While the US has agreed to cut down the subsidy to its cotton growers by $4 billion quicker and faster, it is still reluctant to agree to an overall reduction of domestic farm support to other crops.
There is little chance of the EU deviating from the phasing out timetable agreed by its 25 member states under a budget deal. On the services side the EU is pressing the developing countries to open up their markets while the poor nations want the rich nations to accept more temporary workers in the services sector.
WTO needs to address the structural issue more seriously, wherein more than a fifth of its members comprising LDCs are offering no concessions in the Doha Round, but are entitled to block decisions and are determined to have their say. Some are mainly concerned with protecting their existing rights and others oppose freer markets and even the existence of WTO.
World trade can only increase if all member states reduce import tariffs, eliminate subsidies and have a small list of sensitive items outside the import regime.
This must apply to all the four blocks currently negotiating, ie, EU, US, Japan and the G-20 states. Liberalism in world trade can only succeed if all the four engage themselves and are willing to offer more concessions. Obviously, without this protectionism will reign.
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