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    At Davos, Doha Progress Fuels Debate


    © International Trade Centre, International Trade Forum - Issue 1/2004

    Despite the setbacks in Cancún, the Doha Development Agenda still offers opportunities for developing and transition economies - as this survey of the state of world trade talks makes clear.

    The World Trade Organization's Director-General, Supachai Panitchpakdi, has often described himself as an optimist. A year and a half after he took up his three-year post, he has been touring key capital cities in the last few months in an effort to inject government leaders and trade negotiators with a dose of his own optimism on the prospects for a speedy and successful conclusion to the troubled Doha Development Agenda negotiations launched in the Qatari capital at the end of 2001. At the same time, he has been expressing mounting alarm at the new-found enthusiasm among WTO countries, both large and small, for negotiating regional or bilateral trade agreements, which he sees as a diversion of focus from the Doha Round and the big prize it offers, a new global trade treaty.

    Supachai's "can do it", or rather "let's do it", outlook was on full public display at the World Economic Forum's Annual Meeting in Davos at the end of January. Much of the discussion on trade at the five-day gathering reflected a prevailing gloom in the wake of the failure of the WTO Ministerial Meeting in Cancún, Mexico in September 2003 to lay out the track for the Doha Round to arrive on time at its final destination at another conference of trade ministers in Hong Kong at the end of this year. Most commentators, and many ministers, had dubbed Cancún a failure, if not a near disaster for the multilateral trading system. Far from it, was the message from Supachai, a former Deputy Prime Minister of Thailand. Yes, it was a setback. "But we're still alive and kicking," was his Davos message.

    Supachai based his upbeat assessment on two main planks. First, he said, the European Union (EU) had finally recognized that it would have to abandon its effort - strongly supported by Japan and the Republic of Korea - to persuade developing countries to start negotiating new WTO rules covering all four "Singapore issues" in the round. These issues are a package, including investment policy, competition policy, government procurement and trade facilitation, which was first presented at the WTO's Ministerial Meeting in Singapore in 1996. However, it met such resistance in Cancún that EU Trade Commissioner Pascal Lamy was forced to abandon the first three issues, leaving on the table only trade facilitation - an all-inclusive topic covering customs procedures and regulations for the processing of imports and exports. Developing countries have signalled that they might be ready to talk about some degree of standardization in these areas, as long as they see progress in others - especially agricultural subsidies and tariffs - of more direct interest to them.

    The other success in Cancún, Supachai argued, was the formal approval of admission to the WTO of Cambodia and Nepal once they had completed the domestic ratification of the entry agreements they had negotiated over the past few years. Bringing in two more of the world's poorest countries - whose eventual entry will bring membership to 147 countries - marked another step towards making the WTO a truly global organization.


    Supachai was also relatively positive on the state of the agriculture negotiations within the Doha Round. Already, he insisted, there was far more momentum than there had been after even four years of the Uruguay  Round - a marathon effort stretching from 1985 to the end of 1993.

    But there was little sympathy in Davos for this view. Developing country representatives from China to Egypt insisted that there had to be a major up-front commitment from the biggest trading powers - the EU and the United States (US) - to dismantle their entrenched systems of farm subsidies and tariff walls that not only keep poorer producers out of the big markets but also often leave them fighting against "cheap-because-subsidized" European and US produce on their domestic markets. Yu Yongding, Director of the Institute of World Economics and Politics in Beijing, said China had benefited greatly from free trade. However, what he called "a dialectical moment" had been reached in the process of international trade liberalization where the developed countries had to make sacrifices and take domestically unpopular measures, especially in agriculture. "If you are always concerned about votes, you will never reform," he said. United Nations Secretary-General Kofi Annan delivered a similar message. "More than anything else, we need a poor-friendly deal on agriculture. No single issue more gravely imperils the multilateral trading system, from which all benefit so much," he declared in a keynote speech.

    If there were a level playing field on global farm produce markets, poorer country farmers and their nations in general would see earnings that would dwarf any conceivable level of aid and investment. Ernesto Zedillo, former President of Mexico and now Director of Yale University's Center for the Study of Globalization, voiced doubts about the readiness of the two biggest trading powers to move on the issue. "US behaviour has been erratic, to put it mildly," he said. He was even tougher on the EU, which, he argued, had never produced the genuine blueprint for farm reform that it had promised in Doha in November 2001 - a move that helped convince many developing countries to agree to start the new round.

    Western business leaders in Davos were clearly on the same side. Niall Fitzgerald, Chief Executive of Unilever, described the EU's Common Agricultural Policy as "obscene".

    Reporting to the final trade session at Davos on backstage discussions during the meeting, Samuel DiPiazza, Chief Executive Officer of accounting giant PricewaterhouseCoopers, said breaking the impasse in the WTO negotiations depended on resolving the issue of farm subsidies and market access to the satisfaction of the poorer countries, and particularly providing for measures that would improve the lot of the 2 billion people around the world living on less than US$ 2 a day. "Everything is about agriculture… There has to be a deal on agriculture," DiPiazza told the session. "The EU must lead. The US must lead." If there were no deal, and the round fizzled out, "We could lose the WTO, and the world could go back to isolationism and protectionism," he said.

    Labour mobility

    But other voices warned against placing too much emphasis on the opening of agricultural markets as a panacea for solving the problems of developing countries. Dani Rodrik, professor of international political economy at Harvard University's John F. Kennedy School of Government and a leading world trade analyst, said an agreement that would allow labour from poorer nations to move even temporarily to richer countries would be far more effective than the elimination of EU and US farm subsidies.

    This is an issue - in WTO terminology, "the movement of natural persons" - that has been raised regularly by India and other Asian nations in the trade body since the early 1990s, to consistent stonewalling from the richer powers. "If you really want to create an impact on poor people around the world, that is the agenda to take on," said Rodrik. Even a modest agreement allowing skilled and unskilled workers from developing countries to provide, on a rotating basis, 3% of the labour force in rich economies could bring the poorer nations, through wage transfers, some US$ 200 billion in extra income annually - far more than they are expected to achieve through the existing WTO negotiating agenda.

    Regional trade agreements

    The World Economic Forum devoted a full session to this issue, and Supachai found some muted support for his concern at what he called the "spaghetti bowl" of the ever-increasing number of pacts - some 400 at present - that fall outside the WTO's purview. The more there were, the more the countries that had stayed aloof because they preferred the multilateral route to trade liberalization, felt drawn in. "I am very worried by the bandwagon effect," he said. Supachai argued that most were based on political expedience, on ministers' perceived need to be seen to be doing something while the Doha Round negotiations were stalled, or at best moving very slowly.

    That interpretation was implicitly supported by Ichiro Fujisaki, Deputy Minister for Foreign Affairs of Japan. His country, he told the session, had been forced into bilateral agreements because of slow movement in the WTO round. Unilever's Fitzgerald said he was a firm devotee of multilateralism - or global agreements reached through the WTO. However, if his company's business horizon stretched only over the next five years, smaller agreements would interest him too. However, he cautioned that smaller trade pacts tended to work against poorer countries.

    Trade talks: getting business on board

    In more than half the world, business interests are not well integrated in national trade negotiating positions. If developing countries are to take advantage of the Doha Development Agenda, their business sectors need to speak out.

    ITC offers many programmes and services to help the business sector make its voice heard with national trade decision-makers and negotiators. They include:

    • "Business for Development" regional meetings

    • Executive Forum global and regional meetings
    • GATS Consultation Kit
    • Market Access Maps
    • Case studies on standards
    • Publications on business perspectives on trade rules

    For more information, see ITC's web site (http://www.intracen.org).

    Related Forum issues

    • Trade Talks: Is Business on Board?

    • Doha: How Business Can Benefit

    Articles from these issues and more are available on the Forum web site (http://www.tradeforum.org).

    Prema de Sousa, Forum's Contributing Editor, wrote this box.

    Robert Evans (robert.evans@wanadoo.fr) is a freelance writer and media consultant based in the Geneva region. He specializes in trade and WTO issues.