Doha Project

PROJECT ON

DOHA ROUND OF TALKS

SUBMITTED BY : LATIKA DHUNNA(108128) MERI

DOHA TRADE TALKS INTRODUCTION Doha Round definition A series of trade liberalization negotiations initiated under the World Trade Organization (WTO) in late 2001. The Doha Round focuses on trade liberalization for a wide-range of agricultural products. In particular, this round of trade talks is aimed at helping developing countries whose exportable goods are heavily concentrated among agricultural products develop their international trade. Poor countries complain that rich countries spend $1 billion a day on trade subsidies. By enacting trade liberalization on agricultural products, developing countries can be helped the most and poverty reduced. Other subjects covered by the trade talks include trade in services and intellectual property issues. The round draws its name from the WTO Ministerial Conference that was held in Doha, Qatar, from November 9 to November 14, 2001. Actual talks commenced in January 2002 with their completion scheduled for Jan. 1, 2005. The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings took place in Cancún, Mexico (2003), and Hong Kong (2005). Related negotiations took place in Geneva,Switzerland (2004, 2006, 2008); Paris, France (2005); and Potsdam, Germany (2007). The most recent round of negotiations, July 23-29 2008, broke down after failing to reach a compromise on agricultural import rules.[3] After the breakdown, major negotiations were not expected to resume until 2009.[4]Nevertheless, intense negotiations, mostly between the USA, China and India, were held in the end of 2008 in order to agree on negotiation modalities. However, these negotiations did not result in any progress.

The most significant differences are between developed nations led by the European Union (EU), the United States (USA) andJapan and the major developing countries led and represented mainly by India, Brazil, China and South Africa. There is also considerable contention against and between the EU and the U.S. over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers.[2] Doha Round talks are overseen by the Trade Negotiations Committee (TNC), whose chair is the WTO’s director-general, currently Pascal Lamy. The negotiations are being held in five working groups and in other existing bodies of the WTO

ISSUES The key players in the negotiations, known as the G6, are Brazil and India (representing the G20 group of developing countries), the EU, the US, Australia (representing the Cairns group of agricultural exporters) and Japan (representing the G10 group of net agricultural importers). The major sticking points in their discussions are: •

Agricultural market access:

The US currently has much lower agricultural tariffs than the EU or advanced developing economies. It therefore wanted a 90% reduction of highest farm tariffs and an average tariff cut of 66% for developed countries. While the EU agreed to raise its initial offer (of a 39% average tariff cut) to close to the G20 proposal of 54%, this was deemed insufficient by the US. The

US

also

accused

the

EU

of

using

sensitive

products

to

counterbalance the level of new market access it was offering, because the EU wished to maintain higher protection levels for 8% of its farm

products. The EU insists that it is already very open to agricultural exports from the developing world, providing tariff and quota free access to the 50 LDCs through its Everything But Arms system and absorbing more farm goods from LDCs than the rest of the developed world combined. •

Agricultural subsidies:

Although agriculture makes up only 8% of world trade, it represents the main income source for about 2.5 billion people, mainly in developing countries. However, farmers from poor countries are unable to compete with vastly subsidised exports from the EU, US and Japan. The EU agreed to slash its overall trade-distorting subsidies (OTDS) by 75%, as the G20 group of developing countries were requesting. This would have seen EU OTDS levels reduced from €58.1 billion in actual spending in 2004 to a future cap of around €28 billion. The US proposal to reduce its OTDS by 53% would have cut its WTOpermitted spending limit from $48.2 billion to roughly $22.7 billion, but the EU and G20 complained that this could actually lead to an increase in US farm subsidies as the latter actually only paid out $19.7 billion in such payments in 2005. They demanded minimum cuts of 60% and 75% respectively, but the US refused to give in. •

Industrial market access:

Negotiations on non-agricultural market access (NAMA) were pushed forward by the EU and US who were looking to gain access to the huge markets of emerging economies like China and Brazil. Meanwhile, developing countries were keen to protect their infant industries and maintain their preferential access to rich countries.

Negotiators finally agreed that industrial tariffs should be cut according to the so-called ‘Swiss formula’, entailing higher cuts for the highest tariffs and the introduction of a tariff ceiling; but they failed to agree on the actual structure of the reduction formula or on the level of the cap. The EU and the US had suggested that maximum rates on manufactured goods should be 10% for developed countries and 15% for developing countries. Developing countries, on the other hand, wanted a tariff cap of 30% for themselves, which would entail softer average cuts. While the EU was prepared to permit an intermediate tariff cap of 20% for developing countries, the US continued to call for a maximum difference of 5 percentage points between developed and developing country coefficients. •

Services:

An ambitious deal on service liberalisation was of key interest to the EU because trade in services makes up 75% of its economy. Increased trade in services would also contribute to development goals as improved transport, IT and telecommunications, banking and insurance sectors form the backbone of a growing economy. However, trade in services faces considerable restrictions, mostly based on national regulations, such as technical standards or licensing requirements and procedures. The World Bank estimates that developing countries could gain nearly $900 billion in annual income from elimination of their barriers to trade in services. Discussions in the WTO focused on establishing disciplines to ensure that domestic regulatory measures do not create unnecessary barriers

to trade. Significant progress was made in this area but negotiations on market access stood still as a result of the lack of movement on agricultural and industrial market access. •

Trade facilitation:

Numerous studies show that trade facilitation is a ‘win-win game’. Greater transparency and procedural uniformity at country borders could generate twice as much gain to GDP than tariff liberalisation, especially for developing countries because of their comparatively less efficient customs administrations.

BENEFITS (STUDIES) All countries participating in the negotiations believe that there is some economic benefit in adopting the agreement; however, there is considerable disagreement of how much benefit the agreement would actually produce. A study by the University of Michigan found that if all trade barriers in agriculture, services, and manufactures were reduced by 33% as a result of the Doha Development Agenda, there would be an increase in global welfare of $574.0 billion. A 2008 study by World Bank Lead Economist Kym Anderson found that global income could increase by more than $3000 billion per year, $2500 billion of which would go to the developing world. Others had been predicting more modest outcomes, eg, world net welfare gains ranging from $84 billion to $287 billion by the year 2015. Pascal Lamy has conservatively estimated that the deal with bring an increase of $130 billion.

PAST Some countries, including the United States, wanted to expand the agriculture and services talks to allow trade-offs and thus achieve greater trade liberalization.  The first WTO ministerial conference, which was held in Singapore in 1996, established permanent working groups on four issues :transparency in government procurement, trade facilitation (customs issues), trade and investment, and trade and competition. These became known as the Singapore issues. These issues were pushed at successive ministerials by the European Union, Japan and Korea, and opposed by most developing countries.] Since no agreement was reached, the developed nations pushed that any new trade negotiations must include these issues.  The negotiations were intended to start at the ministerial conference of 1999 in Seattle, USA, and be called the Millennium Round but, due to several different events including protest activity outside the conference, the negotiations were never started. Due to the failure of the Millennium Round, it was decided that negotiations would not start again until the next ministerial conference in 2001 in Doha, Qatar.

DOHA ROUNDS FROM 2001-2008 DOHA, 2001 The 'Doha Development Agenda' began in November 2001, committing all

countries

to

and manufacturingmarkets,

negotiations as

well

as

opening

agricultural

trade-in-services

(GATS)

negotiations and expanded intellectual property regulation (TRIPS). The intent of the round, according to its proponents, was to make trade rules fairer for developing countries However, by 2008, critics

were charging that the round would expand a system of trade rules that were bad for development and interfered excessively with countries' domestic "policy space".

CANCÚN, 2003 The 2003 Cancún talks—intended to forge concrete agreement on the Doha round objectives—collapsed after four days during which the members could not agree on a framework to continue negotiations. Low key talks continued since the ministerial meeting in Doha but progress was almost non-existent.[12] This meeting was intended to create a framework for further negotiations. strong North-South divide on agricultural issues. Developing nations gained in strength, forming 2 new negotiating groups - the G-20, consisting of middle-income developing countries, and the G-90 group of poorer developing countries - and finally rejecting the deal which they viewed as unfavourable.

GENEVA 2004 WTO Members agreed to a framework for continuing talks, the socalled ‘July Framework Agreement

’. The EU, US, Japan and Brazil

agreed to eliminate all agricultural export subsidies, reduce tradedistorting subsidies and lower tariff barriers. Developing nations consented to reduce tariffs on manufactured goods, with the right to protect key industries.

PARIS 2005 Trade

negotiators

wanted

to

make

tangible

progress

before

the December 2005 WTO meeting in Hong Kong, and held a session of negotiations in Paris in May 2005.[16] Paris talks were hanging over a few issues: France protested moves to cut subsidies to farmers, while the U.S., Australia, the EU, Brazil and

India failed to agree on issues relating to chicken, beef and rice. [16]

Most of the sticking points were small technical issues, making

trade negotiators fear that agreement on large politically risky issues will be substantially harder

HONG KONG 2005 The initial objective was to conclude a final agreement at this conference but progress made up till then was too feeble to do this. Instead, a deal was reached in which rich nations agreed to allow quota and tariff-free imports from all Least Developed Countries (LDCs) and 2013 was set as the deadline for eliminating agricultural export subsidies

GENEVA 2006 Last resort talks in July 2006 failed to bring an agreement on reducing farm subsidies and lowering tariffs, leading WTO chief Pascal Lamy to formally suspend the Doha Round. because the broad trade authority granted under the Trade Act of 2002 to U.S. president George W. Bush was due to expire in 2007. Any trade pact would then have to be approved by the U.S. Congress with the possibility of amendments, which would hinder the U.S. negotiators and decrease the willingness of other countries to participate

POTSDAM 2007 In June 2007, negotiations within the Doha round broke down at a conference in Potsdam, as a major impasse occurred between the USA, the EU, India and Brazil. The main disagreement was over opening up agricultural and industrial markets in various countries and also how to cut rich nation farm subsidies

GENEVA 2008

On July 21, 2008, negotiations started again at the WTO's HQ in Geneva on the Doha round but stalled after nine days of negotiations over the refusal to compromise over the special safeguard mechanism. [28]

In particular, there was insoluble disagreement between India and

the United States over the special safeguard mechanism (SSM), a measure designed to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods in the event of an import surge or price fall.

PRESENT NEW DELHI 2009 Mini-ministerial meeting held on Sept. 3-4 in New Delhi, senior officials of key WTO members agreed on a work plan aimed at pushing forward the long-stalled negotiations in the next few months, which was claimed as a Doha Round breakthrough. The meeting in New Delhi, which was attended by more than 30 trade ministers, reiterated a WTO goal to conclude the whole round of talks by the end of 2010. New Delhi has insisted on measures to protect India from a possible surge in cheap imports that could swamp its millions of poor farmers. CORE ISSUES At the centre of the talks are efforts to open up trade in agriculture and industrial goods. A

deal

is

likely

to

involve

rich

countries

opening

up

their

protected markets for farm produce and cutting heavy subsidies for agricultural goods that squeeze farmers in poor countries out of the market.

In return the richer developing countries will cut industrial tariffs, opening up their markets for industrial goods to businesses in both rich and poor countries. FLEXIBILITIES The difficulty comes in the exceptions to these cuts, known as flexibilities. Developing countries led by Brazil say that rich nations are using these exceptions to protect farmers and prevent any competition in politically sensitive produce. As a result, what they see as the main aim of the Doha talks -- the elimination of an unfair agricultural trading system that favours developed countries -- will not be delivered. Rich countries on the other hand say that developing countries may take

advantage

of

flexibilities

to

shield

some

sectors

such

as cars almost entirely from any new competition. The United States, for example, says it cannot improve its offer on agriculture until it has a better idea how the big emerging countries such as Brazil, China and India will use their flexibilities. STICKING POINTS A meeting of ministers in July last year to seek a breakthrough in the Doha talks collapsed over two issues in particular. -- Special safeguard mechanism. This is an agreement that would allow developing countries to raise agricultural tariffs temporarily to help their farmers cope with a sudden flood of imports. While the principle is accepted, there are big differences over the way it would work.

The United States, backed by some developing country food exporters such as Uruguay and Costa Rica, argued the safeguard must not be used to choke off the normal growth in trade, and that tariffs must not rise above "pre-Doha" levels. India and other big countries such as Indonesia said they needed a quick and powerful safeguard to protect their millions of subsistence farmers from the unforeseen impact of market opening, even if that meant big rises in tariffs. -- Sectoral deals. The United States is pushing for agreements that would go beyond any general cut in industrial tariffs to eliminate duties altogether in some sectors, such as chemicals or electronic goods. Such deals would not apply to everyone but would be negotiated with groups of key players in those sectors. Given the use of flexibilities (see above), Washington sees sector deals as the best way of creating new market opportunities. Several rich and developing countries also favour them. Big emerging countries such as China and India, whose participation would be essential for any deal to be viable, say they are resisting efforts to strongarm them into sector deals, which they insist must be purely voluntary. -- Cotton. The meeting in July last year never got as far as discussing cotton, the issue which is seen as a touchstone of efforts to create a fairer global trading system. African countries want the United States to make bigger cuts in its cotton subsidies than in other agricultural products. They say that U.S. cotton subsidies make it uneconomic for their farmers to produce, and they cannot afford similar state aid.

U.S. officials have hinted that they will do something on cotton but say they cannot make an offer until they can see the overall deal in agriculture. More recently they have argued that China and India must also open their markets to U.S. cotton.

The tough stance by India, which has weathered the financial crisis better than rich nations, has highlighted the growing clout of Asia's third biggest economy on global issues such as trade and climate change. The senior officials also pledged to reconvene in Geneva in October, November and December to advance the plan, the contents of which have not yet been disclosed GENEVA 2009 If the informal talks held in Geneva are anything to go by, chances of an agreement emerging by 2010 — the deadline for concluding the Doha Round of negotiations — look dimmer. Despite the meeting in New Delhi and agreeing to press ahead with talks, countries failed to make much headway in what is known as green room (informal discussions held at the head of delegation level) meetings.There will be a ministerial from November 30 to dec 2 in Geneva however.

FUTURE OF CONCLUSION OF DOHA ROUND OF TALKS  A successful Doha round trade deal could boost the global economy by $300-700 billion a year(GDP GAINS), a study by the Peterson Institute for International Economics said  Developing countries like Pakistan will be allowed to protect 10 percent to 15 percent tariff line from tariff liberalisation.  There would be better rules for application of anti-dumping duties in the developed world that would help developing countries  It will protect India from a possible surge in cheap imports that could swamp its millions of poor farmersThe only system that really works is the multilateral system. India and most developing countries feel that a rule-based multilateral approach is the only way to go. The quicker we reach an agreement, the better. But What you can negotiate bilaterally gives you some degree for manoeuvre. If I am negotiating a deal with Asean, I am worried about tea, coffee and pepper. But if I am dealing with Europe, I don’t care about these as they don’t produce them. So, what may be a sensitive item with one country may not be sensitive with another. You can customise a bilateral deal to your strengths much easier.  It is going to determine the future role of the WTO as a facilitator of a multilateral trading regime.  It will also determine the role of developing countries in world trade.  India has already unilaterally reduced tariffs from an average of 50-60% to an average peak of 12.5%. Statistics show that Indian markets are more open then they were several years

ago. Thus, India should not be penalized for its unilateral liberalization. India’s position is the following: whatever the United States proposes, India is willing to do slightly less than that. If the United States agrees to 80% reduction, India will do 70%; if 50%, then India will do 40%. Currently, India is being asked to accept 70% while the United States reduces by 20%, and this offer is a non-starter.  Approximately 55% of India’s GDP is comprised of service industries; this number jumps to 60% for India’s 1 billion citizens under age 25. Consequently, India is seeking a balanced package on services trade and has unilaterally taken steps beyond its Uruguay Round commitments to open its services markets.

RECOMMENDATIONS  Offers have to be good from everyone, also from the United States of America  The global economic downturn, which analysts say has led to increased protectionism around the world, was a strong undercurrent to the meeting. While all the delegates said the downturn made reaching a deal imperative, some bluntly said it would be harder now to sell any trade deal back home because political leaders are especially concerned about protecting domestic farmers and businesses.But it could help the countries to revive.  The fear of losing favourable treatment in a bilateral agreement can deter governments from talking tough in multilateral negotiations.

 The future of international trade lies not in tariffs but in rules, in the structural processes of the WTO that are so important to both the United States and India  India’s

main

request

on

services

concerns

contractual

workers. If Microsoft or Motorola want maintenance for two months to fix their equipment, why Indian workers should not be able to secure a visa to provide this service. India wants to see the United States bind—not even enhance—its current posture toward outsourcing. In return, India is willing to bind what it has done on retail services, financial services, etc. and to

open

further

selected

services

markets

 import tariffs are a major source of revenue for many developing countries, although India is not one of them. For these countries, tariffs are not a market access issue but a revenue one, and this perspective should not be ignored.  From India’s perspective free trade is fair trade and should be based on a level playing field, not one that is as structurally flawed as the global agriculture market. Subsidized trade flows displace millions of people. If the current system is left in place, India will need 200 million additional visas for unemployed farmers.  India cannot displace 300 million farmers to support an urban population that does not need the help. Over 100,000 Indian farmers have committed suicide over the last ten years, citing that number as a response to existing tariff levels; it would only increase if tariffs are further lowered.  United States cap its agricultural tariffs at reasonable levels. If this happens, India should follow suit and cap its tariffs as well.

 One of the deal-breakers in the Doha round of negotiations was the developing countries’ refusal to expose their infant industries

to

competition

from

developed

countries.

Current free trade agreements could bankrupt fledgling industries in poor countries because of stiff competition from European multinationals.