Despondent mood at WTO as G4 process seems to reach dead-end

The mood of despondency is increasing among WTO members as the possibility that the Doha negotiations cannot make headway this year looms larger.

The meeting of G6 Trade Ministers in New Delhi was projected by many media agencies as having made progress at least on process if not substance, and highlighting the Ministers' commitment to a "new deadline" of concluding the talks by the end of this year.

"This could only have been portrayed as some kind of success because the media covering it in Delhi were probably not familiar with the WTO talks," said a senior diplomat who has been involved in the bilateral and plurilateral G4 and G6 talks.

Indeed, those who have been involved in or closely following the recent negotiations describe the Delhi meeting as a "failure." (This is also the view of some Indian media, who have been following the trade talks in Geneva.) Far from having made a new deadline, the G4 process seems to have reached a dead-end.

Nothing new emerged at Delhi, certainly not the end-of-year deadline. Even the Ministers who spoke at a Delhi press conference at the close of their talks warned against setting "artificial deadlines", thus contradicting their own joint statement.

Brazil's Foreign Minister Celso Amorim said the history of the Doha talks was filled with deadlines that were not met.

Perhaps the only new element was the announcement by Japan and Australia (the two countries that are not part of the G4 but which were invited to be part of the G4 meeting) that they had offered to organize another Ministerial meeting of the G6, and that this would be held in either Tokyo or Canberra in the second half of May.

It was not even confirmed by the others whether the offer had been taken up. Earlier, it had been expected that the G4 or G6 would meet again at the end of April, in an intense effort to make more progress. But this end-of-April meeting seems to have been abandoned.

In Washington, WTO Director-General Pascal Lamy spoke to the IMF and World Bank's top joint policy-making body, the International Monetary and Financial Committee, on 14 April.

"The decision by WTO Members in February to resume the Doha trade negotiations across the board has not yet led to the incisive breakthrough needed in order to bring the Round to a successful conclusion by the end of this year," he told the Finance Ministers.

"Although this objective has been reaffirmed no later than 2 days ago by G4 ministers meeting in Delhi, if the situation does not change soon, governments will be forced to confront the unpleasant reality of failure. .. Failure of the first WTO trade Round, and of one of the most important exercises in multilateral economic cooperation of the past decade."

Lamy warned of the dangers of failure. But it was kind of a deja vu, as he had delivered the same message at the annual IMF/World Bank meeting in Singapore last September. And there has been no progress since then, although Finance Ministers like Gordon Brown of the UK had made large sympathetic statements in response.

At the Delhi meeting, as in the several bilateral meetings among the G4 before that, the main stumbling block remains the refusal or inability of the United States to make an improved offer on agricultural domestic support.

In October 2005, the US offered to cut its allowed total trade distorting support (TDS) to $22.7 billion, but this was considered unacceptable to its partners since its actual TDS in 2004 was already lower at $19.7 billion.

One would have expected that in their secret talks, the G4 or G6 would be intensely negotiating scenarios of hypothetical offers - if the US could reduce its allowed TDS to $17 billion or $15 billion or $12 billion, whether the others could provide various alternative numbers (hypothetical, of course) for tariff reductions in agriculture, estimates for sensitive and special products in agriculture, and NAMA coefficients.

"But this is not happening," said a trade diplomat of one of the countries involved. The US has not been providing hypothetical figures for domestic support. Or else, it gives figures that are "so ridiculous that they are laughed off the table."

At the same time, the US has been demanding that others make large concessions. In particular, India (and by extension, the G33 developing countries) are asked to make drastic revisions to their positions on special products, and India and Brazil (and by extension, the developing countries) are asked to accept very low coefficients for NAMA (implying that there would be drastic cuts in their industrial tariffs, with maximum tariff caps at 15%).

This, said the diplomat, is "absolutely crazy." His impression is that the US is not serious about making proper offers, because of domestic political considerations, and the problem of 'selling' it to US farm lobbies, to enable the administration to get fast-track Trade Promotion Authority (or even a limited one) which ends on 30 June, but to take advantage of which, the administration would have had to notify before 1 April a detailed draft agreement it intends to sign.

Getting a new or extended TPA has been complicated by the Democratic majority in both Houses of Congress - and the major conflicts and confrontations between the Democratic Congress and the White House over a range of issues (Iraq war, politicisation of the Justice Department and the administration of justice and other scandals).

This assessment is in line with the thinking of several trade and political analysts in Washington, who believe that the Democrats will not want to give a new fast track authority to President Bush. Instead, the Democrats are trying to curb the President's power overall, and are most unlikely to want to go against this general principle by re-arming him with a new trade authority.

Meanwhile, the developing countries are not in the mood to make significant concessions, especially since the US administration has not made a new offer, and has practically lost the fast-track authority.

Without fast-track authority, the US has much less chance to convince others that it will be able to make a deal; in such a scenario, the developing countries ask why they should make concessions that can be "pocketed" by others, without a deal being concluded. When negotiations resume, the concessions already made may be "locked in", without any benefits in exchange.

India, which has been feeling pressurized by the developed countries in the bilateral and plurilateral talks, seems to have stuck to its position in agriculture. Its Commerce Minister Kamal Nath repeated at the Delhi press conference that its priority is the interests of its hundreds of millions of farmers.

Amorim on his part made the point that the developed countries like the US have to understand that developing countries also have important interests of their small farmers to defend.

Immediately after the G6 Ministerial, Nath went to Beijing to hold talks with Chinese Trade Minister Bo Xilai, including a discussion on the Delhi G4 meeting.

The two Ministers issued a joint statement on Monday stressing that the "development dimension is at the heart of the Doha Round". They also agreed that the major issue impeding the progress of the Doha Round was "the lack of movement by developed countries in terms of early removal of distortions, caused by huge subsidies and significant market access barriers in developed countries".

They thus "urged the developed member countries, to realise that they bear a special and specific responsibility for the outcome of the Doha Round" by showing a readiness to implement measures that would remove trade distortions and significantly open up their markets.

The joint statement concluded that the current positions of the developed countries did not provide an adequate basis for successful negotiations on agriculture and called for an "improvement" of these positions, in particular, what it called "the two crucial areas of domestic support and agricultural market access".

The two Asian giants thus appear to be moving closer together in cooperating at the WTO. The Ministers' message was clear: if the Doha talks are stalled, the blame is with the developed countries, and they should not shift the burden to developing countries to make concessions.

Now that there is little movement in the G4 or G6 process of recent months, there is talk that the "multilateral process" of the WTO membership will be boosted instead.

"The G4 will always have a legitimacy problem as they represent only so few members and cannot speak for the rest," said a diplomat. "The only legitimacy they could have is if they make progress, and then bring that to the other members to consider."

But since the G4 process has not succeeded so far, whatever legitimacy it may have in terms of usefulness has been eroded to a very low level.

More action can thus be expected at the WTO in Geneva. In a week, the chair of the agriculture negotiations, Crawford Falconer, will issue a new paper setting out his views on the key issues. This is expected to generate fresh debate.

But if the US is unable to make any offer in such a small group as a G4 or a G6, is it likely to make offers to the whole WTO membership? Many trade experts think it is not likely.

The Doha talks thus seem to be trapped in a time cocoon, with deadlines that do not appear realistic, and brave rhetorical calls to politicians to bridge the gaps sounding more hollow.