Doha: Around and Around

The World Trade Organization has begun preparing the vast amount of papers and agendas that will form the basis of its 9th Ministerial meeting in Bali in December, with the conclusion of the Doha Development Round, which commenced 12 years ago, as far from success as ever despite optimistic predictions.

WTO Director General Pascal Lamy said a series of high-level meetings in 2012 has convinced him that there is "continuing strong support for the multilateral trading system and an overwhelming recognition of the importance of strengthening multilateral trade rules to limit protectionism and restore sustained levels of global trade growth." WTO member nations, he said, "remain committed to re-energizing the WTO talks in a pragmatic and practical manner and to ensuring that 2013 is a productive year for the organization."

This round of trade development talks, named for their original site at Doha, Qatar, began in 2001 in an effort to free up trade in agriculture. They subsequently collapsed in Cancun, Mexico in 2003 and re-collapsed in Hong Kong in 2005 with few new agreements. Efforts to restart the negotiations have stalled in Paris (2005), Potsdam, Germany (2007) and three different times in Switzerland. The delays are emblematic of the increasing difficulty of concluding additional trade liberalization, particularly now with the world mired in the global financial crisis that began late in 2007. "At this rate, to complete five more rounds of trade negotiations after Doha would take more than 430 years," estimates one Web site tracking the talks.

Small farmers, big problems

Partly the talks have remained paralyzed over the attempt to reduce or eliminate agricultural subsidies, which have distorted economies all over the world out of a misguided view that small farmers represent a sort of social ethos whose disappearance would change the national character for the worse. In 2010, the European Union spent €57 billion (US$88 billion at current exchange rates) propping up its farmers. This romantic view of the farmer makes it virtually impossible for politicians to convince their constituencies to eliminate subsidies.

The United states, for instance, spends US$20 billion in direct subsidies and considerably more through other provisions to maintain the fiction that it is protecting the small farmer, the upright backbone of the US heartland, despite the fact that at last count only 2 percent of the US population resides on farms and roughly 80 percent of the nation's food is produced by corporations whose agility in lobbying the US Congress is unrivaled.

Most economists note that continuing subsidies are wasteful and ultimately lead to inefficient industries that are overprotected from competition. New Zealand is probably the best example of what happens when subsidies end, however, having ended farm support in 1984. At that time, the country's economy was five times more dependent on farming than the US was. Subsidies accounted for more than 30 percent of the value of production. Elimination of subsidies, however, has not led to the collapse of the country's agricultural industry. In fact, New Zealand's agricultural sector continues to prosper today.

Another major challenge to the Doha Round is the rise of the new voice of the emerging market nations, with the growing numbers of participating countries building new coalitions that are impossible to untangle. Broadly, however, the world has split into two major camps, with the US and the EU on one side and the developing nations, led by China and India, on the other. Gone are the days when the west could dictate the terms of agreement and expect the developed world to fall in line.

Suspicious eyes

With the largest number of participating members ever, there is a prevailing suspicion among the emerging market countries that past rounds of trade negotiations were skewed in favor of advanced economies who now should grant unilateral concessions while allowing developing nations to continue to protect their farmers.

The advanced markets, for instance, have pointed out that since negotiations began in 2001, the world has changed dramatically. China has grown into the world's second biggest economy, with India growing fast as well. Brazil is now the world's 10th biggest, and granting concessions to economies of this size is no longer valid.

In addition, manufacturing sectors outside agricultural market negotiations also have grown in importance. Brazil restricts its technology sector, as does China in chemicals, electronics and industrial machinery. Lamy has identified disagreements between the US with China, India and Brazil to eliminate duties on selected industrial goods as "the biggest issue blocking the progress of the round."

The WTO isn't giving up despite the setbacks. Lamy, during the 2011 negotiations, asked the member nations to "think hard about 'the consequences of throwing away 10 years of solid multilateral work" despite the lack of progress. In an indication of the modest goals being set for Bali in December, Agricultural Committee Chairperson John Adank, who is also New Zealand's ambassador to the WTO, said last week that consultations on a proposal for managing quotas for lower-tariff imports have shown that agriculture negotiators consider an early deal in their to be crucial  "but some sensitivities remain," according to the WTO website.

Adank has been exploring whether any parts of a considerably broader Doha Round draft outline agreement in agriculture could be settled earlier than the rest and in time for the December 2013 Ministerial Conference. One proposal would seek modest agreement on tighter disciplines for administering tariff-rate quotas Some countries argue that the way the quotas are managed, including methods for allocating quotas to importers or exporters, and various other administrative practices can be too cumbersome and hamper exporters' ability to access markets.

More recently, the G33 group of developing countries, which led the first rebellion against the advanced markets in Cancun in 2003, has also proposed adopting provisions that would loosen domestic support disciplines in order to enhance food security by supporting poor farmers.Some members said they are considering other topics for early agreement.

"The discussion in the meeting, about the two proposed topics for early agreement, showed that while members understand the importance of the topics, some are concerned that isolating these subjects could upset the balance built up in the current overall drafts in agriculture and the Doha Round," according to the WTO statement. But it appears that hopes for making any other progress are slim.