DEAL STILL POSSIBLE THIS YEAR?

WTO Agriculture talk to resume

The month following the failure of world trade talks, trade ministers and world leaders have sought to ensure that the significant progress that was made before negotiations fell apart will not be lost in the aftermath of the collapse. Whether - or to what extent - that aim can be realised is far from certain.

For the immediate future, at least, a schedule has been set: senior-level talks (that is, below the ministerial level) on agriculture will resume at WTO headquarters in Geneva the week starting of 14 September. Key to those discussions will no doubt be the Special Safeguard Mechanism (SSM), which was at least the proximate trigger of the failure of the talks.

In the weeks following the collapse, WTO Director-General Pascal Lamy paid visits to both the Indian and US trade ministers - the primary players, along with the head Chinese trade official, in the SSM deadlock. In a speech to industry representatives in India, Lamy reportedly said that he was urging the two sides to "try to understand each other a bit more, at the political level, because this is a political discussion that has to translate into a technical discussion, not the other way around."

The SSM is a tool that would allow developing countries to raise tariffs temporarily when import volumes increase or prices fall suddenly. One of the main sticking points in the July talks was the question of whether, and by how much, developing countries would be allowed to raise tariffs beyond current 'bound' levels in order to protect domestic producers. India and China fought for more flexible terms for the use of the SSM, while the US was firm in its demands for predictable market access for its farm products.

Many involved in the talks expressed surprise that the SSM, a seemingly minor and technical matter, ended up playing such a critical role in the collapse. "It became a huge issue because of the politics on both sides," Lamy said in an interview with Reuters. "I wouldn't say if we solve the SSM, the rest will fall in place. But what I'm certain is if we don't solve this, the rest will not fall into place," he said.

Some trade observers now speculate that the US refused to yield on the SSM in order to avoid a discussion of its cotton subsidies, which the WTO has repeatedly ruled to be in violation of the US' word trade commitments. After the SSM, cotton was the next item on the negotiators' agenda.

"I know there are a lot of conspiracy theories running on this...To be frank, I don't suspect the US broke on the SSM not to have cotton on the table. They know cotton has to be there," Lamy said in an interview with Reuters.

Looking ahead

Whether progress can be made on the SSM and other outstanding issues remains to be seen. On his recent trip to India, Lamy met with trade minister Kamal Nath, who reportedly expressed his support for the resumption of high-level talks in Geneva. But speaking to reporters on the sidelines of a meeting in Singapore a week later, Nath made it clear that he thought that other players should take on more responsibility: the "key to the lock of the [WTO] deadlock is not in our hands. The key is with the developed countries," he said. Nath is expected to meet with EU Trade Commissioner Peter Mandelson on 12 September.

Less than two weeks after his visit to New Dehli, Lamy paid a call on US Trade Representative Susan Schwab, who also expressed her support for continued talks, telling reporters that a world trade deal was "still conceivable" this year. She cautioned, however, that whether an agreement can be reached "depends largely on the seriousness of purpose, commitment, flexibility of the key players, and grandstanding isn't going to do it."

Schwab called for senior officials to re-engage and work to establish a framework for further action at the ministerial level. "Our sense is we need to have a representative group of countries that are ready, willing and able to engage in good faith to try to find an ambitious outcome to this round," she said.

The US position has been somewhat complicated by opposition from its domestic manufacturing lobby, which disagrees with some language in a report on the status of the industrial goods talks put out by committee chair Don Stephenson in mid-August. The National Association of Manufacturers (NAM), the largest industrial trade group in the US, has argued that the report does not go into enough detail on the offers Members put forward on sectoral liberalisation initiatives, provisions that would rapidly cut tariffs to a low level, even zero, on specific sectors, such as bicycle parts or forest products.

In a statement released while Lamy was in Washington, NAM president John Engler made his organisation's demands clear: "balance for American manufacturers is only possible if the big emerging manufacturers of Brazil, China, and India are part of sector-specific agreements that would be aimed at eliminating tariffs in significant industrial sectors. These countries must open their markets."

While the US and Indian ministers did not go so far as to call for ministers to re-engage in negotiations immediately, Brazil and Australia were explicit in their calls for ministers to return to Geneva as soon as possible to try to hammer out the final terms of a deal. "I'm still hopeful that we can still make an effort, but it has to be very fast," Brazilian foreign minister Celso Amorim told reporters on a visit to Australia at the end of August. "Based on past experience, there are two possibilities. We either do it now, in September, or we will have to wait for a long time," he said.

Many people involved in the talks consider the US presidential election in early November to be a final deadline for the agreement of a world trade deal in the near future.

In a speech to the Australian parliament on 26 August, Trade Minister Simon Crean expressed similar optimism on the prospects of deal. "The amount of distance that we covered in July and the relatively short distance left to travel does offer hope that WTO members can get back to the negotiating table soon," Crean said. "With further and sufficient political will brought to the task, we have a real chance to move forward."

Meanwhile, trade officials from the G-33 group of developing countries, which lobbied hard on the SSM during the July talks, sought to construct a potential compromise on the sidelines of a recent meeting of the Association of Southeast Asian Nations (ASEAN) in Singapore.

"We're working hard to come up with a compromise which we think is doable," Indonesian Trade Minister Mari Pangestu told reporters at the meeting. She said she hoped that ministers would return to Geneva to continue discussions in September, stressing the importance of acting quickly. "When you have an economic slowdown as is being predicted in the US as well as Europe and Japan, then this is often the time when you have unilateral protectionism. We certainly would be very concerned about that," she said. (ICTSD)