The stakes are staggering for the World Trade Organization’s ministerial meeting in Hong Kong this month. From December 13 to 18, trade minis- ters from the institution’s 148 members will effectively determine the fate of the crucial Doha Round of negotia- tions, which has struggled forward since its launch in 2001.
While negotiations during the Doha Round have been extremely complex and technical, the main story has been the unprecedented assertiveness, coordination and power of developing countries and their demands for agriculture liberalization on the part of the richer members. Other issues have certainly shared the stage, but agriculture has remained the key issue of the negotiations. Essentially, the United States, European Union and Japan must come to an agreement on reducing market access barriers and ”œdisarm- ing” themselves of subsidy regimes that make their pro- ducers artificially competitive in both their own markets and abroad. This must then be matched by the powerful developing countries, such as India, Brazil, South Africa and others with their own agriculture concessions and an unlocking of offers by all parties in other areas like non-agricultural market access (NAMA), services, rules, improvement of border procedures for trade (called ”œtrade facilita- tion”) and the details of ”œspecial and differential treatment” for certain developing countries. Since the negotiations are a single undertaking, with everything agreed upon in one package, substantial movement must occur in agriculture for all of the other negotiating areas to reach ambitious agreements as well.
Like earlier rounds of WTO negotiations (known as the General Agreement on Tariffs and Trade until 1994), the Doha negotiations have seen their share of ups and downs. Members failed to reach agreement on the launch of a ”œMillennium Round” at the Seattle ministerial meeting in 1999 amid violent protests outside the meeting, a sign of things to come from the then-emerging ”œanti-globalization” movement. Negotiations eventually started in late 2001 at the next ministerial in Doha, Qatar, well out of the reach of the protest groups. The launch of the Doha Development Agenda, more widely referred to as the Doha Round, came in response to the new assertiveness of the developing coun- tries. However, despite the seeming progress toward accommodating the developing coun- try demands, many difficult issues were papered over at Doha and left to be decided at the next ministerial, in CancuÌn, Mexico, in September 2003. There, discussions again collapsed along a general rich-poor divide and with crucial divisions between the European Union and the United States. By July 2004, negotiators at the WTO headquarters in Geneva were able to slim down the agenda with the removal of three of the controversial ”œSingapore issues” (investment, government procurement and competi- tion policy) and accommodate the demands of developing country blocs.
Negotiations since Geneva have hobbled forward at a relatively slow pace, and time is running out. The ”œtrade promotion authority” (often referred to as ”œfast track”) of President Bush expires in early 2007. This authority allows a president to sign trade agreements and then pres- ent them to congress for ratification by a strict yes-or-no vote, without amend- ment. Any agreement submitted after the expiry date will be subjected to amendments that could kill the deal, and other countries will be reluctant to make serious offers because of skepti- cism that the US can keep its end of the bargain. And there is some doubt as to whether an increasingly protec- tionist Congress will renew the TPA in 2007, especially if Bush’s second term continues to stumble. So, an agree- ment must be reached by late in 2006 to fit into the US timetable. That leaves alotofworktodoin2006,andthe level of progress made at the Hong Kong ministerial will clarify the odds of whether a serious agreement can be reached, or if one can be reached at all. Indeed, Pascal Lamy, the WTO’s direc- tor-general, has stated that an agreement in Hong Kong must encompass two-thirds of the entire Doha Round package for the negotiations to con- clude in 2006 before ”œthe window of opportunity closes.”
Canada has advocated an ambi- tious agreement in pretty much every area of the negotiations, includ- ing agriculture (while defending state marketing mechanisms like the Canadian Wheat Board). In agricul- ture, Canadian producers would by- and-large stand to make major gains in other markets (for Canada’s own agriculture sensitivities, see the article by Dymond and Gifford in this issue). Along with the rest of its foreign poli- cy, Canada seeks a rules-based multi- lateral trading system. Canada even refers to the WTO as the cornerstone of its trade policy, despite the fact that a large majority of its trade is gov- erned by NAFTA. Nonetheless, the WTO is the key to the longstanding policy goal of increasing Canada’s commerce with most non-NAFTA countries, and it is also used as a tool for managing its trade relations with the United States. Canada makes use of the WTO dispute settlement system as a forum for bilateral disputes with the US, and also when it teams up with other countries to make joint challenges. On a wider level, Canada seeks to keep the United States locked into the larger multilateral trading system and a general pro-trade mind- set to help maintain the smaller, bilat- eral relationship.
As for the prospects of progress on agriculture and therefore the rest of the Doha agenda in Hong Kong, the signs are mixed. The United States faces some domestic opposition to the reform of its agriculture protections, but could possibly overcome that opposition if equally strong conces- sions are made by the EU, Japan and others. On October 10, US Trade Representative Rob Portman made an offer on reductions of allowable farm subsidies and tariffs that most observers consider a credible effort to get negotiations moving. Europe and Japan have both responded negatively so far, with counter-offers by the EU scoffed at by other major negotiators for demanding huge concessions on other issues in return for little move- ment on agriculture. But the next month could include seri- ous negotiations at both the domestic and interna- tional levels of the major players that would move parties closer to an agree- ment in Hong Kong.
Japan’s September election results bode well for the possibility of an agreement on agriculture. Prime Minister Junichiro Koizumi received a strong mandate for liberal reforms, defeating anti-reform opposition with- in his Liberal Democratic Party, shift- ing political power from rural to urban areas and weakening the farm lobby. Earlier this month, his newly appoint- ed farm minister indicated Japan is open to compromise for the sake of progress in Hong Kong. Shoichi Nakagawa said, ”œA consensus is grow- ing day by day among WTO members that the ministerial meeting in Hong Kong in December should not fail.”
Within the European Union, prospects for agricultural reform do not look as bright. While many mem- bers support reform, key members such as the increasingly protectionist France and politically impotent Germany have a good chance of pre- venting Peter Mandelson, the EU trade commissioner, from making accept- able offers to the United States. This, in turn, would fail to accommodate developing country demands and halt other areas of negotiation. However, while declaring opposition to agricul- ture subsidy reductions, French politi- cal leaders, who face a famously activist domestic farm lobby, also sup- port a successful Doha Round agree- ment and fear the further erosion of their influence in the EU after this year’s constitution-killing ”œNo” vote.
What are the implications for the global trading system if a strong agreement proves elusive? For the WTO, a negotiation collapse or watered down agreement in Hong Kong and the larger Doha Round would likely trigger the proclama- tion by free trade advocates of the institution’s slide towards irrele- vance. Despite the rhetoric, the WTO would lumber forward with small negotiating mandates, and its exist- ing agreements would continue to act as a minimum floor of rules to govern the trade relationships of countries lacking stronger bilateral agreements (most trade relationships fall into this category). The biggest losers of a Doha Round failure would be farmers in the world’s developing countries. While it would be no sil- ver bullet for solving the world’s poverty problems, it is not an exag- geration to say that a deal would ”œsave a lot of lives in poor coun- tries,” in the words of Meghnad Desai, a former professor at the London School of Economics now serving in Britain’s House of Lords.
Recent history has shown that when WTO negotiations stumble or fail to meet the expectations of mem- bers, one result is a flurry of regional and bilateral trade agreements, referred to generally as preferential trade agreements (PTAs) because of their exclusive nature. A World Bank study this year reported that the num- ber of comprehensive trade agree- ments worldwide has grown from 50 in 1990 to almost 230 today, with another 60 currently under negotia- tion. Others put the numbers higher, depending on how agreements are classified. Such agreements have two effects. First, they allow keen coun- tries to liberalize trade further and faster with willing partners than is possible at the WTO. Second, they boost WTO negotiations by pressur- ing countries fearful of being exclud- ed from preferential arrangements that cause disadvantages to their own exporters. The United States used this tactic with the European Union dur- ing the Uruguay Round in the early 1990s by initiating negotiations for NAFTA while discussing ambitious free trade agreement plans in Asia- Pacific Economic Cooperation (APEC) meetings. Though the APEC free trade plans crumbled, the threat of an accelerated shift in the world trading system to the Pacific, with Europe excluded, was a formidable threat, and prompted Europe to make the moves necessary to complete the Uruguay round in 1994.
Canada has PTAs in place with several countries, including the Unit- ed States and Mexico under NAFTA; Chile, Costa Rica; and Israel. It is cur- rently negotiating deals with Singa- pore, South Korea, the ”œCentral American Four” (Guatemala, Nicaragua, Honduras and El Salvador), and the European Free Trade Associa- tion (Switzerland, Norway, Iceland and Liechtenstein), and is in the con- sultation stage with several others. Since Canada has been an advocate of a strong agreement in the Doha Round, it is expected to increase its efforts to conclude its ongoing PTA negotiations and find new partners if WTO negotiations are not successful. With the continued paralysis of negotiations for a Free Trade Area of the Americas, Canada may start negotiations with the Brazil-led Mercosur group (which also includes Argentina, Uruguay and Paraguay). Also, Canada has long sought negotiations for a free trade agreement with the European Union, with lukewarm response. This may become another focus for Canadian trade policy if the Doha Round fails.
Even ambitious free trade agree- ments and commercial growth with large economies like the EU, South Korea and Brazil would barely put a dent in the dominance of the United States as Canada’s largest trading part- ner. Given that, at the end of 2004, 85 percent of Canada’s goods exports went to the United States (more than five times the level of all other coun- tries combined), the United States remains squarely in the sights of Canadian trade policy. Canada will likely pursue diplomatic steps similar to the ”œnew partnership” declaration of President Bush and Prime Minister Martin in December 2004, and the Security and Prosperity Partnership of North America, which includes Mexico, unveiled in March of this year. Specific initiatives on regulatory stan- dards, rules-of-origin changes to NAFTA and the strengthening of the Smart Border Action Plan will likely continue, regardless of WTO results.
But before anything more substan- tial can be negotiated with the US at the highest political levels, Canada must find a way past the softwood lumber ordeal. The current strategy of Martin and his ministers has been strong language (called ”œapocalyptic” by Secretary of State Condoleezza Rice during her late October visit to Ottawa). Given the political vulnera- bility associated with looking weak in a dispute with the US, and the fact that all three opposition parties, most Canadian editorial pages and public opinion squarely support this tough talk, it appears that Martin is stuck with the strategy, at least until after the coming election. This despite its futility as a tactic against the powerful US lumber lobby (including its work- ers) and its bi-partisan supporters among members of Congress and the US public. If Martin or the next Canadian prime min- ister can manage to stuff the softwood lumber dis- pute back into its cage and separate it from the rest of NAFTA and the Canada-US trade relationship, more high-level initiatives aimed at strengthening Canada’s access to the US market can be expected.
Notwithstanding the magnitude of the US relationship, the Canadian government still places high impor- tance on the WTO and desires a strong outcome in the Doha Round. Beyond doing what they can at the negotiating table before, during and after next month’s Hong Kong ministerial meet- ing, Canadian officials can only sit back and watch to see if the right polit- ical gambles are taken, backs stabbed, and deals struck. Not so much among WTO members, but among the players who can make or break a deal: the European Union, Japan and the United States.