As talks fail, Lamy given new role

The Doha negotiations reached crisis point when a Ministerial-level meeting of the World Trade Organisation in Geneva fell apart after major countries could not agree on how to cut subsidies and tariffs in agriculture, and clashed over how to proceed on non agricultural market access (NAMA).

The meeting ended last Saturday -- one day earlier -- after it became clear that no progress could be made on the agriculture issue. Also on hold was the issue of liberalization of industrial products.

"There has been no progress, so we are in a crisis, we have to admit it," said WTO Director General Pascal Lamy.

Lamy suggested to the Trade Negotiations Committee that it make three decisions: that he conduct "intensive and wide ranging consultations with the aim of facilitating the urgent establishment" of agriculture and NAMA modalities; that the consultations should be based on the draft texts of the chairs of the negotiating groups; and that he report to the TNC as soon as possible. The agreement by the TNC was its only follow up action.

How much authority and leeway Lamy will actually have within this mandate, and how he intends to use it, was one of the major questions being discussed before and after the meeting ended.

One senior official who was present in the Green Room meetings said it appeared, at least to some, that Lamy was interested in a mandate to draft a new text, but that the Green Room decided he should only facilitate further negotiations.

Lamy at a press briefing denied he had "managed" or engineered a crisis to give himself a new role, said there were already a lot of texts available, and what was needed were "numbers." He saw his job as "cracking heads, consult, confess, starting with the G6, so we can get the missing numbers in the chairmen's texts." (See separate article on Lamy's press briefing).

EU Trade Commissioner Peter Mandelson said that Lamy's new task was to be facilitator and catalyst but not author. But since numbers are what counts, it is hard to figure out the difference between facilitator and author.

About 60 Ministers of trade and agriculture had gathered on Friday in an effort to agree on the "modalities" for agriculture and NAMA -- formulae and numbers for cutting agricultural tariffs and subsidies and industrial tariffs, as well as for exceptions and flexibilities, or reduced rates of liberalization, for certain goods and for some countries.

The meeting was planned for at least three days. But it became clear by the first evening (Friday) that the positions were too far apart, and a decision was made then to call off the talks the next day and to try to limit the damage to the WTO's image.

The talks have been plagued with problems since they were launched at Doha in 2001. They were to have ended in 2004 but went through many failed deadlines. The Hong Kong Ministerial conference last December gave it new life and directions, but the new deadlines of April and now June have passed without a basic agreement on how much to cut tariffs and subsidies, and what "flexibilities" to give.

The urgency for completing the Round is due to the expiry next July of the "fast track authority" of the United States President. Without this authority it would be difficult to have a trade agreement passed by the US Congress. The wide belief is that the WTO needed to agree on the "modalities" by the end of June if the talks are to be wrapped up in December, in time for the US to prepare for the passage of its bill before the fast track authority expires. Now that end-June has passed without result, end-July is the new "final" deadline.

However, an alternative solution to the timetable crisis, suggested by some influential US Congressmen on the eve of the Geneva meeting, is for the US Congress to give President Bush a new fast track authority. This would allow the negotiations to go on without the sword of fast-track expiry hanging over the WTO.

However, the US Trade Representative Susan Schwab has said she would not rely on the possibility of a fast track renewal on which to hang the hopes of the Doha Round.

After the meeting ended, EU Trade Commissioner Peter Mandelson warned that Lamy would only have two weeks to turn the talks around by securing a G6 agreement, as non-G6 delegations would need another fortnight to digest a G6 proposal.

The widely held thinking is that the last hope of a December agreement is for convergence on modalities to be reached at the end of July (possibly through another Ministerial level meeting). Few believe it can be done.

The immediate cause of the meeting's collapse was the inability of the United States to improve on its offer to reduce its domestic farm subsidies.

It had already agreed to bring the ceiling (the level that is allowed) of overall trade-distorting subsidies to US$23 billion. But as its actual subsidies were slightly below $20 billion last year, other countries considered the US offer to be inadequate, as it allowed the US to expand (rather than decrease) its actual subsidies.

The Group of 20 developing countries asked that the allowed subsidies be brought down to $12 billion, with others suggesting $15-17 billion. On Saturday, after the meeting, the EU Trade and Agriculture Commissioners both demanded that the US offer be at least $15 billion.

The US was expected to make a renewed offer, even if to go down by a few billions. But due to pressures from its farm lobby and from the US Congress, it was unable to make even a small gesture, and stuck to its position.

Instead it blamed other countries for not going far enough in opening their markets on both agricultural and industrial goods, saying that this was a pre-requisite for it to retain (let alone increase) its existing offer on subsidies.

This blame shifting did not work because the European Union had agreed to lower its farm tariffs by 51%, an improvement from the 39% it had earlier suggested. Some countries thought that was not good enough (the G20 wanted 54%, the US wanted 66%), but almost everyone (except the US) said it was a good start.

The ball then went to the US court for it to match the EU move by telling by how much it would improve its subsidies offer. A whole day was spent waiting for the US to move. When it did not, the Ministers present agreed to call off the talks early.

Meanwhile, an overwhelming number of developing countries expressed their frustration not only at the inadequate US offer but at how the developed countries are now putting pressure on them to steeply cut their tariffs.

The pressure is greatest in industrial goods. The developed countries have proposed coefficients of 10 and 15 for a Swiss formula by which they themselves reduce their industrial tariffs by about 20-30%, whereas the developing countries must cut their tariffs by 60-80%.

At a press briefing to show the solidarity of developing countries, ten Ministers representing various groupings of the South (including the G20, the Group of 33, Africa, the Caribbean and the least developed countries) urged the developed countries to do more, and asked for fairness in their demands on what the South can do. (See separate article on the developing countries' media briefing and statement).

"After all this is a Development Round," said Indian Minister Kamal Nath."The mandate is for developed countries to cut their farm subsidies and open their markets to developing countries.

"But if the developed countries come to Geneva and hope to put the shoe in the other foot, asking developing countries to provide market access to them while they retain their subsidies, then there is no negotiating space possible."

Speaking on industrial tariffs, the South African Minister Rob Davies said: "What is being demanded of us is that we cut our tariffs to such an extent that our industries are dislocated. We have to reclaim the development essence of this Round."