The Doha Round of World Trade Organization (WTO) talks on lowering barriers to global commerce have fallen apart, at least for the moment. After 14 long hours, dialogue between the six key trading powers, the United States, the European Union (EU), Brazil, Australia, Japan and India, ended without a breakthrough in the agricultural issue, the central topic for the trade talks, prompting Director General Pascal Lamy to recommend an indefinite suspension of the five-year negotiations on July 24.
The recommendation was formally endorsed by the ruling General Council of the 149-member body three days later.
Chong Quan, Spokesman for the Chinese Ministry of Commerce, said in a July 26 news release, “The Doha Round of negotiations is critical to a balanced and orderly development of the world economy. We will work with other sides and try to resume negotiations as soon as possible.”
Chinese experts on WTO studies, while agreeing that developed countries should take the blame for the standoff and that chances for the resumption of talks still exist, have different opinions over how much the possible failure would affect the Chinese economy.
Who ruined the talks?
A lot of finger pointing has been going on between the United States and EU over who wrecked the talks. A Reuters report said that the EU, Japan, Brazil and India blamed the United States for the stalemate, while the EU and India said Washington had been demanding too high a price for cutting into its annual agricultural subsidies of $20 billion.
The same report quoted EU Trade Commissioner Peter Mandelson as saying, “Surely the richest and strongest nation in the world [the United States], with the highest standards of living, can afford to give as well as take.”
Yet a statement from the U.S. embassy in Geneva on July 25, said the EU’s accusation is “false and misleading.” The statement said, “Unable to endorse the U.S. proposal given substantial opposition from France and a few other member states with strong farming interests, the EU attempted, alternately, to criticize the U.S. proposal as too ambitious or too weak.”
Zhang Xiangchen, Director General of Department of WTO Affairs of the Ministry of Commerce, told Beijing Review, “Despite its status as the world’s third largest trading power, China has a relatively weak voice at the Doha talks due to its nascent membership.” It was at the Doha Ministerial Meeting in 2001, the very occasion on which the Doha Round of negotiations were initiated, that China formally joined the world trade body--making it the first time China participated in WTO trade talks as a member country.
Zhang said compared with the previous eight rounds of talks in the GATT (General Agreement on Tariffs and Trade)--WTO framework, the outstanding feature of the latest round was the stronger say of the developing world, which has both pros and cons. On the one hand, the negotiation result could be more balanced to reflect the concerns and interests of the developing countries. On the other hand, the difficulty for reaching consensus has been expanded with more stakeholders.
“As the industrial countries know they have to cut their agricultural protection policies and developing countries understand the expectations on them to open their markets wider to industrial products, the essential problem is that nobody would be the first to make a concession,” said Shen Jiru, Professor at the Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS). He explained that any issue related to farmers and agriculture is sensitive in industrialized countries, since farmers are regarded as a “disadvantaged group” and constitute the strongest lobbying team in parliaments.
However, Zhou Shijian, a senior research fellow with the China Society for World Trade Organization Studies, believes no excuse should exempt the industrialized countries from the absolute obligation of backing off in the deadlock. “Industrialized countries, which had dominated the trade negotiations, are very selective on which sectors should be pro-free-trade,” Zhou told Beijing Review.
They are the vociferous advocates of zero-tariffing in the telecom sector, where they have a strong competitive edge, while trying to maintain the distortion of agriculture and textile trade through heavily subsidizing their farmers, maintaining protectionist tariffs and setting up quotas, he said. It is time to remove the “double standards” within the WTO, he added.
“In this ‘development round’ of talks, without compromise in agricultural trade from the United States and the EU, there would be no progress in any other area due to its correlation with the whole array of negotiation topics,” said Zhang from the Department of WTO Affairs of the Ministry of Commerce.
Impact on China
Lamy warned that a failure of the Doha Round would send out a strong negative signal for the future of the world economy and the “danger of a resurgence of protectionism.”
This echoes the concerns of some Chinese scholars and officials, who worry that the rising protectionism may fuel an environment for increasing anti-dumping cases against China. The country has held the worst anti-dumping record for 11 consecutive years up to 2005. In a recent WTO report, of the 178 new anti-dumping investigation cases of last year, 55 cases, or 31 percent, are against China.
Zhang Guoqing is the Vice Director of the Policy Research Department of the Ministry of Commerce. In an editorial in China Economic Times, he said that the failure of the trade talks would in the long run mean more trade collisions, more anti-dumping cases and more demands from net importers of Chinese products, against China. In addition this standoff would set a bad precedent in multilateral trade talks of not making concessions, he said.
Zhang believes the global-deal negotiation regime could better serve China’s interests than negotiations for bilateral or regional arrangements by saving negotiating costs. “In a multilateral negotiation as grand as the Doha Round, a developing country like China could muster more leverage against rich nations, while the country would be placed in a more disadvantaged position if it had to shift to a bilateral agreement.” Although 57 countries had recognized China’s complete market economy status by July 20, the names of China’s top trading partners, the EU, the United States and Japan, are absent from the list, which makes the establishment of a free trade area between China and these countries particularly difficult.
However, Zhou with the China Society for World Trade Organization Studies is optimistic. He asserted that failure of the WTO talks would not affect China much. “China doesn’t have major interests at stake, whether the talks succeed or fail,” he said, citing two reasons.
First, China would not benefit much from the lowering of tariffs on farm produce and farm subsidies. In his speech at the Sixth WTO Ministerial Conference at Hong Kong last December, Minister of Commerce Bo Xilai said China’s average tariff level for agricultural products stood at only 15.3 percent, as compared to the pre-accession level of 54 percent, much lower than the world average tariff for farm products of 62 percent. “But China’s agriculture produce is mainly for domestic consumption,” said Zhou. In 2005, China’s agricultural exports accounted for 7 percent of total exports.
Second, Zhou believes that the reduction of anti-dumping cases against China relies more on the internal industrial restructuring rather than the success of the Doha talks. He said many people expect the WTO to correct the discriminatory treatment of China as a non-market economy after China’s appeal at this round of talks. But he thinks the chances of success in this regard are not high and even if China succeeded, it would still be the major target for anti-dumping due to its large volume of low-quality low-price exports. “The final solution lies singly in the improvement in quality of Chinese goods and climbing the value-added ladder,” said Zhou.
Not doomed yet
Visiting British Prime Minister Tony Blair said in a July 30 speech after meetings with his host U.S. President George W. Bush that they both hope to revive the deadlocked WTO talks sometime in the next few weeks, which has ignited new hope for the Doha Round’s revival. The next day, President Bush made a similar pledge, “We’ll do everything we can to get Doha back on track. They have a chance to create new jobs and economic growth, not only here [in the United States], but elsewhere.”
Actually few are ready to admit the talks are dead, not even Director General Lamy.
“Should the breakdown transform into a failure to resume the talks, there would be no winners. All of us would pay,” he wrote, in a July 27 editorial titled “What Now Trade Ministers?” for The International Herald Tribune. In this article, he appealed to trade ministers from WTO member countries to salvage the sinking trade talks.
“Historical trends of a more globalized economy and further global labor division render that the trade talks must be a success,” said Shen from the CASS.
Zhang said while it is the prerogative of any country to rally members back to the negotiating table, the United States is the most likely to play such a role. “Most countries blame U.S. inflexibilities in lowering agricultural subsidies for the current setback and, moreover, the United States historically plays the leadership role in the WTO,” said Zhang. After the Cancun ministerial meeting ended in acrimony and without any result, the United States helped to push the process forward. “I hope it can do that again,” said Zhang.