The Trade Beat (Johannesburg)

25 August 2014

Africa: Is There Any Way to Break the Doha Round Impasse in Agriculture Negotiations?

analysis

For many countries, agricultural trade reform is politically sensitive. But that sensitivity did not prevent a ground-breaking multilateral trade agreement in the Uruguay Round of multilateral trade negotiations. Why is it that in the current Doha Round of talks no progress has been made since 2008?

The structure of the Doha Round

The origins of the current impasse can be found in political and structural mistakes made at Doha in 2001. So long as these mistakes remain uncorrected, there is no hope for successful completion of the Doha agricultural negotiations. And without agriculture, there is no hope for the Round overall.

Adopting a 'single undertaking' approach to the negotiations - where all Members are expected to be party to all negotiations and results - was a serious, and I will argue, totally unnecessary, political mistake.

In 2001, many would have argued that the Uruguay Round agriculture negotiations produced a 'sloppy result' where big players like the USA and European Community had far too much flexibility in how they implemented their commitments.

Reacting to this, developing modalities for the Doha negotiations that attempted to cover every single concern for every one of 160+ participants without the national flexibilities that were accommodated in the Uruguay Round is our big structural mistake.

These mistakes created a situation where very little happened in the Doha talks between 2004 and 2008 and virtually nothing has happened in the six years since 2008.

Bali Package

The so-called 'Bali Package' offered some hope to multilateralists that the single undertaking approach might yet be workable. It seemed as though consensus agreement was reached on a package of measures that would allow Doha to progress. But when India and a few disreputable allies killed the Trade Facilitation Agreement (TFA) at the end of July, we saw again just how un-workable the single undertaking approach really is.

Anyway, even if the TFA package had gone through, what would have been the implications for the Doha Round of the 'Bali Package'?

What happened at Bali on agriculture was never more than an illusion of progress. We all know that the real problem in the Doha agriculture talks is the market access pillar. This is where things blew up in 2008 and nothing in the Bali Package does anything to move this part of the talks forward. If we want to break the impasse, we need to fix the mistakes referred to earlier.

Critical Mass

For a number of years now, negotiators seem to have been operating under the assumption that 'single undertaking' agreements are the normal way of negotiating in the multilateral system. This is wrong. Historically most of the important steps forward have come through critical mass agreements. This is true for market access and it is also true for rules.

What is a critical mass agreement? It's an opt-in agreement among a subset of WTO Members who agree that the portion of international trade in a particular sector that they collectively account for is sufficient for them to conclude a trade deal among themselves.

Other Members only marginally involved in the trade need not participate and the insiders accepting the critical mass agreement's obligations agree to provide the benefits of the agreement to all WTO Members on a Most Favoured Nation (MFN) basis. Examples of WTO-era critical mass agreements include the 1996 Information Technologies Agreement and the 1997 Telecommunications Services Agreement.

But a critical mass agreement wouldn't work for agriculture, would it?

Simulating Critical Mass

In fact, it would work, and in 2009 researchers from Australia, India, China, Indonesia and Brazil collaborated on a research project that demonstrated just how well - from a technical standpoint - a critical mass approach to agriculture could work.

In our 2009 project, we used the International Trade Centre's 'Market Access Map' database to identify the most-traded 30 agricultural products (at the 6-digit level of the Harmonized System) and a group of 38 WTO member countries that account for 80% or more of that trade across all 30 products.

We modeled the benefits of an agreement among these 38 Members on these 30 products and compared the results against the likely results of a single undertaking negotiation concluded on the basis of the 2008 draft modalities.

If the Doha Round modalities of December 2008 were implemented, we projected a static net global welfare gain of almost US$15 billion. A critical mass agreement that substantially eliminated duties on just 30 products among 38 countries would achieve about two-thirds of the same level of gains.

If, however, the 38 countries agreed that it would be unfeasible to maintain trade-distorting production subsidies ('amber-box') once borders were open and eliminated both those subsidies and all forms of export subsidy, the gains from a CMA on the 30 products almost double to US$19 billion.

In other words, our simulations showed that, under reasonable assumptions about what would be a feasible coalition of interest in opening world agriculture markets (the 'critical mass' coalition), and what the scope of such an agreement would be, a technically simple agreement engaging less than one quarter of all WTO members would achieve a significantly bigger global result than the laborious, complex modalities of the global Doha Round.

At the end of our research project in 2009 we organised a small conference in Canberra where we heard the views of representatives of the EU, Brazil, Australia and the United States.

The government representatives at the conference pointed out a number of problems they saw with adopting a critical mass approach for future negotiations on agriculture, including: a mercantilist-motivated need to obtain concessions in other sectors to balance the losses in an agriculture negotiation; an inability to tolerate 'free-riders' (like India) should a major developing country elect to stay out of the agreement; and the perceived risk that a critical mass approach to agriculture would contribute to a multi-speed WTO system.

What the conference discussion revealed is that governments believed they were stuck with an approach that is not working, but they were still not willing to consider seriously moving to another framework such as critical mass.

Colleagues who have contributed to the debate on this question have observed - quite rightly - that many of the 'problem' countries in the agriculture negotiations have been countries like Canada, Switzerland, Norway, Japan... and the USA and EU.

They wonder how the negotiation could be made easier by eliminating (through critical mass) many of the small developing countries and problematic players like India and Indonesia. I do not for a minute think that the other 'problem countries' would jump onto a critical mass approach in a minute, but it would have to be easier if we did not have to worry about all of the Small, Vulnerable Economies (SVEs) and the Bolivarian Republic of Venezuela.

Conclusion

It seems to me that the fact that many of the countries that want to see some multilateral progress have exited the single undertaking in the Trade in Services Agreement (TiSA) negotiations shows they might be willing to consider a similar approach in the agriculture sector.

And remember that we advocate getting rid of the Doha agriculture modalities and returning to a simpler, more flexible approach that many governments would find (I think) politically easier to use as a basis for negotiations (a good number of the overly-complex draft Doha agriculture modalities were designed to deal with problems of countries that would be outside of our critical mass approach).

The WTO got a small breath of life in Bali, but the multilateral trading system negotiations based on a single undertaking have now been discredited again by the actions of India and its rag-tag allies at the end of July.

Maybe governments are now more willing than they were in 2009 to consider an alternative approach. Maybe they are not. But sooner or later somebody has to think outside the box.

Andrew Stoler is a former Deputy Director General of the WTO (1999-2002) who participated in the Australian Government sponsored research project referred to in this discussion (Viability of a Critical Mass Framework for Agricultural Trade Negotiations) while serving as Executive Director of the University of Adelaide's Institute for International Trade (2003-2011). Mr Stoler is now an independent consultant on international trade and investment policy issues.

SAIIA has established a new project examining how multilateral trade negotiations can be revitalised to overcome both existing and emerging challenges. Click here to visit the project page for more information and analysis.

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