Talks at the World Trade Organization (WTO) to salvage the seven-year-old Doha round foundered on Tuesday on differences between rich and poor countries and developing importers and exporters.We should add three things to this list. First, despite--ho-hum--earlier hopes for a conclusion to the never-ending banana wars, the failure of this effort means that the associated deal for, erm, banana peace will need to be negotiated separately:
Here are the issues that proved insuperable.
* The deal broke down over a relatively obscure but complicated proposal to protect farmers in developing countries from a surge in imports.
* No one expected the "special safeguard mechanism" (SSM) to be the rock on which the talks foundered [these were over rice, cotton, and sugar--the WSJ has a podcast].
THE BIG ISSUES
* Going into the talks the main issues seemed to be the level of U.S. trade-distorting farm subsidies and the scope of exceptions for developing countries on industrial tariff cuts.
* This month's talks focused on agriculture and industry subsidy and tariff cuts, leaving most other areas until later.
* The United States made an early offer to cut its farm subsidies to $15 billion, and accepted a further cut to $14.5 billion in a compromise proposal last week.
* The new figure is less than one third of the current ceiling, but twice current outlays, so developing countries said it was not enough.
* Rich countries such as the United States and European Union members remained at odds with emerging nations such as China and India over proposals to shield developing countries' infant industries from the full force of industrial tariff cuts.
* One difference was the U.S. push to encourage developing countries to take part in voluntary agreements to slash or eliminate tariffs in individual industrial sectors such as cars or textiles in return for smaller overall tariff cuts.
* The United States said sectoral deals would create real market opening. India and China said the proposed tariff "credit" undermined the voluntary nature of the deals.
* In the end it was the safeguard that blocked the talks. The way the safeguard proposal was framed failed to reconcile the vital interests of three important groups:
-- the United States, which sought assurances that market opening in other areas would compensate them for other concessions such as farm subsidy cuts
-- developing country exporters, which need growing farm exports to other developing countries
-- big developing countries, which need to protect subsistence farmers from a flood of imports that renders them uncompetitive.
* The safeguard proposal would allow importers to raise tariffs temporarily to counter a sudden surge in imports or collapse in prices.
* Developing importers such as India and Indonesia said this was necessary to stop their subsistence farmers being overwhelmed by market opening agreed in the talks [also see Indian Commerce Minister Kamal Nath's earlier statements highlighting the importance of Indian farmers' votes to the ruling coalition].
* The first volume trigger for the rise in tariffs was a 10-percent rise in imports. This led developing country importers such as Uruguay and Costa Rica to say the safeguard would stifle normal trade growth, not just deal with emergencies, and could even shut off existing trade.
* Another proposal would allow importers in some circumstances to raise tariffs temporarily above current levels agreed in the 1994 Uruguay round if imports grew more than 40 percent -- a deterioration in conditions for the exporters.
OTHER BIG ISSUES
* Even if WTO members had agreed on the safeguard, there were still big differences on a host of other sensitive issues.
* The United States is under pressure to make big cuts in its cotton subsidies, but has not yet made a proposal.
* Developing country exporters are also unhappy with proposals shielding developing imports from the full impact of farm tariff cuts on certain products for reasons of food and livelihood security or rural development.
* The European Union wants to tighten rules protecting the use of place names on wines and spirits, like Champagne. They also want to extend this protection to other products linked to regional names, like Parma ham. A big group of developing countries supports the EU, and also wants to protect the use of indigenous plants and folk wisdom in products such as drugs.
Ecuador, Costa Rica and other Latin American countries stand to lose a new deal with the EU which would have seen the bloc's import tariffs on their bananas fall sharply. That bilateral agreement was linked to a broader WTO deal.Second, the momentary progress made in having industrialized countries at least begin to consider Mode 4 or the temporary migration of skilled service workers such as those from India is back on the back-burner [see here also]:
Rival exporters in West Africa and the Caribbean whose bananas pay no EU import tariff, plus some small producers in the French territories of Guadeloupe and Martinique and Spain's Canary Islands, were deeply opposed to the EU-Latin America banana deal struck over the weekend.
Representatives of the services sector hailed signs that countries were willing to make long-awaited moves on services, including a willingness by the United States and the EU to give more temporary visas for IT experts and other foreign professionals and by some developing countries that they were willing to relax restrictions on foreign investors. Progress in turning those signals into concrete offers is now on hold.Third, the EU wasn't even negotiating coherently. Trade Commissioner Peter Mandelson remains at loggerheads with French President Nicolas Sarkozy over the matter of rich agricultural subsidies. Like many others, Sarkozy has a cushy farm electorate to consider:
French President Nicolas Sarkozy has complained to European Commission head Jose Manuel Barroso about a proposed deal on offer at crucial World Trade Organization talks here, a diplomatic source said Monday. Sarkozy called Barroso over the weekend and also demanded that the European Union's chief trade negotiator Peter Mandelson travel to Paris to explain his position - a demand that was refused, the source said.
France currently holds the rotating presidency of the E.U. The French government said Monday it wouldn't sign proposals for a trade pact as they stand because they show no progress on "essential" matters.
Mandelson is negotiating at the talks here in Geneva on behalf of all 27 members of the E.U., but the former U.K. cabinet minister is viewed with suspicion in Paris as a so-called "neo-liberal" who would be willing to sacrifice France's hefty agricultural sector for the sake of a deal. Any final deal must be approved by all 153 members. Within the E.U., all 27 members must also agree to support an accord.