World may have to settle for watered-down WTO deal

WASHINGTON: The Doha round of world trade talks may be headed toward a modest agreement that falls short of the ambitious market access and development goals set more than five years ago, analysts said.

“I think (World Trade Organisation director general) Pascal Lamy and many of the big trading nations have calculated... that they’re better off trying to wrap up a modest package then run the risk of what could happen if the talks are... put in hibernation for several years,” said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.

After missing every deadline, key trading partners have set a new goal of reaching a deal by year’s end. As world leaders gather for a summit this week in Germany, EU trade commissioner Peter Mandelson expressed concern that positions in the talks may be hardening at a time when compromise was most needed.

In a speech on Monday night, US trade representative Susan Schwab said the United States was pushing for “an ambitious and balanced outcome that generates new trade flows in agriculture, manufacturing and services, and that generates economic growth at home and abroad.”

But Schott said he was far more skeptical than he was a year ago that any deal could

reach the lofty market-opening and poverty elimination goals set at the launch of the Doha Development Agenda in November 2001. “It’s hard to see how a big package of agreements is going to be put together over the next six to nine months,” which is probably all the time countries have before negotiations slip into the deep freeze for a couple of years, Schott said.

The White House’s authority to negotiate trade deals that cannot be changed by Congress expires at the end of the month. Lawmakers are unlikely to renew that unless there’s a Doha round deal by early next year, Schott said.

Although the US and the EU appear willing to go further on agriculture, it may not be enough to generate big market-opening offers from developing countries in manufacturing and services. “Once you start talking about a more modest package, every part of the agenda gets diluted,” Schott said.

Dan Griswold, director of the Center for Trade Policy Studies at the Cato Institute, said he also feared a watered-down agreement is the best that can be achieved. “I think there’s an argument for grabbing the gains on the table right now,” Griswold said on Tuesday.

“The major parties could declare victory and go home for a few years while we wait for a more promising environment to strike a comprehensive deal.”

Rich country farm groups bear a big share of the blame by making it politically difficult for the United States and the EU to offer deep farm subsidy and tariff cuts, Griswold said.

Developing countries also contributed to the impasse by insisting wealthy countries make the farm cuts without receiving much from developing countries in return, he said.

Still, it’s too early to write off efforts by the EU’s Mandelson and the US’ Schwab to broker a comprehensive deal, said Grant Aldonas, a former Commerce Department official now at the Center for Strategic and International Studies.

Schwab is under pressure both inside and outside the Bush administration “to push the envelope in terms of getting a deal, and that means agriculture,” Aldonas said.

In order to build support for deeper farm subsidy cuts, Schwab has been working intensively with the EU and other trading partners to identify new export opportunities for American farmers, Aldonas said.

If the US and European Union can “break things loose” by offering developing countries more on agriculture, it will be very hard for developing countries to turn their backs on the deal by refusing to do more in services and manufacturing, he said