COMMENT & ANALYSIS: Stalled in Geneva By Guy de Jonquieres and Frances Williams
Less than eight months after ministers agreed at the World Trade Organisation's meeting in Doha, Qatar, to set aside their differences and launch a global trade liberalisation round, the project is in danger of losing steam.
After a hesitant start, intensive talks at the WTO's Geneva headquarters on detailed groundwork for negotiations have made little progress since late April. The timetable is slipping and on several vital issues planned talks on substance have barely begun.
Differences between WTO members have blocked agreement so far even on an interim date for agreeing a negotiating framework on industrial tariffs. Stalemate also persists on politically contentious European Union demands to place environmental issues on the agenda - a move most other countries view as disguised protectionism. These setbacks and slippages have chilled the warm afterglow created by the success of Doha. Many diplomats say the chances are rapidly receding of meeting the WTO's ambitious deadline of concluding the round by the end of 2004.
The loss of impetus stems partly from waning worries that the September 11 terrorist attacks last year would plunge the global economy and the trade system into crisis. Those concerns, which galvanised decisions in Doha, have subsided as US growth has staged an unexpectedly strong recovery.
Some observers say many governments now view the round as a less urgent priority than a few months ago and seem less ready to make compromises to ensure its success. Meanwhile, few businesses appear inclined to lobby hard for further global liberalisation in national capitals.
But the biggest blow has been recent US decisions to raise sharply tariffs on steel imports and greatly increase agricultural subsidies in its new farm bill. These measures have outraged other WTO members and cast a pall over the talks. "The atmosphere has deteriorated," says a senior European ambassador.
The actions by Washington, which claimed much of the credit for the breakthrough in Doha, have weakened its ability to exercise effective leadership in the WTO and inspired widespread scepticism about its commitment to global liberalisation.
The leadership vacuum could grow bigger still if the steel conflict permanently weakens the close partnership between the US and the EU, which together generated most of the political impetus for the launch of the round. Although the rapid expansion of the WTO's membership to include many more developing countries has limited the big trade powers' ability to set the agenda, little progress can be achieved without their active involvement and support.
Even more serious is the impact of the US farm bill, which has been bitterly criticised by many of the WTO's poorer members. Though the US insists the bill does not breach existing WTO subsidy ceilings, it has undermined the credibility of Washington's stated determination to fight for deep cuts in agricultural support.
Many observers say the US actions have played into the hands of countries that oppose the round, such as India, as well as of many other developing nations that saw agricultural liberalisation as its biggest benefit. "The US is giving the south more reason to say it was taken for a ride in Doha," says a Latin American diplomat.
Washington's posture has also given rich countries such as France and Japan an additional excuse to defend protectionist farm policies. That, along with the disruptive effect on European policymaking of this year's French and German elections, has further clouded prospects for reform of the EU's much vilified Common Agricultural Policy.
Already sceptical poor countries, which dominate WTO membership, are increasingly asking why they should go along with rich countries' demands in the round. They say what is on offer so far falls a long way short of the promise held out by the round's official title, the Doha Development Agenda.
Their doubts have been deepened by rich countries' reluctance to show flexibility over poor ones' concerns about the burden of implementing existing WTO commitments, an issue that is supposed to be settled this year.
These strains are storing up problems for the WTO's crucial ministerial meeting in Cancun, Mexico, in September next year. Some trade diplomats fear it may turn into a rancorous and damaging north-south confrontation.
The meeting's task looks tough enough as it is. Ministers are due to decide whether and how to negotiate new rules on investment, competition and the environment, as the EU wants. But developing countries oppose the proposals and say the Doha agreement gives them a veto, which they may seek to use unless the EU gives ground on agricultural reform.
Also looming over the WTO is the fate of President George W. Bush's race to win the fast-track authority to conclude the Doha round and other international trade agreements before Congress recesses this summer for the mid-term election campaign. Technically, Washington does not yet need fast track to negotiate effectively. But defeat of the bill, which passed the House of Representatives by one vote, would send a devastating signal about US political attitudes to trade and could halt the Doha round in its tracks.
Final passage of legislation in the form approved by the Senate could be almost as bad. Its most contentious feature is a provision known as the Dayton-Craig amendment that would in effect bar US negotiators from agreeing any changes to rules on anti-dumping and anti-subsidy measures.
US assent in Doha to talks on these issues, a key demand of developing countries backed by Japan, was essential to launch the round. Reneging on that promise would be widely seen as a breach of trust. Many in Geneva believe the round could not survive a US refusal to negotiate changes in its anti-dumping laws, which other countries condemn as blatantly protectionist.
Robert Zoellick, US trade representative, has called Dayton-Craig a "killer amendment" and threatened a presidential veto if it remains in the final fast-track legislation. That could leave US trade policy in indefinite limbo.
Nonetheless, no one is yet writing the round off. Some veteran trade diplomats caution against taking too seriously the mood swings in Geneva's tightly knit trade community and say previous negotiations have successfully weathered equally threatening squalls. They also point to some chinks of light.
There are signs that the US and EU are trying seriously to patch up their quarrel over steel, on which Mr Zoellick and Pascal Lamy, EU trade commissioner, hold further talks this week. But even if they succeed, it is unclear whether they will be able to restore fully the effective working relationship that existed before Doha.
Efforts are also under way on Capitol Hill to remove, or at least soften, the Dayton-Craig amendment. And the US continues to insist officially that it is ready to discuss cutting its own farm subsidies, albeit from a much higher level than a few years ago.
Finally, sheer fear of failure may concentrate minds. Many governments doubt the WTO could survive another crippling setback so soon after the collapse of its 1999 Seattle meeting.
Optimists say that, if all goes well, the gloom in Geneva could lift some time after the summer. But that would still leave perilously little time to get the timetable back on track.
Furthermore, hopes of progress will continue to hinge on industrialised countries making good on pledges to make this a real "development round" by opening their markets wider to exports from poor ones. As one European trade official puts it: "If we want this to succeed, we are going to have to start delivering the goods soon."