Issues Responsible for Failure of Doha Talks and Possible Solutions.

Title: Issues responsible for failure of Doha talks and possible solutions. Name: Course: Sunderland ID: EThames Students ID: Intake: Introduction: Current Doha round has been one of the most eventful round but its irony that members couldn’t reach to condenses. This research paper concentrates on reasons that caused friction among the nations and possible solutions that can be used to resolve these issues or reasons. Agricultural issues and industrial goods market issues, talks has been suspended without any further notice of next round. At the end all the hard work after years of negotiation wasn’t successful ad differences among the participating nations proved insurmountable. Pascal Lamy, the Director General of the WTO, tried really hard for the success of these talks but all the sides didn’t show the flexibility that was required for the success of these talks. Failure of Doha round talks also highlight the lack of global leadership at least in some quarters, and this fact is pretty difficult to perceive and there are various reasons for that. Only bright thing emerged from this summit is the talk only need one final push as finishing line is insight. Lot has been already achieved but critical issues need consensus. Success to these talks can bring much needed global stimulus for global economy of hundreds of billions of dollars annually. Both developed and developing countries can gain something out of it, in fact it is a great opportunity for developed nations to address complaints of developing nations where they feel that economic linearization is highly tilted in favor of developed nations. But failure of these talks can bring some serious consequences; it will seriously damage the reputation of WTO and more importantly multilateralism for which everyone is working hard for will be damaged permanently. Most of the representatives were worried about what could be perceived from their stance i. e. compromising on their stance might appear as compromising on national interest. (Deardorff, 2008) Reasons for failure of Doha round: Failure of Doha round talks have put temporary pause on further negotiations, this is not the first time that talks has been failed and further discussion has been suspended. This has happened before also ministerial talks in Seattle in 1997 and in Cancun in 2003 also have met the dead end though there were different reasons and different out come for each of the failure. Exception in case of Doha round is for the first time talks has been suspended officially. Official announcement of suspension of talks came after 14 hour long last meeting for overcoming farm subsidies and tariff cut of G6 members yielded no result. Members of G6 group came together to come to consensus on support for domestic farms, agricultural market access and non agricultural market access were the core points of the discussion. Agricultural issues and Outcome of G6 meeting: Pascal Lamy, the Director General of the WTO called this meeting as a last attempt for consensus. This meeting had ministers from India, Japan, Australia, Brazil, unites states and 25 members from European Union. Main aim of this meeting was to reduce or remove hurdles in the way of free trade in the agricultural sector and goods manufacturing. There were many other factors that were needed to be addressed but entire discussion revolved round these issues. Each side remained firm on it stance and more emphasis was put on precondition before further negations. (Bhagwati & Sutherland, 2011) It was necessary for all the participating nations to meet the deadlines and to achieve that it was necessary to agree on figures and formulae for the tariff cut and subsidy cut in context of industrial goods and agriculture modalities but talk couldn’t move forward in positive direction because irreconcilable differences between participating ministers representing their nations. Failure in the talks was more unfortunate on the background of fresh hopes which were raised in G8 meeting of worlds most powerful and industry oriented nations. Then president of United States and European commission president assured flexibility. Even heads of developing countries like India and Brazil participating in G8 meeting showed their interest in pushing for the breakthrough. (Bhagwati & Sutherland, 2011) G6 minister headed for Geneva after St. Petersburg meeting where they were prepared to transform their promises of flexibility into concrete deals. Pascal Lamy, the Director General of the WTO convinced these nations to discuss these issues. Lamy was pushing for USA to reduce domestic farm support and European Union for increasing access for domestic agricultural market and at the same time developing nations like India and Brazil will be convince for reducing their industrial tariffs. Problem here was each group was expecting other group to give in first. In these triangle of issues main hurdle in the talks were issues in agricultural sector which has been mentioned above. The third issue of convincing of India and Brazil for reducing their industrial tariffs didn’t even make it to the discussion because there wasn’t any result from the discussion of first two issues. In the negotiations USA and European Union were expected to cut the subsidy they were providing to domestic farms at the same time developed nations were expecting India and Brazil, to open their domestic market for agriculture and agricultural goods. Negotiations had the first jolt when far from removing subsidy to agricultural sector USA proposed to increase it. With this development Lamy realized that there wont be any consensus and gap was widening and thus before situation deteriorates any further he suspended the talks. He didn’t give any indications when next round of negotiation will begin he hinted that instead of deadlocking on same issues again participating countries should carry out their respective work internally regarding these issues and then participate in the discussion. (Chimni, Chantal, Thomas & Trachtman, 2009) Major reasons From above information it is pretty clear that agricultural issues are the main reason for breaking down of talk. Members had heated discussion on this issue and USA offered to cut farm subsidies which proved trade distorting by 53% that is USA proposed to slash the subsidy amount from $48. 2 billion to $22. 5 billion but issue here was this amount of $22. 5 billion was much higher than their last year subsidy, which was $19. 7 billion thus by proposing slash of 53% they were indirectly trying to increase the subsidy on their agricultural sector where all the nations were gathered together to discuss subsidy cut on the agricultural sector by developed nations. This offer from United States didn’t satisfy any of the G6 members as well as any of the diplomatic delegations from other nations. (Bhagwati & Sutherland, 2011) To add to it in the exchange United States expected tariff cut from European nations up to 66% where European Union offered 51% increasing from original proposed position of 39% this offer of 51% was quite close to demand of developing nations where they expected tariff cut from European nations up to 51%. But on the contrary USA stated that European nations only were willing for 48% of tariff cut and they were expecting at least of 54%. Both India and Brazil appreciated this movement from European Nations their representatives also suggested that it was approach from united status which blocked the progress of talk and that resulted in suspension of the talks. Other reasons behind failure of talks: Some issues other than agricultural issues also played their part in the failure of the talks in Doha round. The president’s administration in USA was under severe pressure from congress and it had to give in because of pressure of protecting domestic interests. Delegates from Special interest groups such as National Association of Manufacturers and American Farm Bureau from United States were present at the summit they monitored as well as instructed representatives of United States. Pressure applied by these groups reduced space of negotiation for United States delegation. There was deep rooted North South tension it combined with many other adverse factors to undermine success of the talks. (Chimni, Chantal, Thomas & Trachtman, 2009) Many scholars and commentator stated that current situation in major negotiating parties like United States, India and European Union wasn’t quite in the favor of trade concessions; political leadership everywhere was not willing to concede much. Key elections were due in United Status and it was expected that administration won’t go for any risky compromise on their position which might appear as compromise on national interest. To add fuel to the fire economic crisis emerged from Wall Street had huge repercussions and it got converted in global slow down. (Deardorff, 2008) There were oppositions for European Union offer of 51% tariff cut from European nations from European Union according to French president Nicolas Sarcozy 51% tariff cut would result in destruction of European agriculture and would reduce more than 100000 jobs. Absence of fast track authority (trade promotion authority) also didn’t go to well with other delegations. Without passing of trade promotion authority it wouldn’t have been possible to get passing of congress even if participating nations would have managed to reach some kind of consensus. After effects of talk failure: India, Brazil, Japan, Australia, USA and European were involved in 14 hours long meeting to make consensus but unfortunately the meeting ended without any results on lowering tariff and slashing farm subsidies. This failure in talks gave birth to inhibited blame game in the participating countries. EU Trade Commissioner Peter Mandelson said that â€Å"What they’re saying is that for every dollar that they strip out of their trade-distorting farm subsidies, they want to be given a dollar’s worth of market access in developing country markets. That is not acceptable to developing countries and it’s a principle that I, on Europe’s behalf, certainly couldn’t sign up to either. This is not my definition of leadership† In reply to this statement from EU Trade Commissioner, Susan Schwab from USTR alleged that statement by the EU alleging that the US failed to show flexibility and attempting to divert the blame for the stalemate is false and misleading. The countries that have tended to be finger-pointing at this point are the ones that are reluctant to act in terms of market access. We are deeply disappointed that the EU failed to exhibit similar restraint and hope this will not jeopardize the few chances we have left to save the Doha round. † EU and US kept pointing fingers at each other after suspension of Doha round each party blaming other party for failure of Doha round. As usual India also blamed developed nations for not removing subsidies those were proved a trade distorting. India’s industry and commerce minister Kamal Nath said that â€Å"It is best we tell the world that the talks have failed, and the negotiating process is suspended. Now, there is no roadmap for the future,† according to him United State’s approach of refusing to cut subsidy regarding agricultural sector has been solely responsible for failure of talks at Doha summit. European Union also openly blamed Unites status for suspension of negotiation. EU Trade Commissioner Peter Mandelson stated that it was disappointing to see lack of flexibility in USA’s approach after promising the same in G8 summit. To take the blame game further US officials blamed other trading partners for failure of process to bridge the differences on other important issues such as import duties on tariff related to agricultural sector. US officials further alleged that they were prepared to remove subsidies related to agricultural sector those were proved a trade distorting but they could not do so because India and European Union did not present any substantial proposal on global agricultural market access. Pascal Lamy, the Director General of the WTO preferred to stay away from the blame game; he was more intended on how to resume talks. Lamy urged all the participating nations to avoid megaphone diplomacy and do some introspection in order to avoid such situation in the future. Lamy also requested all participating nations to think positively to arrive at any acceptable solution. Chances of resolving the differences: Doha round has been disappointing and talks has been moved to deep freezing state since then. There is very little positivity around these talks very few people are still in belief of revival, though Brazil and United States have promised to work hard in positive direction for revival f the talks chances are looking really thin about it. Most experts believed that there are little hopes for revival of talks ahead of Doha round. Breakdown at that juncture meant that there is very little hope for revival of talk before end of presidency tenure of then president of United States. As mentioned above, fast track authority or trade promotion authority thinks that congress must show green or red signal otherwise opponent might take advantage of such situation. Political climate in United States during that time was not very conducive for any compromise because of mid term elections current trade deficit in US economy also played negative role extension of fast track authority and even if it would have happened, in case of opposition win in the election would lead to weakening of fast track authority. Hoekman, 2003) It is believed that France who is strongly opposing for 51% tariff cut in agricultural sector has forced Lamy to suspend the talks indefinitely. In fact many say that France made it sure that talks get suspended that if discussion is highly concentrated on agricultural issues. Wall street journal quotes French agricultural minister saying that â€Å"I would prefer the negotiations fail rather than raise questions about agriculture†. Because of t his situation promises by USA and Brazil of reviving talks appear unrealistic. Successful round and preconditions: Political capitals should be mobilized in order to have any hope for success in breaking the deadlock this has to be done domestically as well as internationally. This will require monumental leadership globally. With new president United State certainly has position to do this. Morally also United State has to take responsibility because they are the most influential and powerful nation in the world to add to it they are responsible for current economic crisis. Other major trading nations like Canada, Japan and European nations also should join United States in these initiatives of bold economic reforms and liberalization. Meaning of economic liberalization itself is to save public money and removing of wasteful economic programs. It is true that current financial status of United Status might complicate things for that country still United States can afford to act little proactively. Road ahead: There is growing concern about global economic recession and it’s after effects and because of mounting fear world leaders are requesting businesses to consult their respective governments, to think successful solution regarding failure of talks in Doha because if that doesn’t happen there is constant risk of developing other barriers in world trade. Peter Mandelson feels that it better to act quickly and it consensus are not reached immediately, chances are pretty slim that it will be done in future. Trade talks were working on stop start basis from last six years but after Doha talks are on halt. A constructive seminar was held at Davos where subject was â€Å"Threats to the Global Trading System† some progress was registered on some technical issues in this summit but no party still is close enough for any sort of formal agreement because of high degree of skepticism. Developing countries are concerned about interests of their farmers; they feel that lowering the tariff might expose farmers especially poor farmers to global competition for which they might not be prepared for, and this situation will have its adverse effects on growth and will result in slowdown of entire economy. Minister of Commerce and Industry of India Kamal Nath insisted that India, Africa and Asia pacific are the most productive markets for developed nations and if they want to take advantage of these markets it has to be made sure that India, Africa and Asia pacific have healthy economy. Deardorff, 2008) At the same time financial scholars feel that cost of failure of Doha talks is already taking its toll on participating nations and if solution is not obtained in near future most of the countries might opt for protectionism and this will be bad news for free trade as it will be the roll back what ever progress that has bee made in the direction of free global trade. Pascal Lamy, the Director General of the WTO has mentioned his concern may time according to him effects of global economic slow down might be having their exaggerated side effects on global economy due to Doha failure. Minister of foreign affairs in Brazil Celso Amorim is also worried about current situation he feels that though all the negotiating parties are adamant on their position they all have to face the consequences in near future for their stance. (Das, 2009) Because of increasing delay companies are loosing their faith in negotiators and voters though they have lot more o gain from what ever negotiations carried out at Doha though lot more still left to be achieved and because of this companies and powerful and influential corporate houses all over the world should consider the fact that stalling of talks will result in loss of opportunities for them thus as mentioned above they should use their might to convince their respective government and if they succeed to do so, it will be a terrific achievement. Conclusion: The longest trade round ever was held in Doha. It could have been termed as constitutional moment for trading systems across the world. Structure of trade between the member nations is largely dependent on future of Doha talks how it ends and what shape does it take. Having said this, this round will exist without any positive response or developmental challenges. For Doha to succeed and for better future for WTO in the context of its credibility it is important that focus of the talks shifts from mere commercial bargain that is controlled by major negotiating parties to a process of public interests who’s success will be beneficial for all. Commercial bargains of the member nations of WTO have been primarily responsible for jeopardizing of the talks. Although some members think for alternative way for controversial points they won’t be as productive as successful Doha round nor do they will be able to survey larger public good. For dispassionate involvement in the negotiations highlights lack of leadership from USA. It is responsibility of trading partners of United States be its developing or developed nation to prevent that nation from becoming a stumbling block in the talks. At the end of the day it must be remembered that world in which every one has enough food to eat and good enough work to do; only such world can derive peace and security for global citizens which can be provided by successful trade. References: Deardorff, A. , 2008 â€Å"International Provision of Trade Services, Trade and Fragmentation. † Review of International Economics, Vol 9 No. 2. pp. 233-48. The Economist, 2003 â€Å"The WTO Under Fire. † September 18 Available on the Internet at http://www. economist. com. /PrinterFriendly. cfm? Story_ID=2071855 Hoekman, B. 2003. Cancun: Crisis or Catharsis†. Paper presented at the joint roundtable of the Brookings Institution and George Washington University held on 20 September, in Washington DC. Pr Jagdish Bhagwati and Peter Sutherland KCMG, (January 2011) THE DOHA ROUND: SETTING A DEADLINE, DEFINING A FINAL DEAL Interim report B. S. Chimni, Chantal Thomas & Joel P. Trachtman eds. , (2009 ) Some Reflections on the Idea of Free Trade and Doha Round Trade Negotiations, in DEVELOPING COUNTRIES IN THE WTO LEGAL SYSTEM 21, at 27–28 A key year ahead for Doha trade talks, available at: http://www. weforum. rg/node/65945 Accessed on: 9-7-11 DAS, supra note 151, at 105. There is also a collective benefit from trade liberalization: developing countries should open their markets among one another to fully achieve â€Å"export-market diversification. † Id. at 106. Dilip K. Das. 2009a. ,Financial Globalization and the Emerging Market Economies. Routledge, London and New York. 2009. Lamy, P. , 2003 â€Å"Can the Doha Development Agenda Live up to its Name? † Available on the Internet at http://europa. eu. int/comm/commissioners/lamy/speeches_articles/spla188_en. htm September 10, 2008