The first international trade negotiations which proclaim as one of their objectives reducing discrimination against developing countries in the global trading system are entering a critical few months.
The talks, which began in Doha, Qatar, in 2001, have long been plagued by differences over issues such as the measures which countries take to protect their own farmers, or industries, against cheaper imports from elsewhere. Developing countries want rich countries to cut agricultural subsidies, or tariffs on agricultural imports, so they can export their produce there. Industrialized countries want newly-emerging countries to cut import tariffs so they can export manufactured goods to those countries.
Now, says Pascal Lamy – who, as director-general of the World Trade Organization, referees the talks – there is a better chance than ever before that a deal can be done which will help African and other developing countries break through into new markets in industrialized countries. Lamy was in Lesotho last week for a conference of the bloc known as the least-developed countries (LDCs). On his way back home through South Africa, he spoke to AllAfrica. Excerpts:
Last time we spoke, you compared the process of concluding the Doha Round of talks to an aircraft preparing to land. Some people now think the aircraft is going to crash; it certainly must be running out of fuel. How would you apply that analogy now?
I think we now know in agriculture which portion of the tarmac we will land on. It's still a bit less clear in industrial tariffs, which is why the coming weeks must be focused on that, but we definitely have the landing zone in sight.
What about talks on services?
Services is a more complex negotiation because it's a request-and-offer negotiation, so it takes more time. And the services negotiation is very much linked to the final conclusion of the round. There will be a result on services because services are mandated – just as trade and environment, or trade facilitation or fisheries subsidies or anti-dumping rules are.
We have kept to this principle that we have a single undertaking. If something is agreed on farm subsidies, on farm tariffs and on industrial tariffs, it will only be accepted as part of a global deal with 17 other topics. The services negotiation is one of those 20 topics and if members don't agree with what's on the negotiating table there is no deal.
What are the sticking points for Africa in each of those areas – agriculture, industry and services?
Well, it's as difficult to speak about Africa as a whole as it is to talk about Asia or Latin America as a whole. South Africa is not Kenya, Kenya is not Senegal. And in WTO we don't have one-size-fits-all. We have tailor-made solutions depending on the level of development.
On agriculture, African countries are mostly on the offensive. They want the United States, the European Union and Japan to reduce their subsidies [paid to farmers to produce certain types of crop]. They want the U.S. and EU to reduce their tariffs [on agricultural imports] and they will get that. The question now is exactly how much they will get.
On industrial tariffs, African countries are more on the defensive. But only very few of them – South Africa, Egypt, Tunisia, Morocco – will have to take tariffs cuts according to a general formula. All the other African countries, because they are LDCs or have a low number of fixed tariff rates will be exempted from cuts in industrial tariffs.
Overall… the conclusion of the LDCs' conference which took place in Lesotho – and the majority of African countries are LDCs – is that they are pushing for a deal as they are the ones in this negotiation who will gain the most from a success while paying a very modest price.
LDCs would benefit from duty-free, quota free treatment on 97 percent of their exports. Rich-country cotton export subsidies would be eliminated straight away and other forms of trade-distorting support would be reduced by an even higher percentage that the cuts on support for other crops. Cotton exports from LDCs would receive duty-free, quota free treatment.
If the round fails, it will be bad news for LDCs. This is why a Doha agreement is so important.
On industrial tariffs, they're on the defensive because they're being challenged to reduce the tariffs which they've used to protect their industries?
Well, yes, for some of them the price of a deal is that they will have to reduce some of their applied tariffs. Now the official currency in WTO is bound tariff which is the maximum tariff a country can apply. It's not the applied tariff and usually applied tariffs are lower. So it's a very complex issue because the reduction that you take is on your bound tariff but it only impacts your business or constituency if it bites into applied tariff.
Some emerging countries – notably South Africa – will have to take some cuts in some of their applied rates, although they will benefit from flexibilities so that it doesn't cut the rates too much, which the U.S., the EU and Japan will not have.
A year ago it was being suggested that a deal needed to be done by last year for President [George W.] Bush to get it through the U.S. Congress. Now people are saying it needs to be done this year, while he's still in office. Is the door ever going to close?
The Bush administration has made very clear that they want to conclude the Doha round in 2008, before the new president takes office. The U.S. administration does not need authority to negotiate. What is needed in the U.S. system, as in any in other democratic system, is that Parliament accepts the final deal. In the case of the U.S. it implies that Congress has to waive its right of amendment because you vote on a trade treaty by 'Yes' or 'No'. You can't start saying, "Oh yes, there are things that I like and I'll take those, and there are things that I don't like and I won't take those." But we are not there yet. We first need a deal on the table and the prospect of a deal to be there for this debate to restart.
One might say that actually you keep moving the goalposts. Are you moving the goalposts, or are deadlines being set an attempt to force people to take talks seriously and to push for settlement?
Deadlines are a symbolic way of making the game simple. The problem is that negotiations do not work with deadlines; chemical reactions do not work with deadlines, they work with accumulation, they work with what's on the table, they are a process, which involves assessing every day where exactly this process stands.
What's for sure is that if you look at what's on the table, there is much more than last year. Any negotiator will agree with that. Where they will disagree is how much remains to be done, depending on the negotiator and the topic. The notion of how far we are… is something which is inevitably tactically spun by each negotiator, depending on the cards he has in hand. So it's difficult to assess.
If we can get agreement on agriculture and industrial goods trade in the coming weeks we would have six to eight months to do the technical work on scheduling these agreements while working simultaneously on the other areas of importance.
So what I can say as a neutral party is that, yes we are nearing the end game. Now whether the end game is success or failure, I don't know. I think it's do-able and I think many countries want this to happen and I think the world economic outlook is propitious to that now. But it's like chemistry – you have to have the right ingredients, the right temperature and pressure. [If you do] it usually works. It doesn't always work.
Can you allow the Round to fail? Can you ever finally close the door?
I am not the negotiator. I'm not the one who makes proposals. I am a facilitator, maybe a midwife. The negotiators [for each country] have to take responsibility because at the end of the day they are the ones accountable to their domestic political systems. I am not the one who will go to the Indian Parliament or the EU Council of Ministers or to the U.S. Congress saying, "Please vote for that deal because it's a good deal." The ministers will do that, they are accountable, they take the decisions.
Where does your 'Aid for Trade' initiative stand at the moment?
It's working well… We've already collected quite a bit of money for organizations like UNIDO (the United Nations Industrial Development Corporation), for instance, for industrial development. We adopted last week in the WTO a road map for this year, which basically is putting more focus on country experiences.
It will take a bit of time before we (a) mobilize a few more billion dollars and (b) make sure that recipient countries have the right and stable set of priorities, the problem being that if they do not set their own priorities, then donors have a tendency to promote their priorities. Since building capacity for trade is extremely dependent on local conditions – problems with energy, with ports or sanitary and phytosanitary issues [which ensure food is safe to eat]… the right order of priorities depends on local conditions. We have been working hard – and I must say, well – with regional development banks. In Africa, the African Development Bank has a very clear aid-for-trade strategy and this is partly the result of what we've been doing around the table.
How do the regional Economic Partnership Agreements (EPAs), over which there is currently so much controversy, relate to Doha? Would the potential for conflict be reduced if Doha was concluded?
International trade is regulated by different sources. WTO does the multilateral part, not the bilateral part. If South Africa decides to have a free trade agreement with India or the EU, it's not for the WTO. But there is a simple medical check that the conditions laid down in multilateral rules for bilateral deals – which is that they are really seriously trade-opening – need to be met. So EPAs are beyond the WTO remit.
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Then you have the systemic issue of what the right cohabitation is between bilateral trade agreements and multilateral trade. On this there are various sides of the coin. Bilateral agreements are sometimes good because they acclimatize an economy to being more open than it is multilaterally. But it is sometimes is a big problem because you create a preference between two countries… and then in order to keep this preference, people will resist WTO tariff reductions, which is very bad for the multilateral trading system because it creates what [economist Jagdish] Bhagwati calls a spaghetti bowl of preferences… So it's a mixed bag.
I think that the way ahead is probably to reinforce the multilateral discipline by which bilateral deals have to abide.
If you were an African trade minister, what would you be doing now?
The rules of the WTO on farming have not been that development-friendly because they were drawn up at a time when the weight of developing countries around the table was not that big… Those [who subsidized their agriculture] had the upper hand for a long time in the international system. Agriculture has taken such a prominent position [in negotiations] because of the politics of the international system.
I would be pushing for a WTO deal that ensures that, for instance, given the rise in food prices… my comparative advantage in agriculture can be used to develop my country. On top of that… you need the oil of world trade to make sure that supply adjusts to the changes in demand that will increase prices. If I'm an African country I would do that.
In Lesotho I visited a very interesting aid-for-trade operation which grows mushrooms, with extremely simple technology and which is very labour-intensive, doesn't depend on water and is nutritionally extremely rich. That's the sort of product in which a country like Lesotho has an enormous comparative advantage, for which there is a huge demand, notably in India and in China.
I know that in the short term, food price increases do hurt a number of net food-importing developing countries. But if we want this problem to be addressed the only solution is to make sure that supply reacts to demand – through making available more land, better technology, more training, which will all improve productivity in agriculture. That's something which I think for Africa is now very important.
