Lamy warns Doha failure will seriously weaken the trading system

At our last meeting, in March of this year, I explained how, following the Hong Kong Ministerial Meeting, it was both possible and necessary to conclude the Doha Round of negotiations by the end of this year.

We have known since 23 July that this will no longer be possible. On that day, the negotiations stalled on agriculture owing to the gap that appeared among the countries of the G-6, namely Australia, Brazil, India, Japan, the EU, and the US (in alphabetical order … ).

This left us with two options:

• To push on, in a more negative climate, at the risk of eroding what had already been achieved in the negotiations, in itself insufficient; or
  
  
• to call a break, in order to give the negotiators time to reflect calmly, to review their positions with their constituencies, and if possible, to return to the negotiating table with revised proposals and a positive frame of mind.

I therefore suggested, and the WTO Members accepted, that the official negotiating process be suspended for the time it took to establish the necessary conditions for resumption.

So what has happened since July?

The suspension has resulted in three important developments: collective reflection on the cost of a failure; a series of calls for resumption; and the beginnings, albeit tenuous, of a reassessment of negotiating positions.

The prospect of a failure of the negotiations, brandished rhetorically before July, is now seen by many countries as a serious hypothesis, and the consequences of such a failure are now emerging more clearly — not as a major economic shock that would precipitate any particular market crisis, or a breakdown in trade or in the operating environment in the short-term, but rather as a slowly developing disease that would progressively sap the strength of the multilateral trading system built up over the past 50 years, damaging its economic lungs, its political heart, and its systemic bone structure.

Weakening of the economic lungs if what has been achieved in the negotiations so far were to disappear from the table. In terms of market access or new disciplines, the Doha Round as originally defined is worth two to three times the Uruguay Round that preceded it. Negotiations have been difficult precisely because of the high level of ambition established at the outset. And this applies equally to the conventional North-South dimension and to the newer South-South dimension. Suffice it to recall that in the space of ten years, the proportion of developing countries in world trade has gone from third to one half of the total.

Damage to the political heart as conceived in 2001, when priority was given to development and to the correction of the injustices that persisted in the international trading order — a sort of colonial heritage. It is as if economic decolonization had had to wait 50 years after political decolonization. It is now an acknowledged fact that should the negotiations fail, the main victims of the WTO's inability to correct the inequalities that the Uruguay Round had begun to narrow in the agricultural or textiles and clothing areas would be the weakest and the poorest. In other words, the developing countries, and in particular the least developed countries, for which a successful outcome represents the only hope of dealing with the adverse effects of agricultural subsidies on cotton or sugar, or of gaining unhampered access to the markets of the rich countries. In other words, zero contribution to the Millennium Objectives as adopted by the UN!

Crumbling of the systemic bone structure, which holds together the multilateral trading system that acts as an insurance policy against protectionist accidents. Like any insurance policy, it has to be updated from time-to-time and its value is only evident when the accident takes place. Sometimes, it is too late. As for the bilateral insurance policies, however fashionable they appear to be, we know that they are of lesser value. They do not cover all trade, and they are worth nothing when it comes to disciplines on agricultural subsidies, fishing subsidies, or anti-dumping that are of considerable interest to the developing countries.

Considerations relating to the consequences of a possible failure undoubtedly account for the second development noted since last July: the increasing number of calls for resumption at the political level: the ASEAN Group in Kuala Lumpur in August; the G-20 in Rio in September; the World Bank and the IMF at their meeting in Singapore; the Cairns Group; the African Union last week; not to mention the positions expressed in business circles and by influential representatives of Universities or academic circles, as well as certain NGOs.

While the political signals provide no particular indication of a change in negotiating positions, particularly when they are addressed to the others, they could be the harbingers of a new frame of mind.

The third development has involved what is commonly referred to as silent diplomacy. It would be unreasonable to expect the positions publicized last July to be modified unilaterally by any of the important actors. They were formulated under the watchful eye of interest groups whose influence — quite naturally — is crucial in the development of negotiating positions, and they are unlikely to change as long as the necessary flexibilities have not been tested, discussed, and agreed between the negotiators and their constituencies, and among the negotiators themselves. Hence a period of underground work which, though frustrating for the media, is necessary to the process.

Until when?

Not even I can answer that. But we do know that next Spring coincides with two important stages in the American legislative timetable. The decision on the Farm Bill to begin with. Will the current law, passed in 2002, be extended for five years, or will it be reformed? And then there is the decision on the possible extension of the trade promotion authority given by Congress to the Administration. It seems likely to me that the position of the US Congress could lean one way or the other depending on the prospects for an agreement at that time.

So, in the meantime, we must endeavour to help those who are pushing for a resumption of the negotiations, and to facilitate the work being done quietly in the background by different coalitions or countries. And we must try to keep a cool head. Particularly when it comes to plans for bilateral agreements that are emerging here and there, apparently promising concessions beyond what would be needed to unblock the multilateral negotiations. Unless my arithmetic is out of date, I find it hard to see how, for example, American beef or poultry imported into the European Union at lower tariffs under a vast Euro-American Free Trade Agreement would differ from Argentine beef or Brazilian or Thai poultry subject to similar treatment under a WTO agreement.

Let me end this short introduction to our exchange of views with the only good news of any importance since our discussions last March, apart from the imminent accession of Vietnam to the WTO: the progress recorded in Aid for Trade for the developing countries. Following the excellent work conducted in accordance with the guidelines agreed in Hong Kong, we now have some recommendations that last week's General Council asked me to implement. They involve:

• Harmonizing the assistance provided by international and regional financial organizations and bilateral donors in building up the trade capacity of the developing countries, whether it involves heavy infrastructure or lighter technical improvements;
  
  
• increasing the volume of financial flows for the developing countries in accordance with the decisions adopted at the Gleneagles G-8 summit in July 2005 and the Hong Kong WTO Ministerial Conference in December 2005.

The European Union has played an important part in these commitments and greatly contributed to the progress achieved. In conclusion, I would like to take this opportunity to extend my most sincere thanks to Commissioners Mandelson and Michel for their support. The opening up of trade is all well and good, but many WTO Members will only benefit from it if we support them in these areas.

Though the rejection of the draft Constitutional Treaty deprived the European Parliament of the new powers it was entitled to expect in the trade policy area, I have not forgotten the Parliament's influence in the area of development policy. Hence my appeal to you, the European Parliamentarians, to support the efforts of the Commission and the Member States in the area of Aid for Trade for the developing countries. I trust you to ensure that the increase in aid for trade announced by the EU in Hong Kong of one billion euros by 2010 for the Commission and a further one billion euros for the Member States (non-infrastructure) rapidly becomes a reality.

Thank you for your attention.