Is there still hope for the Doha Round?

Table of Contents

List of Figures and Tables

1. Introduction

2. The Doha Development Agenda
2.1 The Doha Declaration explained – Results of the 4th Ministerial Conference
2.2 Status Quo of the current Doha Negotiations
2.2.1 Results of the 5th Ministerial Conference of Cancún
2.2.2 Results of the 6th Ministerial Conference of Hong Kong

3. Reasons for the Failure of the Doha Round
3.1 New Policy Circumstances
3.2 Multilateralism versus Regionalism
3.3 Economic Self-Interest

4. Prospects for Doha’s Future

5. Concluding Remarks

References

List of Figures and Tables

Figure 1 Regional Trade Agreements (RTAs) by date of entry into force reported the WTO (1948 – 2006)

Table 1 Real-income effects from liberalisation of world trade in agricultural and non-agricultural products in USD billion in 2015

1. Introduction

The GATT/WTO is arguably the personification of multilateralism and the most successful institution of international economic cooperation since post-1945. The General Agreement on Tariffs and Trade (GATT) which was signed by 23 countries in Geneva, Switzerland, in October 1947 has tried to give an early boost to trade liberalisation. Most important principle to promote liberal trade is the so-called most-favoured-nation (MFN) treatment. If one country grants another a special favour (such as a lower customs duty rate for one of their products), the country has to do the same for all other WTO members. Since 1947 the GATT initiated eight rounds of trade negotiations which ended with the Uruguay Round in 1994. The final act of this round was the establishment of the more extensive World Trade Organization (WTO) which came into being on January 1, 1995. Today the WTO has 150 member countries and a much larger number of trading rules. The present low tariffs on most traded manufactures are the result of the past GATT negotiations. Moreover, during the Uruguay Round (1986-1994) liberalisation in non-manufactures made much progress. This included agreements on agricultural trade (more or less efficient) and on trade in services. Furthermore, special conditions on textiles and clothing and on a range of non-tariff restrictions were agreed during that time. Particularly important was the establishment of a system to govern the settlement of disputes between members. So far the past WTO negotiations seem small in comparison what was achieved under the GATT. Negotiations on agriculture and other sectors which are of interests to developing countries, made less progress in past years and still remain a major problem for the Doha Round negotiations which began in 2001.

This paper analyses the prospects of a successful complementation of the Doha Round and is structured as follows. In the second part the main content of the Doha Development Agenda and its historical development will be presented. The analysis will reveal that the Doha talks are quite problematic. The third section will investigate why Doha is struggling. Furthermore, the fourth part offers prospects for the future of the Doha Development Agenda and finally some concluding remarks will be given in the last paragraph.

2. The Doha Development Agenda

The Doha Ministerial Conference in Qatar in November 2001 which met only a few weeks after the 9/11 terrorist attacks was characterised by political unity to launch new trade negotiations after the failure of the Seattle meeting in 1999. It encouraged the countries of the Organisation for Economic Co-operation and Development (OECD) to agree on an agenda and to demonstrate their resolve that terrorism would not ruin international cooperation. Especially this statement motivated developing countries to play an active role in getting their interests on top of the agenda. Hence, the media quickly declared it ‘the development round’.

2.1 The Doha Declaration explained – Results of the 4th Ministerial Conference

In making trade rules fairer for developing countries it was once more agriculture which was regarded as one of the major discussion points. It was agreed to establish a fair and market-orientated trading system by programmes of fundamental reform. This means strengthened rules, in particular on government support and protection for agriculture. Crucial aim is the correction and prevention of restrictions and distortions in world agricultural markets. Moreover, member countries commit themselves to reduce all forms of export subsidies with a view of phasing them out. Additionally, domestic support that distorts trade has to be reduced as well (WTO, 2006a).

In the service sector significant progress was already reached under the WTO General Agreement on Trade in Services (GATS) which was initiated in January 2000. The purpose of the negotiations on trade in services is to promote economic growth of all trading partners and in particular that of developing and least-developed countries (LDCs) by reducing trade barriers.

Concerning market-access for non-agricultural products the ministers agreed that tariffs for these products have to be reduced or as appropriate to be eliminated. This includes tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers. Especially tariffs on products of export interest to developing countries have to be reduced respectively eliminated.

Much emphasise was also laid on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). This agreement comprises support in public health especially for developing countries, by promoting access to existing medicines and research and development into new medicines. Moreover, this agreement also includes geographical indications such as protections of wines and spirits and the protection of traditional knowledge and folklore (WTO, 2001).

Besides public health technical assistance and capacity building have been regarded as essential for developing countries. Working groups on the ‘relationship between trade and investment’ and the ‘interaction between trade and competition policy’ focused on topics such as the clarification of transparency, non-discrimination and procedural fairness or balance-of-payments safeguards (WTO, 2001). The issues of ‘trade and investment’ and ‘trade and competition’ as well as ‘transparency in government procurement’ and ‘trade facilitation’ for developing and least-developed countries became known as the ‘Singapore Issues’ because they were agreed at the first Ministerial WTO Conference in Singapore in 1996.

Developing countries and LDCs also face special treatment when considering anti-dumping and subsidies (GATT Article VI). Clarification and improvement of this topic especially in fisheries was agreed under the committee in 2001. Furthermore, since 1995 the ministers have failed to complete its assessments of whether regional trade agreements conform to WTO rules. Illumination and upgrading in this area as well as with the Dispute Settlement Understanding have to be done.

Improvement is also necessary concerning trade and environment. It has been agreed a reduction respectively elimination of tariff and non-tariff barriers to environmental goods and services. Particular attention is to be paid to the influence of environmental measures on market access. The achievement of so-called ‘win-win-win’ situations (win in trade, environment and development) should be realised by the elimination or reduction of trade restrictions and distortions. Moreover, technical assistance and capacity building programmes for developing countries in the trade and environment area should be set up. Member countries should also be encouraged to share expertise and experience on national environmental reviews (WTO, 2006a).

After all, it has been concluded that no customs duties are imposed on electronic transmissions. Furthermore, special attention has to be paid to small economies and there challenges in taking part in world trade. Moreover, technological transfer between developed and developing countries should be supported. In fact, the integration of developing and least-developed countries into the multilateral trading system is essential. Market access, support for diversified products and export base, the already mentioned trade-related technical assistance and capacity building, as well as debt financing and duty-free, quota-free market access for LDCs’ products should be granted to those countries by all member governments (WTO, 2001).

2.2 Status Quo of the current Doha Negotiations

Doha’s aims are very ambitious, but in the last five years Doha has been characterised by missed deadlines and protagonists that always blamed someone else for the lack of progress. In the following the results of the 5th and 6th Ministerial Conference should be reviewed.

2.2.1 Results of the 5th Ministerial Conference of Cancún

The 5th Ministerial Conference in Cancún in September 2003 was a disaster. Negotiations dealt with four key areas: agriculture, industrial goods, trade in services, and updated customs codes. However, Pfaffenbach (2005) states that the basic conditions were really ideal. Firstly, due to the Luxembourgian agreements on the reform of agricultural policy (summer 2003) the European Union (EU) had offered itself concessions in the agricultural sector. Secondly, the EU and the United States of America (USA) had reached an agreement about market entry areas in agriculture and industrial customs duties. Finally, the industry nations, especially the USA, had agreed a compromise on the access of developing countries to medicines to fight epidemics. Van Dijck and Faber (2006, p. 292) argue that the agricultural reforms, the centrepiece of the negotiations, became the major sticking point. The joint EU-US paper on agricultural reform was considered unacceptable by the developing countries. The refusal of the developing countries was mainly the result of their changed role compared with former negotiation talks. The G-20^[1] under the leadership of Brazil, India and China and
the G-90^[2] as the group of non-transition economies presented their powerful unity. Besides agriculture differences over the ‘Singapore Issues’ seemed irresolvable as well (Sek, 2004, p. 17). Finally, the talks collapsed without any result after four days.

Eventually, in Geneva on July 31, 2004, WTO members approved a framework agreement on opening global trade. The USA, EU, Japan and Brazil agreed to eliminate export subsidies, reduce agricultural subsidies and lower tariff barriers. Developing nations agreed to reduce tariffs on manufactures, but still got the right to specially protect key industries.

2.2.2 Results of the 6th Ministerial Conference of Hong Kong

While the Cancún talks did not bring Doha significantly further at least some progress was made during the 6th Ministerial Conference in Hong Kong in December 2005. Three key factors can be identified. Firstly, it was agreed to eliminate subsidies of agricultural exports by 2013. Secondly, the provision of duty-free, quota-free market access for exports from 50 least-developed countries in 97% of import lines by OECD countries by 2008. Thirdly, support of poor countries concerning the issue of ‘trade facilitation’^[3] to improve efficiency in the handling of imports and exports. Nevertheless, little progress was made on other key topics. Although some progress was made in the agricultural sector according to exports, the EU is still reluctant to reduce tariffs and production subsidies. EU has stated that it will not discuss further on agriculture until others offer trade liberalisation in services and tariffs on manufactures. Encouragingly, negotiations on services have opened, discussing difficulties of labour movement of OECD countries and the aversion of non-OECD countries to allow rights of establishment to foreign providers of services (Robertson, 2006, pp. 34 – 35).

Despite the positive signals set in Hong Kong the Doha negotiations are stopped so far. The 2006 July talks in Geneva failed to reach a final agreement about the reduction of farm subsidies and lowering import taxes. In particular, the USA has received much of the blame. Bello and Kwa (2006) mention that the Americans want a big Doha deal, where their farmers see real gains in the access to foreign markets. While the developing countries are still unwilling to open their markets for agricultural products as well as manufactures, the USA refused to offer further reductions in their domestic agricultural supports.

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^[1] The G-20 (Group of 20, also variously G21, G22 and G20+) is a bloc of developing nations established on 20th August 2003. The group emerged at the 5th Ministerial WTO Conference in Cancún. The ‘official’ appearance of the G-20 occurred as a response to a text released on 13th August 2003 by the EU and USA with a common proposal on agriculture. Current members are Argentina,Bolivia,Brazil, Chile, China, Cuba, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.

^[2] The G-90 is an alliance between the poorest and smallest developing countries that are part of the WTO. The G-90 emerged as a strong grouping at the WTO’s Ministerial Conference at Cancún in September of 2003, taking common positions representing the largest number of countries, with 64 of the 90 countries in the G-90 being members of the WTO. Together with the G-20, the G-90 aims to counter-balance the power of the USA and EU in directing global trade, particularly with respect to negotiations over agricultural goods, upon which most of the G-90 economies depend.

^[3] The ‘Singapore Issues’ except for ‘trade facilitation’ have been eliminated from the Doha Agenda on 1st August 2004.