Europe must get serious about Doha

The weeklong WTO conference in Hong Kong ended last night, most likely without even getting close to a favorable conclusion to the Doha round of trade talks designed to help developing countries. Negotiators had hoped to at least agree to a framework, or "road map" by last night, on the steps needed to reach a world trade deal that would help the world’s poorest countries.

The Group of 20, led by India and Brazil, and the Cairns Group of major food exporters stood by their demands for opening markets to more farm imports and totally eliminating all forms of export subsidies – government funds paid to domestic producers to promote exports – by no later than 2010. They pointed out that millions of struggling farmers in poor countries are counting on selling more of their products to Europe and other affluent markets. But the developed world, particularly Europe, rejected calls to subject their agricultural sectors to world market competition.

As this column is being written, the US Trade Representative was pleading with the conferees to at least agree to meet again in March so that a comprehensive agreement could be reached by the end of 2006. That would give the Bush administration time to work on an implementing legislation before the trade negotiating authority of Mr. Bush expires in June 2007.

What exactly are they trying to accomplish under the Doha Round? The Hong Kong conference was originally intended to produce an outline for a binding treaty that would cover agriculture, manufacturing and services. That would conclude the talks started in Doha, Qatar in 2001. In Hong Kong as it was in Cancun, a deadlock in agriculture prevented the talks from getting anywhere. Rob Portman, the US Trade Representative, was quoted as saying that he is now convinced that agriculture is the lynchpin to any deal.

This explains why the United States has dismayed the Europeans by offering surprising concessions. Portman insisted that the negotiations should focus on reducing tariffs and quotas for some of the agricultural commodities most heavily protected from international competition.

The United States has called for each country to be allowed to label only one percent of farm products as import sensitive. The European Union wants to label eight percent of all categories of farm products as sensitive to imports, with only modest reductions in tariffs and increases in quotas.

It didn’t help that there were renewed frictions between rich and poor countries over the extent to which new trade rules should allow greater international competition in banking and other services. Developing countries are not ready to start talking about banking and the services sector without an agreement in agriculture.

The same thing happened in negotiations to reduce import duties for manufactured goods. Poor countries are demanding, and rightly so, that any such reductions be matched by similar cuts in rich countries’ duties on farm products. And so the conference of the deaf went on for a week in Hong Kong, a city that should have given the conference delegates a good idea of how to prosper through the unfettered exchange of goods.

What is galling with the WTO trade talks is the hypocrisy on the part of the developed nations. The Doha round is called the development round, meant to help the third world countries to help themselves through equitable trade. But the hard line taken specially by the European community showed less than full commitment to the principles of free trade that they preach and impose on the Third World. Not only are the Europeans unwilling to expose their agricultural sector to competition, they also want to preserve the current trading arrangements that favor their former colonies.

Nobel prize winning economist Joseph Stiglitz, in an op-ed piece for The Financial Times, has other problems with the current WTO approach. Stiglitz thinks there is a broad agenda beyond agriculture that the Doha round ignored.

First on his list is the reduction of tariffs on industrial goods. "The structure of rich countries‚ tariffs is heavily biased against the goods exported by poor countries’ particularly labor-intensive industrial goods and processed foods. Rich countries collect tariffs four times higher on their imports from poor countries than on imports from other rich countries."

Second, and this is my favorite in this column, is the need to increase the mobility of workers. Migration, Stiglitz points out, particularly temporary schemes to allow workers from developing countries to work on short term projects in rich countries would enable workers from poor countries to fill labor shortages in rich countries and send part of their pay back to their families.

As we all know, "the flow of remittances from migrant workers in rich countries is an important source of development finance and now exceeds total aid flows from rich countries." This is something that is already happening between the poorer countries in Eastern Europe like Poland and richer countries in the West like Britain. But in the US, despite their acute shortage of workers, the mood is in favor of making legal migration tougher, specially in the light of the 9/11 paranoia. There is even a proposal to erect an American version of the Great Wall along the southern border with Mexico.

Finally, Stiglitz urges the Doha round to get serious about "aid for trade." Stiglitz writes: "In recent years, the EU and US have slashed tariffs to the poorest countries under special schemes granting them free market access. Yet despite the good intentions behind these schemes, we have witnessed almost no increase in the volume of exports from beneficiary countries. This experience belies the rhetoric of politicians who espouse the virtues of trade over aid. Market access is not enough. Without assistance to overcome gaps in infrastructure, boost product quality and connect to international supply chains, tariff cuts have little effect on trade from the poorest nations."

A true development round, Stiglitz observes, should "redress the imbalances of the past and create opportunities for the future." The irony, Stiglitz concludes, is that both the rich and poor countries could benefit from a fair and development-oriented agenda.

Well, nothing could be clearer than the way the Nobel prize winning economist framed it. The issue also, isn’t about stopping globalization because that’s a given. It is all about how to make trade in this era of globalization, benefit every human being in this world, not just the rich ones.

Position

Here’s Dr. Ernie E.

Jill needed some extra cash. So she decided to apply for a part time job on the weekends.

During the interview, she was asked: "What was your last position?"

Without hesitation, she replied, "Missionary."

Boo Chanco’s e-mail address is [email protected]