• A Trade Compromise, for Now?

    Saturday 28th January 2006 - 3:00pm - 4:30pm

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  • A Trade Compromise, for Now?



    28.01.2006

    World Economic Forum Annual Meeting 2006

    If the current round of trade negotiations doesn't come together, everyone stands to lose. This was the message delivered by Washington to both developed and developing countries as they grapple with the huge issues open in trade liberalization talks. Panellists generally agreed that there is much work still to do before the 30 April deadline set by trade ministers in Hong Kong to agree on cutting tariffs and subsidies in agriculture and manufactured goods.

    Both Peter Mandelson, Commissioner, Trade, European Commission, Brussels, and Robert Portman, US Trade Representative, agreed that there is a new spirit emerging, following a private meeting on 28 January organized in Davos by the Swiss government. Mandelson urged all players to capture this spirit and maximize the better "mood music". Portman praised this turn and encouraged all countries to work together, but cautioned that if the current round fails, everyone stands to lose.

    Pascal Lamy, Director General, World Trade Organization (WTO), Geneva, compared the negotiating process to aligning a Rubik's cube using 150 pairs of hands. "The reality is that we need to sequence things. Two colours agriculture and industrial tariffs must come together. The major players are here. On agriculture, the EU will have to move on market access and the US will have to move on domestic subsidies. Japan and Switzerland will have to do both," he said.

    Alan Kyerematen, Minister of Trade, Industry and Presidential Special Initiatives of Ghana, warned that increasingly, many countries are becoming disillusioned about whether the multilateral trading system can deliver on its promises. "WTO members have failed to put development at the centre of the negotiations," he said. The Minister called for greater convergence in the EU and US positions and on developing countries to better align their common interests.

    Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries, India; Co Chair of the Annual Meeting 2006, pointed out that trade discussions have indeed been difficult and there is some fear in the global community that the WTO process itself would collapse. "In the past, countries and individual groups as well as national alliances have taken entrenched positions and defended them," he said. "What we need to do now is move off those positions to think about creating global well being."

    Joseph Deiss, Federal Councillor of the Economy of the Swiss Confederation, organizer of the private meeting in Davos among trade ministers and negotiators, said it is important to move forward if we want to conclude negotiations in 2006. However, he noted, "When it comes to substance, the most difficult issues are still before us."

    Agriculture is at the centre of negotiations, but despite what many call a deadlock, significant progress has been made, according to Celso Amorim, Minister of Foreign Relations of Brazil. At the same time, an important gap exists. "We have arrived at a stage that to have a reduction in subsidies there must be advances in market access. This is a gap that requires real political leadership to take the difficult political decisions."

    Portman admitted that as difficult as it is politically, unless the agriculture issue is dealt with, "we will not be able to meet the Doha promise". Mark Vaile, Deputy Prime Minister and Minister for Trade of Australia, pointed out that while there appears to be an extraordinary focus on agriculture, this is because it is so far behind other areas. "Agriculture is a significant development issue. Poor countries need to get their products in to developed countries to make their climb up the development ladder."

    Kamal Nath, Minister of Commerce and Industry of India, reminded panellists that the current round is a development round, not just an agricultural one. Nevertheless, one of the lessons from Hong Kong is that "sensitivities must be respected" when issues such as agricultural tariffs and subsidies threaten the livelihood security of millions of people. "If India is going to be flooded with agricultural products that displace our farmers, my defensive mechanism will be tariffs," he added.

    Mandelson commented that as agriculture is liberalized, the bulk of benefits will go to the developed world, not developing countries: "The reason many developing countries are cautious and nervous about this is because other developing and developed countries are going to wipe the floor with them." He pointed out that today 85% of Africa's agricultural exports end up in Europe because of trade preferences or in the case of Least Developed Countries, no tariffs or quotas whatsoever.

    Mandelson added that he would prefer to see a case made for agricultural reform "on behalf of developing countries by developing countries". Portman noted that the US supports "all of the liberalizing aspects" of the current round and called upon all players to work together: "We need to do this simultaneously," he said. He pointed out that developing country economies braced for open trade have experienced better growth. "Consider the dynamic that 73% of tariffs paid by developing countries are paid to other developing countries," he added. "There is more to do, especially in the core negotiation areas, which is why we cannot fail."

    Shoichi Nakagawa, Minister of Agriculture, Forestry and Fisheries of Japan, said he is "shocked" to discover that coffee comprises 95% of the exports of certain developing countries. "How can these countries profit? How can we raise their added value?" he asked. Supply side assistance from richer nations to such countries benefits both parties as the world deals with poverty, disease and conflict.

    There is just one year to put together what the world trading system will look like over the next 10 years, he said. Lamy stressed that agricultural tariffs will have to be reduced; it is only a question of how much, as compared to the price developing countries will have to pay in other areas. At the end of the day, what is at stake is a multilateral system with rules and dispute settling mechanisms that for developing countries is fairer than any other system. "Developing countries have a say regarding balancing the system in their favour because they represent two thirds of the membership," he concluded.

Speakers

  • Lord Peter Mandelson Lord Peter Mandelson
    Chairman, Global Counsel, United Kingdom

    Studies in philosophy, politics and economics, St Catherine's College, Oxford. 1985-90, Director, Ca...

  • Pascal Lamy Pascal Lamy
    Honorary President, Notre Europe - Jacques Delors Institute, France

    Degrees: HEC School of Management; Institut d'Etudes Politiques (IEP); Ecole Nationale d'Administrat...

  • Rob Portman Rob Portman
    Senator from Ohio (Republican), USA

    Represented South-West Ohio in the US House of Representatives for 12 years. Worked across party lin...

  • Kamal Nath Kamal Nath
    Member of Parliament, Parliament of India, India

    1968, degree in Commerce, St Xavier's College, Calcutta. Formerly: youth worker, Indian National Con...

  • Celso Luiz Nunes Amorim Celso Luiz Nunes Amorim
    Minister of Defence of Brazil

    PhD in Political Sciences, London School of Economics; Diplomatic Studies, Rio Branco Institute; pos...

Introduced by

  • Mukesh D. Ambani Mukesh D. Ambani
    Chairman and Managing Director, Reliance Industries, India

    Bachelor's in Chemical Engineering, Bombay University; MBA, Stanford University, US. Expertise: mana...