Tough Doha trade talks loom in political shadow

By Jonathan Lynn – Analysis

GENEVA (BestGrowthStock) – World Trade Organization members agree they must push on with difficult talks on a global trade deal, but November’s U.S. mid-term elections mean they are unlikely to bear fruit before next year.

The United States, ultimately the key to any pact, says that what is on the table after 8 years of talks on the Doha round is simply not compelling enough to attract support back home.

Emerging economies say they have given enough in the current draft of what is meant to be a deal promoting development, so the scene is set for some bruising confrontations in which Washington too will be under pressure to make concessions.

“We’ve walked up to the water’s edge… What we haven’t done yet is dive into the actual give and take of negotiations,” said a senior U.S. official.

The WTO’s consensus-driven system requires negotiations to move in a carefully choreographed dance, with proposals shared among ever-widening groups to ensure that none of the 153 members feels excluded from decision-making.

But the time has now come for “frank, open and difficult negotiations” rather than exercises in transparency, U.S. Trade Representative Ron Kirk told a briefing.

He was speaking after trade ministers met in Paris on May 27 to review the state of the Doha talks and agreed to pursue negotiations in whatever form is needed to aim for a deal.

In particular, Kirk wants China, India and Brazil — as the three prime beneficiaries of globalization and the source of much future growth in the world economy — to make a bigger contribution to a deal.

Kirk insists it is not just the United States pushing the big emerging economies. Other rich countries, and some developing ones, also want a more “ambitious” deal, he said.

U.S. negotiators also complain that talks so far have concentrated on agriculture and manufactured goods, with little progress in services such as insurance and express delivery.

REDRESSING IMBALANCES

China, India and Brazil retort that with hundreds of millions of their citizens still living in poverty, they cannot give all that it will take to clinch a deal in the Doha round — launched in 2001 to right some of the imbalances in the global trading system and help poor countries to prosper through trade.

In practice that means that the United States, which says it has already made generous offers on cutting trade-distorting farm subsidies, must do more too.

“I think they now fully understand, and it’s been made very clear to them, that if they want to push for any additional opening they need, then they’re going to have to be responsive in some of the areas where people want things from them,” said one senior official familiar with the talks.

It is now widely accepted that a deal will require the big emerging economies to make additional offers, said this official. The question is whether the administration of President Barack Obama actually wants a deal before the mid-term elections.

“It may be something they prefer to do next year rather than this year,” the official said.

But that will deter America’s trading partners from making concessions now for fear they will face fresh demands in 2011.

Even the strongest proponents of a Doha trade agreement now acknowledge that the talks are at an impasse, despite statements that a deal is the shot in the arm the global economy needs.

Only 21 WTO members were represented at the Paris meeting, and of those only nine at ministerial level — far fewer than in previous years where similar gatherings have taken place, and an indication of the current low level of expectations.

Proponents of a Doha deal argue that the boost it would provide to business sentiment by opening new trading opportunities in everything from corn to chemicals would represent a welcome stimulus to the recovering world economy — and one with little impact on stretched budgets.

“Despite the fact that there have been disagreements about how much the value of the Doha Round on the table is worth, there is no doubt that trade not only sustains and strengthens economic growth, it also creates job opportunity,” said Australian Trade Minister Simon Crean.

The problem is that trade also destroys jobs, and its victims tend to be more vociferous than those whose firms are benefiting from new export opportunities or consumers enjoying cheaper goods from abroad.

Trade is not just about exports. For many businesses in today’s sophisticated networked economy, the ability to source intermediate goods and components through competitive imports makes a crucial difference to their bottom line.

But the fact remains that few votes are currently to be won over trade in the United States, where labor unions and other core constituencies of Obama’s Democratic Party remain suspicious of new trade deals.

Trade is such a sensitive topic that Obama may prefer not to argue for a new deal even next year, as he readies for a re-election bid in 2012. “Trade is a second-term issue,” said one WTO ambassador.

Growth Stocks

Tough Doha trade talks loom in political shadow