Doha or Do Not?

Dec 23, 2008 Editorial

As our year slides towards its end with the lubrication of the incessant rains, the recent announcement by the Head of the World Trade Organization (WTO), Pascal Lamy, that the Ministerial meeting of the Doha Development Round scheduled for this month will be rolled over into next year, deserves comment.

After all, the consummation of this round, which had promised to focus on improving the lot of the “developing countries”, is now three years past due.

More alarmingly, when the hastily assembled grouping of G-20 leaders responded to the call of President Bush – under fire of a financial meltdown in the developed economies – and met in Washington on November 15th, the only commitment they undertook that had a timeline was to reach consensus on the outstanding issues of the Round by the end of this year.

The recommitment to “free trade” was conceded to be crucial in the efforts of the floundering economies towards their eventual recovery. And those battered economies now included some of the giants of the developing world, for instance, China and India, which had derailed the Round back in July.

Does their inability, or unwillingness to follow through with their commitment, signal an abandonment of the goals of the Doha Round?

The hurdles that have stalled the seven-year-old talks are legion, but they boiled down essentially to sharp differences in the fields of agriculture and NAMA (non-agricultural market access).

In concrete terms, while Europe and the US talked the talk about helping the developing economies to increase their share of world trade, their refusal to eliminate the stupendous level of subsidies they directed to their agricultural products made it clear that they were not willing to walk the walk.

For instance, the Organisation for Economic Cooperation and Development (OECD) — the richest block — provides annually $374 billion as farm subsidies.

The latest US Farm Bill 2008 makes a provision for $307 billion support for agriculture in the next five years. Offering free and unrestricted access to their markets is of little consequence to underdeveloped economies that cannot even afford the packaging mandated by the developed markets.

There also was the necessity for the developing countries to open up their markets to the developed countries – which somehow (but not surprisingly) always ended up to the detriment of the former group.

Unless the subsidies are removed, one would be naive to think that developing countries could be in a position to prevent surges of food imports into their fragile economies – eating up valuable foreign currency reserves and destroying the local food industry that would have employed a large percentage of their workforce. One only has to ask what has happened to our coconut oil industry under the flood of corn and vegetable oils from the North.

In the past three decades, due to the free trade liberalisation policies promoted as the salvation of the developing countries, 105 of the 149 Third World countries have become net food importers.

A decade before, developing countries were actually exporting food and had a surplus of $7 billion in food trade. Compare this with their present annual food deficit of $11 billion.

The last breakdown (July) in the Doha Round transpired because of China’s and India’s willingness to take a common stand against the developed world’s refusal to allow developing countries to impose tariffs at previous rates if import surges exceeded 15%. They wanted the trigger to be 40% — that is, when the local industries would have already been destroyed.

We hope that the present inability of the negotiators to reach consensus was because the larger developing countries are standing firm, not only on the particular issue of import surges, but also on the larger and more fundamental issue of the unconscionable quantum of subsidies provided by the developed economies to their agricultural products.

Under the present pressures of the financial meltdown that has percolated inevitably into the real economy, we believe that the developed countries would be even more unwilling to remove those subsidies. In fact, they are now openly extending their subsidies into their manufacturing sectors.

The developing world should now demand a complete rethinking on the details of the Doha Development Round.

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