(by the International Trade and Integration Division, ECLAC)

The Doha Round has commenced its ninth year of negotiations and it is already the longest in history. Its last crisis was in July 2008, when the ministers gathered in Geneva were unable to reach an agreement in the areas of Agriculture and Market Access for Non-agricultural Products. Afterwards, the negotiations were virtually suspended for over a year.

The global economic crisis unleashed in September 2008 gave a renewed sense of urgency to concluding the Doha Round. The World Trade Organization (WTO) is projecting a 10% fall in the volume of international trade of goods in 2009, the first since 1982 and the steepest since the Great Depression. Meanwhile, a significant number of countries are adopting measures that restrict trade.

In this context, India called a meeting of ministers from about 40 member countries of the WTO on September 3-4 last year in New Delhi to restart negotiations. A few weeks later, G20 leaders gathered in Pittsburgh, United States on September 24-25 expressed their commitment to concluding negotiations this year.

This call was reiterated by the leaders of the Asian Pacific Economic Cooperation Forum (APEC) during its summit last November in Singapore, and by the overwhelming majority of WTO members at the organization’s Seventh Ministerial Conference held in Geneva between November 30 and December 2 last year.

The position the United States assumes will be key to the prospect of concluding the Round. Its negotiators say that the potential benefits currently on the table in terms of market access for U.S. exporters are uncertain and do not justify the high economic and political costs that the country would have to pay if it were to reduce its agricultural subsidies and tariffs in sensitive industries (textiles and clothing, for example).

The United States has stated that an essential condition to repair this “imbalance” is that advanced developing countries (namely Brazil, China and India) undertake greater commitments in opening services, agriculture and market access for non-agricultural products.

The focus of attention and of the disagreements has centered on the latter two, although the Doha Round has a broad agenda.

The main disagreements during the negotiations on agriculture revolved around the extent to which developed countries (especially the United States) should reduce their domestic subsidies for agriculture and the characteristics of agricultural safeguards for developing countries. A group of developing countries known as the G33, led by India and Indonesia, wants this instrument to be easy to invoke and have extensive coverage.

Meanwhile, net agricultural export countries like the United States, Australia and some developing countries like Argentina, Thailand and Uruguay want the new agricultural safeguards to be more limited scope so they don’t hamper imports unnecessarily.

As for market access for non-agricultural products, the principal controversy is over the demand of some developed countries like the United States that the main “emerging” economies (particularly Brazil, China and India) participate in certain “sector initiatives” of tariff elimination, even though WTO members agreed on 2005 that participation in these initiatives would be voluntary. 

Complicated context for trade

The current political context in the United States is complicated for trade. There is virtual consensus that the Trade Promotion Authority (TPA) establishing that Congress may only approve or reject a trade agreement without introducing amendments, is essential to congressional approval of the Doha Round.

However, the TPA expired in July 2007 and so far, President Barack Obama has not begun formal procedures to renew it. Moreover, trade in general does not seem to be one of his priorities, as is evident in the lack of progress in the congressional approval of free trade agreements already signed with Colombia, the Republic of Korea and Panama.

In addition, in the context of the crisis, at least 70 countries – developed and developing – have adopted trade-restrictive measures, although they are a far cry from the massive protectionism of the 1930’s. This includes all of the largest world economies, among them all G20 members, and goes against the commitment not to introduce new protectionist measures until late 2010, as agreed upon by G20 leaders during the Washington, D.C. summit in November 2008 (and reiterated in the following summits).

Developed countries have principally provided financial aid to sectors affected by the crisis, such as financial services and the automobile industry, and restricted employment of foreign workers. Many of these measures have been implemented in the framework of economic stimulus programmes containing, according to the WTO, “buy/invest/lend/hire local” elements.

Developing countries have resorted mainly to “traditional” border measures, such as raising tariffs (generally considered temporary), quotas, import licenses and minimum customs values. This reflects, among other things, the limited funds available to developing countries with respect to developed ones.

Both groups of countries have increased their discriminatory practices in government procurement 1 and in the amount of new research related to trade defense instruments, especially antidumping rights.

Some initiatives on climate change currently being debated or in process, particularly in developed countries, also threaten to become protectionist. One example is the bill on climate change approved by the U.S. House of Representatives in June 2009. This law would establish as of 2020 a border tax on merchandise produced in countries that have not adopted commitments to reduce greenhouse gas emissions within the framework of an international agreement, or that have not independently adopted commitments to a reduce them to an extent equivalent to that of the United States. Measures of this kind, which are also supported by France, could conflict with several WTO rules.

For countries in the region and developing countries in general, it is crucial to reach a global agreement on climate change soon. In the absence of a new multilateral framework that could reflect the contribution of the different economies to climate change better than the current one, the risk that industrialized countries resort to unilateral trade restrictions is higher. They not only imply a threat of protectionism, but they also weaken the efforts for international cooperation that are vital to effectively address climate change. In consequence, it is imperative to redouble efforts to reach a binding agreement during 2010 based on the political agreement reached in the Copenhagen conference last December.

Over the past few years, there has been a proliferation of North-South and South-South preferential trade agreements as a “second best option” that the governments of practically all WTO member nations have adopted in light of the need to improve their insertion in the world economy and the slow advance of multilateral negotiations.

Although all of these agreements include benefits for their members, their proliferation has meant a constant erosion of multilateral rules through the superposition of rules on standards, origin and tariff reductions. This complicates the operation of global value chains around which world trade is increasingly based.

The proliferation of preferential agreements is expected to continue in the years to come. However, an agreement in Doha would be a reassuring sign of the validity of the multilateral system that could slow down this proliferation, or at least the discrepancies between multilateral rules and the contents of these preferential agreements.

Benefits of Doha

According to a recent study of the Peterson Institute of International Economics 2, the benefits of the package currently “on the table” on agriculture and market access for non-agricultural products for the 22 countries included 3 would amount to US$54 billion a year in greater exports, and US$100 billion a year in a higher GDP.

If the latter figure is adjusted according to the participation of these countries in the world product, it would increase to US$114 billion a year. This figure would therefore be the minimum possible gain of an agreement in the Doha Round. These numbers could even multiply, according to the study, depending particularly on the results obtained in services and trade facilitation.

For Latin America and the Caribbean, an agreement on this package in Doha would bring considerable benefits for agriculture, an area that has been put at the center of Doha by countries in the region. In effect, access to markets in industrialized countries for the region’s exports would improve significantly, along with the elimination of subsidies for agricultural exports and substantial reductions in the levels allowed for domestic agricultural subsidies provided by those same countries. This would contribute to “level the playing field” in an area of indisputable interest for exporters in the region.

In terms of market access for non-agricultural products, countries in the region would have tangible improvements in access to the markets of industrialized countries, especially in sectors with tariff scales and tariff peaks (textiles and clothing, footwear, vehicles, etc.). They would also see other improvements - primarily more predictable conditions of access to developing markets. This is not a minor issue, given the increasing importance of south-south trade.

The negotiations on trade facilitation offer important benefits, but its fruits will not be possible without a global agreement in Doha. There doesn’t seem to be political will to break the current logic of “one sole package”, which would be a necessary condition to implementing the results of trade facilitation in advance of or even independently of the global package. The same occurs with the negotiations to limit subsidies for fishing, which are also of special interest for the region.

Other initiatives in favor of developing countries that have been discussed in recent years will probably not fully materialize without a global agreement in Doha. This would be the case of the commitment undertaken by developed countries in 2005 to provide tariff and quota-free access to the exports of less-advanced countries and a greater provision of funds in Aid for Trade.

All WTO members say they share the goal of concluding the Doha Round this year. However, the high-level political commitments so far have not led some of the main actors to be more flexible in their positions, casting doubts about the feasibility of achieving it. Given its position as the foremost world economy, the United States should assume a leading role in this direction.

Concluding the negotiations of the Doha Round this year is imperative for at least four reasons:

• The significant economic gains involved would contribute to the recovery of the world economy in the difficult post-crisis context expected for the next few years;
• To close off the chance of reverting to protectionism;
• Because the credibility of the multilateral system of trade as a whole is being negatively affected by the repeated failures in concluding the current Round;
• To allow the WTO to concentrate on other issues of increasing importance in world trade, such as climate change and trade in energy products, and seek manners to restrict discriminatory practices in government procurement and regulate competition based on subsidies. Although the agreement regarded today as feasible is probably far from the legitimate original expectations of many countries, it nevertheless constitutes a significant step forward compared to the current situation, and is moreover vital to preserve the credibility and relevance of the multilateral system of trade.