David Jessop

Should we believe the optimism of the World Trade Organisation (WTO) Director General Pascal Lamy when he suggests that global trade talks in the Doha Round are on their last lap and can be completed by the year's end?

Alternatively, is not a more realistic assessment that the possibility of a deal in the near future has begun to evaporate as dramatic shifts occur in prices and global economic and political relationships?

The answer is important for the Caribbean as it struggles to accept the premise on which the Economic Partnership Agreement (EPA) with Europe is founded: that tariff liberalisation, open markets, competition and integration will create sustainable economic growth within the timelines proposed.

Speaking last week to the WTO's Trade Negotiations Committee in Geneva, Lamy suggested that if difficulties on agriculture and industrial goods can be resolved by March, a deal was possible by the year's end.

This is of course a big 'if' as the talks have been deadlocked over agriculture since 2006. The issue is fundamental to the negotiations.

Oversimplified, emerging nations (Brazil, India, China and others) and less advanced developing nations want to see cuts in the farm subsidies of the kind that the US gives to its farmers and the removal of tariffs on agricultural imports imposed by the EU and other developed nations.

If, so the thinking goes, such concessions were to be made in both areas, emerging economies and developing nations would be more willing to grant industrialised nations improved access for manufactured goods and services.

New texts

Pascal Lamy, director general of the World Trade Organisation, suggests that global trade talks in the Doha Round are on their last lap. - Reuters

As matters stand, revised texts are expected shortly from the chairs of the respective WTO negotiating committees.

This means that during February there will be two texts - one on agricultural market access, another on industrial goods, known in the WTO parlance as NAMA (non-agricultural market access) - and a third at a slightly later date on services.

Once available, these documents will be studied closely in WTO member states with the objective that WTO negotiating groups should then meet to determine whether they can resolve their differences so that a draft text can be put to a WTO ministerial meeting.

Despite this, movement forward is far from certain. The texts that will appear shortly will first have to prove conceptually acceptable if trade-offs are to be made between access on agriculture and goods.

Only then might it be possible for there to be discussions at a ministerial level on the percentage reductions in subsidies and tariffs.

'Mini-ministerial' meeting

What Lamy's remarks reflect is the outcome of a lunch hosted in the margins of the World Economic Forum in Davos, Switzerland, on January 26. There trade ministers from the US, the EU, Brazil, India, and other countries agreed that there should be a 'mini-ministerial' meeting in March or April to strike a framework accord paving the way for concluding the struggling talks by the end of the year.

Despite Lamy's positive outlook, the view of the EC trade commissioner, Peter Mandelson, was more qualified: "We've agreed that if the round is going to be done successfully, it needs to be done this year. It needs to be done on President Bush's watch. But if we're going to do a deal on that time scale, then that points to a necessary breakthrough, which only ministers can do, at Easter or thereabouts."

This seems to reflect a belief among WTO members that there is agreement about the process but uncertainty whether political positions have narrowed enough for deals to be struck. There is also uncertainty about whether the scope of the negotiations is too great and will militate against any balanced final agreement. Other uncertainties continue to be expressed from states such as those in the Caribbean about the extent to which small developing nations will be able to influence the WTO's consensus-based approach that now involves the most important deals being struck in small rooms between the most powerful developed and emerging economies.

Recognising this in his remarks to the Negotiations Committee, Lamy said, "All members need to have an assurance that all their issues are moving forward towards a broad and balanced outcome which fulfils our mandate."

However. achieving such a balance will not be easy.

While the possibility of a recession in the United States and a consequent global economic downturn has led both Brazil and India to make clear that they believe completing the Doha Round would stimulate the global economy, they are also equally clear that any agreement would need to fully accommodate their concerns. These include, in the case of India, finding ways to address the politically sensitive issue of how to shelter small farmers from the full force of international competition, an argument that is unacceptable to a number of WTO members including the US.

Revising trade liberalisation

Moreover, achieving an agreement in the US in an electoral year without fast-track authority would appear to be well nigh impossible. This is not least because the leading candidates in the US presidential race have made clear in the primaries they would look again at the value of trade liberalisation. Strikingly, Mrs Clinton, in a recent interview with the Financial Times, said that she believed that theories underpinning free trade "might no longer hold true in the era of globalisation" and observed that she has called previously for the US to take 'time out' on new trade agreements.

It is also now increasingly far from certain if the value and direction of trade were recalculated to take account of world food and energy prices whether all WTO members actually want a trade deal at this time.

Add to this the possibility of a recession in the US economy and the manner in which the changing global balance of economic power is reorienting global centres of global wealth and ownership, it is no longer as clear who the winners and losers will be.

What, therefore, seems to be emerging is not an agreement this year but a willingness to try to lock in to the texts some of the negotiating gains before waiting to see what will emerge in 2009 or 2010 when the US presidential race is out of the way and a more clear global economic picture emerges.

All of which should give food for thought in the Caribbean as to whether Cariforum is able to take further the process of trade liberalisation before the region is genuinely integrated and has fully assimilated the impact of the EPA.

David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-council.org.