Ideas to Action:

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Doha Prospects: Q&A with Kimberly Elliott

November 7, 2005

Kim Elliott

Q: What is the "Doha Round" exactly, and what are the big issues on the table for this round?

A: The "Doha Round" is called that because it was launched in Doha, Qatar, in November 2001. It is the ninth round of international trade negotiations conducted under the auspices of the General Agreement on Tariffs and Trade (GATT) and the first since the GATT was incorporated in the World Trade Organization in 1995. GATT/WTO membership has grown from less than 30, mostly high-income countries in the 1950s to nearly 150 countries today. The communiqué launching the Doha Round recognized the profound changes in the organization in the preamble, declaring: "The majority of WTO members are developing countries. We seek to place their needs and interests at the heart" of these negotiations."

Q: Why is there so much focus on agriculture?

A: The commitment to make this a "development round," is one reason that agriculture holds such an important place in the negotiations. By far the highest remaining trade barriers in rich countries are in agriculture, many developing countries have a comparative advantage in agriculture, and most poor people in poor countries live in rural areas. Textile and apparel tariffs are also still relatively high in rich countries and this is another area of interest for developing countries. The rich countries want to increase their access to non-agricultural manufacturing and service sectors in emerging markets such as Brazil, China, and India, especially financial, telecommunications, and transportation services.

Q: Is there a chance for a breakthrough in negotiations before the WTO meetings in Hong Kong in December?

A: As with the previous round of trade talks - which concluded only after two failed ministerial meetings and 8 years of negotiation - the Doha Round is threatened by intransigence over agriculture. After an initial surge of optimism in early October when US and European negotiators exchanged serious proposals on domestic subsidies, the negotiations are again bogged down, this time over market access in agriculture. Following an aggressive US proposal for cutting tariffs and a slightly less ambitious but perhaps more realistic one from the G20 group of developing countries, the EU response is widely regarded as inadequate. Moreover, French President Jacques Chirac has suggested that the EU proposal may already exceed the mandate that EU member states gave Trade Commissioner Peter Mandelson and that he would veto any agreement crossing that line.

It's possible that the WTO ministerial meeting in Hong Kong might go forward on the basis of the proposals currently on the table. But if Commissioner Mandelson does not have the flexbility to go further on market access, the odds of a successful meeting in Hong Kong are long.

Q: What happens if WTO members fail to reach an agreement in Hong Kong?

A:
Failure to reach agreement on at least the key parameters of the negotiation going forward would put the entire Doha Round at risk, which could in turn undermine the credibility of the WTO as an institution. Some in Europe are suggesting that serious negotiations on agriculture must wait until after the French presidential elections in spring 2007. But that schedule is inconsistent with legislative and political deadlines in the United States. The president's so-called "trade promotion authority," which allows him to negotiate trade agreements that Congress must vote up or down without amendment, expires in mid-2007 and an extension could be difficult to achieve. The original authority passed the closely divided House of Representatives by only 3 votes.

No previous round has ever failed to reach a conclusion and such an outcome could seriously undermine the credibility of the WTO and the political commitment, especially of the larger, richer countries, to abiding by its rules and disciplines. That would be particularly serious for the smaller, poorer countries that benefit disproportionately from a system based on rules rather than power.

Q: Do you see any sign that the need to trim the rising U.S. fiscal deficit - and the need to pay for hurricane reconstruction - might strengthen the argument for cutting U.S. agricultural subsidies?

A:
Budget pressures have in the past contributed to efforts to reform agricultural programs. Initially, however, there was some discussion in Congress of increasing payments to growers who experienced losses due to Hurricane Katrina, either directly or indirectly through damage to ports and Mississippi River barge traffic. That talk has faded as recovery of these services has proceeded faster than expected. Still, the proposed cuts to agricultural programs in the current congressional deliberations on the 2006 budget were quite modest. Under the House version, food stamps would be cut in order to avoid deeper cuts in crop subsidies. Still, hurricane reconstruction, the war in Iraq, and the proposal to make the President's tax cuts permanent mean that budget pressures will surely play a role in the negotiations over the 2007 farm bill.