US alone can lead the WTO salvage mission

Washington has to make amends in the light of the opposition to its stance by EU, developing countries.

NEW DELHI: “There is no movement in the talks. I am taking the first flight out.” Commerce minister Kamal Nath’s dramatic statement is being seen as the flashpoint that led to the collapse of the World Trade Organisation’s (WTO) ministerial meeting at Geneva on July 1, which was meant to end the deadlock at the Hong Kong ministerial in December.

There are indications that there could be a mini-ministerial later this month to sort out contentious issues.

What happens if there is no agreement on the exact numbers of cuts in agricultural and industrial tariffs and in agricultural subsidies by the end of July?

The current Doha Round, which is to end in December 2006 (the original deadline was 2004), will effectively get written off. Once there is agreement on the cuts, countries have to draw up schedules of reductions, an extremely tortuous process that can take close to six months. Hence the importance of the July deadline.

So who will have to blink first in this standoff? It will have to be the US, which has both the developing countries and the EU ranged against it, though India’s uncompromising stand is being dubbed intransigence by both the US and EU.

US trade representative Susan Schwab came to Geneva, say sources in the Indian delegation, with no mandate to move forward on agricultural subsidies. The huge subsidies the US gives to its farmers enable them to sell their products cheap in the world market, making it difficult for other countries to compete, they add. The last US offer was a 53% cut in these subsidies. In return, it wanted very substantial cuts in agricultural tariffs globally.

The US’ rigid position stood out from that of the EU, which expressed its willingness to extend tariff cuts from 39% to 50%, provided the former climb down on the agricultural subsidies front. WTO director-general Pascal Lamy, who has the responsibility of salvaging the round lies, will have his work cut out in persuading the US to yield ground. But even assuming he gets some concessions from the US on agriculture, the question of industrial tariffs still remain. The battle for the developing countries will be tougher here, because the US and the EU  — at daggers drawn on agriculture — stand together on this. They want a tariff cut formula that will mean developing countries will undertake big cuts, something the latter are not ready to concede.

If the US makes improved offers on agriculture, it will demand its pound of flesh on industrial tariffs. That will clearly put Nath in a cleft stick, caught between the need to protect agriculture and industry.

Nath has been making the point that the Doha Round is a development round and is all about increasing trade flows from developing countries to the developed countries, and not the other way around. But it’s not clear if the developed bloc will pay much heed to this.

July is clearly going to be a difficult month for Nath. And a definitive one for the WTO itself.