Insight The WTO Doha Round Negotiation: Suspended Indefinitely By
September 5 , 2006
Volume 10, Issue 22
On July 28, 2006, the WTO General Council approved Director General Pascal Lamy’s recommendation to suspend the current Doha round negotiation amid irreconcilable differences in negotiation positions among negotiators over main issues, such as the reduction of farm subsidies, farm tariffs, and industrial tariffs. No further negotiation schedule was announced. The Doha round negotiation has now slipped into total uncertainty. Moreover, this suspension has prevented the hitherto agreements reached by Members from becoming binding norms. These aborted agreements include substantial cuts in tariffs and subsidies, the elimination of export subsidies, and tariff/quota-free market access of exports by the least-developed countries.
The Hong Kong Ministerial Conference originally set the end of April as the deadline for agreeing on the modalities, which are a template for determining eventual levels of reduction of trade barriers (tariffs and subsidies) both in agricultural and non-agricultural (industrial) sectors. However, amid irreconcilable differences among Members, especially among the U.S., the EU and major developing countries (G-20), this April deadline lapsed without any meaningful outcome and was only replaced by another deadline (the end of June). The June deadline once again lapsed as Members had failed to narrow their original gaps. On July 1, 2006, WTO Director General Pascal Lamy declared a “crisis” in the current Doha round talks. Members had asked him to “conduct intensive and wide-ranging consultations with the aim of facilitating the urgent establishment of modalities in agriculture and NAMA [non-agricultural market access].”
With the end of July as a new informal deadline, negotiators from major countries (G-6: the U.S., the EU, Australia, Brazil, India and Japan) had two intensive sessions in Geneva to deliver a last-ditch deal on the modalities. Leaders attending the G8 meeting in St. Petersburg, Russia also expressed strong support for the deal. However, despite these last-minute efforts, no such deal emerged. Having witnessed no possibilities of reaching a deal, Pascal Lamy suspended the negotiation indefinitely on July 24, 2006. Kamal Nath, India's Commerce Minister, observed that the Doha round “is between intensive care and the crematorium,” though it may be completely dead. Acrimonious recriminations followed among major players, the U.S., the EU and developing countries (India and Brazil) as to the others’ lack of flexibility.
As the talks proceeded, it became clear that a successful Doha round would require a grand deal on the so-called “triangle” of issues: the U.S.’ substantial reduction of its farm subsidies, the EU’s more generous cut in agricultural tariffs, and major developing countries (Brazil’s and India’s) further lowering of their industrial tariffs. However, Members could not form this triangle in a fair fashion to their respective eyes. They simply wanted too much from others in exchange for their modest concessions. The EU demanded that the U.S. cut its current farm subsidies below an “absolute minimum” of $15 billion; the U.S. wanted to minimize loopholes attached by the EU and developing countries to the reduction of farm tariffs, i.e., “three S’s” (sensitive products, special products, and special safeguard mechanism); developing countries still wanted to preserve substantial tariff barriers in their industrial goods to prevent too much “social dislocation and adjustment.” One envoy from a developing country observed that the triangle should not be “equilateral” since rich countries’ reduction of agricultural protection could not be equated with job losses due to industrial tariffs cut in poor countries.
Nonetheless, a certain deal might have been settled on a less ambitious scale had the U.S. accepted the idea of the so-called “Doha-lite,” which refers to a modest deal on modalities largely wrapping up the hitherto negotiational achievements. As the June deadline approached, Pascal Lamy broke the silence and finally presented a deal-making formula, a “magic number 20.” His formula stipulated that the U.S., the EU, and developing countries offer somewhat modest concessions in the reduction of domestic farm subsidies (overall trade-distorting support), farm tariffs, and industrial tariffs, respectively, all around the number 20. In other words, the U.S. would reduce its domestic farm subsidies below $20 billion; the EU cut its farm tariffs to the level which G-20 developing counties proposed (54%); developing countries cap their industrial tariffs at 20% (a coefficient of 20).
Recently, the EU has shown some flexibility in its agricultural tariffs reduction, expressing its willingness to improve its original position (39%) close to the level proposed by G-20 developing countries (54%). This additional flexibility from the EU, despite the still recalcitrant position of some Member States, would have led the negotiation closer toward a deal. However, this reduction was still too small to be tolerated by the U.S. farm lobbies which have pushed for 66% cut. The new USTR, Susan Schwab, also emphasized that the U.S. would not agree on such a light deal. Indeed, 57 out of 100 U.S. Senators signed a letter to the President urging that the U.S. should not offer any substantial reduction of farm subsidies in return for unacceptably low level of market access commitments (from the EU).
First, the suspension threw the Doha round into a very bleak future. Some predict that any negotiation could resume only after the U.S. mid-term election in November 2006 or even in 2009 with a new U.S. Administration. Even if the negotiation soon restarts, it seems nearly impossible to finish it by the original deadline (the end of this year) agreed in the Hong Kong Ministerial Conference last December. It would take at least six months to convert these abstract modalities into concrete national schedules consisting of countless product-specific tariffs and subsidy liberalization timelines, verify those conversions, and finally agree on the scope of exemptions, such as sensitive products (for both developed and developing countries) and special products (for developing countries). Of course, the Doha round deadline may be extended if the U.S. Congress extends the fast track authority (by which Congress can only vote up or down, but cannot change the outcome of the negotiation) beyond the current expiration in July 2007. The USTR, Susan Schwab, hinted after the suspension that a deal on the modalities in early 2007 might help her persuade the Congress into such an extension. Yet, the protectionist sentiments in the current U.S. Congress may undermine this possibility.
Second, the recent impasse is likely to put pressure on WTO Director-General Pascal Lamy to devise an extraordinary breakthrough patterned after the “Dunkel Draft.” The former GATT Director-General, Arthur Dunkel, reportedly saved the then-moribund Uruguay Round negotiation by submitting his own negotiation text and urging negotiators to work on the text. However, Lamy’s reaction to this idea has been rather negative. He emphasized that “we've got plenty of [text] on the table… what we do not have on the table is numbers.”
Third, one might reasonably predict that developing countries will shift from negotiation to litigation in dealing with developed countries’ agricultural subsidies. Encouraged by the recent victories by Brazil against the U.S. and EU, more developing countries may challenge various farm subsidies under the disciplines of the WTO Subsidy Code. Some even urge that the WTO’s enforcement (sanction) mechanism be reinforced to increase its effectiveness after the suspension of the Doha round talks. This litigation drive might generate enmities from those developed countries which are potential defendants in these disputes. In this regard, WTO Director-General Pascal Lamy warned that “shifting priority away from negotiations and to litigation... could damage the fragile balance that exists between interpreting existing rules and creating new and more relevant WTO agreements.”
Lastly, with the multilateral trading system being adrift, regionalism is likely to gather steam. For example, China has recently engaged in numerous regional or sub-regional trade deals with East Asia countries in response to regionalist trade policies conducted by the U.S. and the EU. This “reactionary regionalism” may be of grave concern in that it further fragments, complicates, and thus undermines, global businesses.
About the author Sungjoon Cho, an ASIL member, is an Assistant Professor of Law at Chicago-Kent College of Law, Illinois Institute of Technology. During the period of 1994-96, he represented the government of South Korea in negotiations under the World Trade Organization and the Organization for Economic Cooperation and Development. He is the author of Free Markets and Social Regulation: A Reform Agenda of the Global Trading System (Kluwer Law International, 2003), and The Law of the World Trade Organization (2005) (with Joseph H. H. Weiler), http://www.jeanmonnetprogram.org/wto/Units/index.html.
 WTO News – General Council, General Council Supports Suspension of Trade Talks, Task Force Submits “Aid for Trade” Recommendations, July 27-28, 2006.
 WTO News-DDA June/July Modalities, Lamy: Ministers Are Here, But Will There Be Negotiations?, Jun. 30, 2006.
 François Traoré and Jean-Michel Severino, Doha Postmortem: What Next for Poor Countries?, Int’l Herald Trib. July 27, 2006.
Doha Round Suspended, supra note 8; The Future of Globalization, The Economist, Jul. 29, 2006, at 11 (observing that after the suspension of the Doha round talks the U.S. Congress seems to become more hostile to WTO rulings against the U.S.).
SeeIn the Twilight of Doha, The Economist, Jul. 29, 2006, at 63-64.
Copyright 2006 by The American Society of International
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