For the third year running, global trade negotiations came to a disappointing end yesterday (29 July) as countries refused to compromise on opening up their national markets for agricultural goods. The talks in Geneva were considered a "last chance" for a deal before the US Presidential elections in November and are unlikely to be reopened before January next year at the very earliest.

Background:

The Doha Development Agenda, launched in November 2001, in the Qatari capital, Doha, aimed to free global trade by cutting industrial and agricultural tariffs and by reducing farm subsidies, with a special focus on achieving concrete benefits for developing countries.

The initial target was to finalise the negotiations by the end of 2005, so that the agreement could be approved by the US under the fast track procedure of the "Trade Promotion Act" (TPA), which allows the President to adopt international trade agreements without Congress altering them.

But successive deadlines have been missed and the US TPA expired on 1st July 2007. The talks in Geneva, convened by World Trade Organisation Director-General Pascal Lamy and which began on 21 July 2008 were widely seen as a "last chance" for a deal before the US Presidential elections.

Despite achieving some momentum last week, antagonisms and stubbornness prevailed in the marathon negotiations that started on 21 July in Geneva.

Hopes had initially been high, with pledges from the US to cut their farm subsidies to a level slightly more acceptable to developing nations and advances in a key dispute on bananas between the EU and developing countries (EurActiv 28/07/08).

But, on the ninth day of discussions (29 July), WTO chief Pascal Lamy announced that ministers had failed, once more, in their attempts to agree on a blueprint for freeing up trade in agricultural and industrial products.

"It is no use beating around the bush. This meeting has collapsed. Members have not been able to bridge their differences," he said.

According to him, the 30 trade ministers present in Geneva had actually succeeded in converging on 18 "out of a to-do list of 20 topics", "but the gaps could not narrow on the 19th – the special safeguard mechanism for developing countries".

Such a scheme would have allowed developing countries to protect their farmers by raising tariffs temporarily if faced with large import surges or price drops.

'Irreconcilable differences'

According to Lamy, the difference boiled down to some (the US, supported by Uruguay) wanting a high "trigger" for safeguard tariff increases, to avoid protectionist use of the system, while others insisted a lower one that would make the security net easier to use (India, supported by China).

"After more than 36 hours trying to find bridges between these two positions, today it became clear that the differences were irreconcilable," said Lamy, adding that other difficult issues, including cotton, protection of geographical indications or biodiversity "were not even negotiated".

Some say the atmosphere became particularly difficult after the arrival of Kamal Nath, the Indian trade minister, who got to Geneva a few days later than his counterparts due to a parliamentary confidence vote his government was facing, and who refused to budge on the issue. "I am not willing to negotiate the livelihood security of millions of farmers," he defended himself, pointing out that 700 million people in his country still live on less than 2$ per day.

But fingers are also pointing towards the US, which insisted upon India and China opening their rice and cotton markets, and China, which attempted to force through last-minute concessions from its partners.

Disappointment all around

Lamy said he was personally disappointed. "I had hoped to come to you today with good news…I was hoping to say that we had slashed and capped the level of trade distorting subsidies like never before. I was hoping to announce that beef, sugar, ethanol, tropical products or products suffering from tariff escalation would now see an improvement of their market access worldwide. I was hoping to tell you that tariff peaks on industrial products of interest for developing countries had been slashed, that least developed countries would consolidate duty-free and quota-free market access in the WTO," he said.

"What members have let slip through their fingers is a package worth more than $130 billion in tariff saving annually by the end of the implementation period," he lamented.

EU Trade Commissioner Peter Mandelson said the collapse over such a small issue was "absolutely heartbreaking". "I am very disappointed that we were unable to finish the round…I would not have thought that everything would hinge" on the special safeguard measures, echoed Brazilian Trade Minister Celso Amorim.

The end of the game?

The talks were the last chance opportunity for a deal in order for the technicalities of the text to be set out in time for it to be approved by the US Congress before the Presidential elections in November. Now, it appears the Doha Round will be put in the freezer until January 2009 at the very earliest or even until after European Parliament elections and the nomination of a new European Commission in November 2009.

While some speculate that, with new faces around the table, the chances for a deal would increase, others say by then, there will be no chance of reviving what will then be the nine-year old negotiating mandate of the Doha Round.

But Lamy insists the failure does not mean the end of the Doha Round, saying what is on the table represents twice or three times more than has been achieved in any previous multilateral trade negotiation. "We will need to let the dust settle. It is probably difficult to look too far into the future at this point," Lamy nevertheless conceded.

US Trade Representative Susan Schwab insisted: "This is not a time to talk about collapse," adding that the US commitments would remain on the table. Mandelson however said there was no prospect of agreeing the outlines of a Doha deal in the foreseeable future, while Amorim said it could be 3 or 4 years before the talks were revived.

Bad news for global trade?

Despite protests from farmers and certain industries about the deal that was on the table, most major business federations believed the negotiations to be crucial in boosting the global economy, especially in the framework of the current oil and food crises. NGOs such as Oxfam also say a "trade reform that puts poor countries first is desperately needed in the face of rising food and fuel prices and global economic insecurity".

A return towards bilateralism would cut up markets leading to a complex "spaghetti bowl" of trade rules that raises operating costs for businesses. A shift to bilateral free trade agreements is also bad news for developing countries, which are more likely to see themselves strong-armed into big concessions.

"This is certainly not going to strengthen the multilateral trading system," warned Lamy, adding that he hoped "the system is resilient and will be able to resist the bumpy road ahead of us."