David Jessop, Contributor
THERE IS a real possibility that the World Trade Organisation (WTO) ministerial meeting in Hong Kong this December will fail. The meeting was intended to determine how global trade could be further liberalised in a manner that is of benefit to developing countries.
After months of exchanges in Geneva and in many other locations around the world, the various groupings in the WTO are still unable to agree on how to close the gap between their different positions. So much so that the organisations' director general, Pascal Lamy, has indicated, in part to try to encourage movement, that he may ask members to delay holding the meeting.
SIGNIFICANT PROGRESS
A significant amount of progress has been made on technical issues. However, agreement remains elusive on a basis for the reduction of tariffs and subsidies on agriculture. This is considered to be the precursor to enabling progress in other areas. To make matters worse, one key entity, the European Union, now has internal differences as to what its position should be on this key issue.
Speaking about this on October 24 to European development ministers, the European Trade Commissioner, Peter Mandelson, told EU development ministers bluntly: "If we want the U.S. to reform its own domestic subsidy regime and if we want the Brazilians to cut industrial tariffs and open up on services, we have to move on agricultural tariffs, there's no other way." Yet this is not how some European governments see it.
In the past few weeks, the views of European member states have become polarised around not just the level of tariff cuts in agriculture but about the whole philosophy of subsidies and tariff protection for Europe's uncompetitive farmers. As a consequence it seems unlikely that EU Member states will coalesce around any new position proposed by the European Commission.
The EU had initially offered a 24.5 per cent cut in its farm tariffs but, as this is being written, is now engaged in difficult inter-European discussions to try to agree a revised offer. This comes in response to U.S. offers to reduce its agricultural subsidies.
Some reports put the new European tariff reduction offer on agriculture at around 40 per cent. If this is the case, it is a figure, which falls significantly short of the 54 per cent that the U.S. says is required for a deal that it or many other members of the WTO would find acceptable. At the same time, it is clear that any revised European offer will be non-negotiable and subject to progress being made in other parts of the round relating to services and trade in non- agricultural goods.
PROPOSAL FOR REDUCTION
For its part, the African Caribbean and Pacific (ACP) group of 79 nations has tabled its own proposal. On October 21, it informed the Committee on Agriculture that its formula would classify tariffs into four tiers for reduction. There would be different tiers for developed and developing countries, and in the case of developing countries, tariff cuts ranging from 15 to 30 per cent would be offered. They also noted that many developing countries preferred a cautious approach to the reduction of agricultural tariffs.
For its part, the Caribbean Regional Negotiating Machinery (CRNM) believes that the outlook for the present WTO round is not promising and has expressed serious doubts about its development content. It has noted that the failure to 'front-load' development issues is distressing for small developing countries like the Caribbean. As the CRNM's Director General, Richard Bernal, notes, "Confidence in global trade talks and their commitment to advancing development issues for poor countries has not been augmented by action,"
SIDELINED
From a Caribbean perspective, the attempt to achieve balance among the principal players is also resulting in smaller developing country members' interests such as special and differential treatment, being sidelined.
Jamaica's Foreign Affairs and Foreign Trade Minister, K.D. Knight, recently called for the interests of small, vulnerable economies to be addressed in WTO talks, warning that otherwise, the Caribbean could not be part of any consensus. "We are not going to block the game, but we are not going to Hong Kong to be losers at the end of the game," he said.
More bluntly, the CRNM has said that the global trade talks risk a breakdown in the negotiating process if there is not a quantum shift in the way in which the WTO's now it addresses the concerns of its small, weak and vulnerable members.
"The Caribbean must be better off when the round comes to an end, as compared to when it was launched. Development issues cannot be treated as an annex, an afterthought, in what is supposed to be a development round," the CRNM's director general, Richard Bernal, has warned.
What all of this means is that the possibility of a balanced package at the ministerial meeting in Hong Kong in December is not just elusive but may be unachievable under WTO rules that require consensus among all of its members.
GREAT RECRIMINATIONS
If this WTO ministerial fails to make progress, the recriminations will be great. But the probability is that the world's most developed countries as well as advanced economies such as Brazil and India will then switch their emphasis to the creation of regional free-trade agreements in the hope that eventually, such arrangements can be brought together into a more coherent whole.
More practically, this would mean that Europe would rapidly seek to bring to a conclusion idling negotiations such as that with Mercosur, while Brazil and probably the U.S. would refocus on the Free Trade Area of the Americas. For its part, the EU would have to prove that economic partnership agreements such as those being negotiated with the Caribbean were development oriented. It might also allow the Caribbean and others space to try to move forward an agenda that sought to create a new grouping of the world's smallest and most vulnerable nations able to compliment or maybe even eventually succeed the ACP on the world stage.
In the Caribbean, views are mixed as to whether a failure in Hong Kong would be a good or a bad thing for the region. Those who want greater equity may be relieved but uncomfortably will also be in the same camp as those who believe the region can continue as it is. Others who hoped that an equitable development-oriented settlement would create the environment in which the region has to act will be disappointed but may have gained some space in which to complete the Caribbean Single Market and Economy.
The world appears to be on the verge of the first real setback for globalisation. Caribbean governments will need to have a clear action plan as to how to deal with the consequences.
David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org.
