Cairns Group 20th Anniversary Meeting, High Level Forum on Agricultural Trade Reform, The Doha Round's Future: Worth the Fight?

Ladies and gentlemen,

It is my pleasure to speak to you today on the occasion of the 20 th Anniversary of the Cairns Group. This anniversary marks the day when your coalition was born, and reminds us of the important role it has played in placing agriculture at the heart of multilateral trade rules. In doing so, your coalition has initiated an important process of agricultural trade reform on a global scale.

Today you ask me to respond to a very specific question: Is the Doha Round Worth the Fight?

To answer that question I will describe to you the various elements of the Doha Round — the package that was on the table at the end of July — and allow you to draw your own conclusion. My focus will naturally be on agriculture, although agriculture is only one part of the Doha agenda, which also includes industrial goods, services, anti-dumping, fisheries subsidies, and trade facilitation, to mention but a few other subjects.

The “agricultural package” — if I may call it so — that we had before us in July, had nearly all the makings of a deal that would have represented a QUANTUM LEAP from the results of the Uruguay Round.

As a well-seasoned agricultural negotiator in Geneva put it to me — and he had also been around at the time of the Uruguay Round — quote:

“if anyone had told me at the time of the Uruguay Round that there would be a deal coming a few years later that would eliminate all export subsidies, that would slash harmful domestic support by 60-70%, and cut tariffs by half, I would have signed off immediately. Such a deal would have been inconceivable at the time” unquote.

But to understand where his views come from, it is important to remind ourselves of where the Uruguay Round had left us off.

First, let us look at market access. In the Uruguay Round:

• Countries only had to make “average” tariff reductions. What does that mean? It means that countries could get away with making very little reductions to their highest tariffs, or to their most sensitive products, hiding behind an average cut. Moreover, since many developing countries at the time of the Uruguay Round did not have a clearly articulated tariff structure, many were allowed to simply set an “across the board tariff” rate for all their agricultural products (something known as “ceiling bindings”). In so doing, many made no reductions at all.
  
  
• The average reduction that developed countries were required to make was 36%. For developing countries, it was 24%.
  
  
• In the Doha Round, what are we looking at? In this Round, members decided to show tripple or even quadruple the level of ambition of the Uruguay Round. They decided to move away from “average reductions” to a methodology that would lead tariffs on each and every agricultural product to come down substantially. It was also agreed that the highest tariffs would be cut the most. So, contrary to the Uruguay Round, countries would no longer be able to shield their highest tariffs.
  
  
• In July, an agreement had almost been reached that the agricultural tariffs of developed countries should fall to about HALF of their current rates. Compare that to the 36% average reduction of the Uruguay Round, and you will see the quantum leap that I am talking about.
  
  
• Also, developing countries came forward in the Doha Round and said: what the developed world was able to do in agriculture in the Uruguay Round, we the developing world intend to MATCH in this round. Developing countries therefore agreed in the Doha Round to slash their tariffs by 36%! Another quantum leap.
  
  
• However, given the very high level ambition exhibited by members in the Doha Round, naturally some have asked for flexibilities. Both developed and developing countries alike asked that they be allowed to shield a certain set of sensitive products. These exceptions from the general rules were part of the reason that the negotiations unravelled in July. But should they have led to this breakdown? I will return to this point in a few minutes. However, now I would simply say that these flexibilities should have been looked at in the context of the much higher overall level of ambition of the round - its much more rigorous approach to trade opening.

 

Let us now turn trade-distorting domestic subsidies. In the Uruguay Round, developed countries were only required to reduce this very harmful type of subsidy by 20%, and developing countries by 13%.

What did countries propose in the Doha Round in July? They proposed to slash this type of subsidy by 60-70% (and we may have gone further than that), and developing countries who give these sorts of subsidies might have accepted 2/3ds of that! More than a quantum leap — from 20% to 60 or 70%!!! Not to mention that caps would have been placed on the subsidies that any individual product can receive. That's the size of the jump.

And what about export subsidies? In Uruguay Round, in addition to certain rules, developed countries agreed to reduced their export subsidy spending by 21% and developing countries by 14%. In Doha Round, the complete elimination of this category of subsidies was proposed! Not only that, but the more disguised and hidden ways in which countries can subsidize their exports would have also been addressed. Rules were being developed for food aid, export credits, state-trading enterprises and so on. Once again, a quantum leap.

Moreover, cotton, a sector of particular importance to some of the world's poorest countries, was going to receive specific, more ambitious, treatment in the negotiations. Approximately 30 African countries are producers of cotton, and many derive a substantial proportion of their GDP from this commodity. The round would have given specific attention to all trade-distorting policies in the cotton sector, helping to rebalance trade rules in favour of the weak, in favour of the small.

We must also remember, that agriculture was not the only sector in the Doha Round. Similar quantum leaps from the days of the Uruguay Round would have been made in other areas, such as industrial goods, and services. Moreover, completely new, and extremely important subjects, were part of the Round. Take the example of trade facilitation, fisheries subsidies, rules for the environment, to mention but a few.

So what went wrong? If the Doha Round did represent the quantum leap that I just described, how is it that members allowed the negotiations to unravel. In my view, the negotiations unravelled, because too many negotiators focussed on the “small picture”, forgetting the bigger one. Too many negotiators, took the quantum leap for granted, focussing on smaller side-steps.

Two main issues were at the heart of events in July; one, were the flexibilities on the market access side (the products that some wanted to shield from the general tariff cut); and, two, was the size of the reduction of trade-distorting domestic subsidies (with some not wanting to sufficiently lower their current subsidies allowance).

Were those problems insurmountable? In my view, no. No, because their details remained to be discussed. The shielding of some products from the general cut, would not have meant that these products would undergo absolutely no reduction. They would have still undergone some reduction — the size of which countries should have focussed on negotiating. Let us remember that the Doha mandate had called for a “substantial improvement” in market access.

And what about domestic subsidies? Again, not an insurmountable problem, because some of the subsidies in question were part of a largely unused allowance. Again, let us remember that the Doha mandate had confirmed members' commitment to a “program of fundamental reform” in the agricultural sector.

Relative to the potential gains from the Doha Round, relative to the quantum leap that it represents, it is unfortunate that the negotiations broke down over a few thousand tons of beef, a few thousand tons of poultry and a few billion dollars of trade-distorting subsidies! The bigger picture went by unnoticed.

Coming back to the question that was put to me: is the Doha Round worth the fight, my answer would be yes! The question is which fight, and the answer is probably: “the domestic one.” Some farming constituencies either do not want to give up their subsidies, or do not want to expose themselves to greater competition. It is at the national level, in each WTO member country, that a deal needs to be worked out.