Business Day (Johannesburg)

Africa: World Trade Talks Bomb

Johannesburg — HOPES of saving a world trade deal were dashed when World Trade Organisation (WTO) talks collapsed last night in Geneva, dealing a major blow to the global economy and raising questions over the continued viability of the WTO.

The meeting was the last chance to strike a deal on cutting tariffs and subsidies in agriculture and manufactured goods before the US presidential election in November.

Talks collapsed when the main protagonists - the US and India, with the latter supported by China and Indonesia -- failed to reach a compromise on a measure to shield developing countries against massive agricultural import increases.

SA's chief trade negotiator, Xavier Carim, said essential gains would be lost, which could have grave implications for the trading system and the WTO.

Multilateral trade talks are likely to go into hibernation indefinitely as elections in the US throw negotiating mandates into disarray, while a slowdown in the global economy has already dampened the appetite for further trade reforms.

Carim said WTO chief Pascal Lamy had done "as much as he could have on the main issues. In the end this broke down on issues in agriculture." He said the round's ultimate direction had veered off the developmental route promised at the start of the talks seven years ago in Doha, Qatar.

"We cannot be under any illusion that what was on the table was a package for very modest reforms in agriculture. The price SA was being asked to pay until the point of the collapse was just exorbitant, and not worth the gains ," he said.

Trade ministers of the Group of Seven (G-7) bloc, consisting of Australia, Brazil, China, the European Union (EU), India, Japan and the US, yesterday mulled over a new compromise text Lamy put forward on Monday . But the talks failed to break an impasse on a clutch of key issues, notably what is called the special safeguard measure, a mechanism to allow developing countries to increase tariffs on farm produce in the event of import surges or price collapses.

The Geneva meeting was scheduled to end on Sunday, but Lamy, in an attempt to save the round, extended talks to today. An important breakthrough on Friday when the G-7 countries reached consensus on a compromised position raised hopes that a pact was within reach.

But those hopes were dashed last night as the G-7 emerged empty-handed after a marathon session with Lamy.

The compromise on the safeguard measure specified that if import volumes rose 40% above the average over the past three years, tariffs could be raised above their current ceilings, with a ceiling of 15% of the current tariff or 15 percentage points, whichever was higher.

The levels allowed were unpalatable to the US.

Brendan Vickers, a senior researcher at the Institute for Global Dialogue, said the collapse came as no surprise.

"The safeguard was of big concern to India. That country has 650-million subsistence farmers, whose positions the Indian government has to take into account. Then there were pages of flexibilities (for the US and EU) in a text in which they would have made modest concessions yet they would not yield on this issue ," he said.

Economist Matthew Stern, a director of Development Network Africa, said the collapse was also a blow to serious trade liberalisation in SA.

"It is extraordinarily unlikely that SA would liberalise unilaterally. And over the next few years the appetite will likely diminish further. We needed an external impetus, and that has now gone," he said.

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