Cameron: Why the WTO talks have collapsed (again)

The WTO talks have collapsed. Wait, did I not report that last year? Alas, talks are never really over, the Doha Round never really “dead” as reported in the papers. Just stalled. But as Cameron points out in his column (thanks to Duncan and rabble for sharing columns with RPE), this recent impasse has a lot to do with the unfairness to poorer countries of the current WTO rules (plus other parts of the international system) and why they are not going to give away the store in a new round. Canada, it should be noted, would have caved by now. Our negotiators on international trade deals have a poor track record that may be because they believe in free trade too strongly to be strategic. In any event, we were not invited to Potsdam.

Potsdam plotz

“Lies,” said the Brazilian Foreign Minister Celso Amorim of the promises made by the EU and the U.S. — India and Brazil refuse unfair world trade.

by Duncan Cameron
June 28, 2007

In the summer of 1945, the allied victors (the USSR, UK and U.S.) met in Potsdam to decide the fate of defeated Germany. Last week, meeting in Potsdam, the U.S., the EU, Brazil and India (a.k.a. the G4) failed to revive world trade talks, known within the World Trade Organization (WTO) as the Doha round, which were suspended a year ago.

The G4 meeting broke up in anger after only three days of the scheduled six-day encounter. The EU and the U.S., which have been fighting each other over trade issues for about fifty years, this time agreed — they agreed to blame India and Brazil for the failure of the talks. WTO watcher Daniel Drache of York University observed that breakdown of the Potsdam talks signals that big capital and the major powers lost.

The bargain offered was supposed to be good for all. The EU and the U.S. would get tariff reductions facilitating their access to markets of poor countries, and, in return, the U.S. would reduce subsidies to agricultural exports and the EU would reduce tariffs on agricultural imports, both moves to benefit poor country agriculture.

Brazil and India pointed out that the tariff reductions would hurt development prospects in the poor South, and the agricultural promises amounted to nothing, or worse. “Lies,” said the Brazilian Foreign Minister Celso Amorim.

The WTO had a scenario worked out for Potsdam. If the G4 could agree on the important outstanding issues, prospects would improve for a world trade pact by the end of 2007, presumably for the benefit of the 150 WTO member states. When Amorim and Indian Commerce Minister Kamal Nath walked out of the Potsdam talks, they sent the discussion back to Geneva where WTO committees have fallen short of significant agreement.

The problem is that world trade is unfair, and the WTO rules are part of the problem. Those who benefit disproportionately, mainly the rich, developed countries, do not want to give away trade advantages without getting equal or greater advantages in return. Successful trading by China and India in particular has Western nations seeking fresh advantages through control of the WTO agenda.

The poor, developing countries have poor prospects unless the world economic rules of the game change. Trade changes alone are not enough to benefit the world poor: debt forgiveness, foreign aid and financial reforms are more important; and the trade changes under discussion at the WTO would in fact make things worse.

The Doha round was supposed to be the Seattle round, but following the major protests that shut down the 1999 WTO meeting in that city, when trade ministers reconvened two years later in Qatar, they decided to pursue what was called the Doha Development Agenda, in the hopes of persuading poor countries, and protestors, that trade could lead to development.

Trade can makes good sense: it is a way of sharing work. Your country does what it does best, mine will do the same, and then we can choose to exchange what each of us produces beyond our immediate needs. But world trade is about power first. The big and rich want to get bigger and richer, and the small, weak and poor need protection, and attention paid to their development needs. The proposed Potsdam bargain would have expanded trade for poor countries as well as rich, but existing trade rules, such as those protecting patents and intellectual rights — monopoly rights really — take more away from the poor than they would gain from tariff reductions.

The unwillingness of the U.S. and the EU to recognize the injustice of the prevailing trade order provoked the dispute with Brazil and India, speaking for the developing world.

In order to negotiate trade deals the U.S. has acquired “fast track” authority from Congress. That authority expires June 30, 2007, and can only be renewed within two years if the U.S. can show substantial progress in meeting its trade goals. Otherwise, new trade talk authority will await a new president, and another Congress.

So, to make Congress happy, the U.S. is pushing hard to get improved access to markets abroad and is reluctant to give up its own subsidizes to agricultural exporters. India wants the need for food security to be recognized, and domestic subsistence agriculture — the livelihood of billions — made safe from subsidized U.S. exports.

At Potsdam in 1945, the post war international order was being established under U.S. leadership and growing differences with the USSR would create the cold war. In 2007, the U.S. is determined that its domestic priorities dominate the world trading system. Brazil and India have openly challenged U.S. leadership of the rich countries and are calling for a fairer world trading system. Efforts to demonize them, or to bash China, should be understood as the continuation of U.S. efforts to dominate the world. Unlike in 1945, however, today U.S. leadership is widely in question.

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