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Trade Talks Collapse: Who's to Blame and What Next?

July 25, 2006

WTO Doha collapse: who's to blame?The totality of the collapse of WTO talks stunned even seasoned negotiators. "It is somewhere between intensive care and the crematorium," India's Trade and Industry Minister Kamal Nath said of the Doha Round. Kimberly Elliott, the author of a new book, Delivering on Doha: Farm Trade and the Poor, and a joint fellow at the Center for Global Development and the Institute for International Economics, explains what happened – and what to expect next.

Q: Who is most to blame for the collapse of the Doha talks?

A: There is ample blame to go around. The initial E.U. proposal on agricultural market access was not serious and recent indications that it might go further are undercut by the E.U.’s continued insistence on maintaining substantial flexibility to protect "sensitive" products. Developing countries have shown little willingness to open their markets for industrial products, or anything else, and India, a member of the Group of 6 key negotiating countries, recently showed signs of backtracking. The U.S. proposal on agricultural subsidies was not adequate as an endpoint, but it was a serious opening offer. The puzzle is why the U.S. allowed itself to be put on the defensive in these talks.

Q: Which group of countries stands to lose the most as the result of the collapse of the talks?

A: The biggest losers would be the smallest and poorest developing countries. If the round is not revived, proposals to extend duty-free and quota-free treatment to most or all exports from Least-Developed Countries, as well as proposals to increase aid for trade, would also likely stall. In addition, key congressional representatives, including House Ways and Means Committee Chair Bill Thomas (R-CA) and Senator Max Baucus (D-Mont), ranking minority member of the Finance Committee, have suggested that the U.S. turn away from the WTO multilateral negotiations and instead concentrate on bilateral trade deals with Korea, Malaysia and other willing countries. These bilateral deals would divert trade from countries that aren't included, typically the poorest and least-developed.

Q: In a blog posting today you urged (Where is the U.S. Leadership on Trade?) that Washington take the lead in reviving the talks--even though the U.S. is not the main offender in terms of agricultural subsidies. Why should the U.S. do this?

A: The U.S. should not be on the defensive in these talks and it cannot take a leading role as long as it is. Washington should take the offensive and thereby shift the spotlight back to the E.U.'s much higher agricultural support and to India’s failure to engage seriously. U.S. negotiators could still do this relatively easily, by offering to lower the ceiling on allowable U.S. trade-distorting domestic support to below $20 billion. This could be done with little pain for American farmers while still responding to the criticisms from other parties that the U.S. proposal sets a ceiling that would remain above recent spending levels.

Q: Why did the U.S. hold back?

A: Given events in Iraq and elsewhere in the Middle East, and recent missile tests by North Korea, it's no surprise that the Bush administration is distracted and that trade is not at a top priority. Plus, the Republican "red" states tend to be more rural than Democratic "blue" states. The risk that the Republican Party will lose seats in congressional elections this fall created an inhospitable environment for making difficult decisions that could imperil any additional seats.

Q: What happens next?

A: If I'm right that fear of losses in this fall's mid-term elections is keeping the administration from offering even minor concessions, then the trade talks are unlikely to get serious again until early 2007. But then France holds presidential elections in April and similar political constraints there could mean that serious negotiations are not revived until mid-2007. That's when the U.S. Congress must decide whether to extend the president's "Trade Promotion Authority" (TPA), the so-called "fast track," which requires that Congress hold a simple up-or-down vote, without amendment, on any trade agreement negotiated by the executive branch. Without serious progress in Geneva, Congress may be less likely to extend fast-track. Sadly, unless something unexpected changes in the next few weeks, I think that the next chance for a pro-development multilateral trade deal won’t arise until after the U.S. presidential elections in 2008. I hope I'm wrong.