Progress at last

May 5th 2005
From The Economist Global Agenda

After months of deadlock, the Doha round of global trade talks has taken a big step forward, thanks largely to an abstruse but important deal over agricultural tariffs

JUST as it seemed time to declare the Doha round of world trade talks dead, the negotiations have seen an infusion of energy. Thanks to a new face, a new partnership and an important technical breakthrough in the crucial talks on farm trade, this week’s gathering of trade ministers in Paris marked a big step forward.

The new face is Rob Portman, a Republican congressman from Ohio, who was formally confirmed by the Senate as America’s trade representative on April 29th. Three days later in Paris, Mr Portman had his first official meeting with Peter Mandelson, the European Union’s trade commissioner and a man who had a notably strained relationship with Bob Zoellick, Mr Portman’s predecessor. Messrs Portman and Mandelson, in contrast, were all smiles and both were pointedly focused on getting Doha going again. Writing in the Financial Times on May 3rd, Mr Mandelson said the time for “bickering” was over. By July, he argued, there needs to be a “rough approximation of what a Doha undertaking might look like”. Mr Portman, too, made clear in Paris that the trade round was a big prize: “Doha…will boost jobs and prosperity and can help lift literally millions out of poverty if we do the right thing.”

To underscore that determination, the two trade supremos helped push a breakthrough on the calculation of agricultural tariffs, dispute over which had held up the farm-trade talks for months. On May 4th, negotiators from America, the European Union, Brazil, India and Australia hammered out a formula for converting specific tariffs on agricultural goods, such as 10 cents per pound in weight, into percentage (or so-called ad valorem) tariffs.

Measuring all tariffs as a percentage of the goods’ value is a prerequisite for further progress in talks about reducing trade barriers for agricultural goods. Under the broad outline for the farm-trade talks agreed last summer, countries pledged to divide their tariff barriers into different tiers. Higher tariffs will be cut more than lower ones. Not surprisingly, those countries that protect their farmers most wanted a conversion formula that translated specific tariffs into lower percentages, as that would imply smaller cuts down the road. In the end, the deal was based on a compromise proposal made by the European Union.

Last-minute breakthroughs after seemingly interminable deadlock are a hallmark of all trade talks. Nonetheless, the ministers gathered in Paris this week gave the Doha talks exactly what they needed: a concerted political shove. But there is still much to be done by the time the full crowd of World Trade Organisation (WTO) member states meet for their “ministerial” in Hong Kong in December. It is conventional wisdom that Doha can only succeed if the big political bargains are struck in Hong Kong. That is because George Bush’s fast-track negotiating authority—which limits the ability of America’s Congress to unravel any trade agreement—runs out in July 2007. Mr Bush barely won initial congressional approval for fast-track. Given rising protectionist sentiments among America’s lawmakers, another renewal two years from now looks extremely unlikely. That suggests any Doha deal will need to be formally signed by early 2007. Since it takes trade negotiators around a year to wrap up a deal once the big political breakthroughs are made, Hong Kong is widely viewed as a crucial deadline.

And there is still a huge amount of negotiating to do. In farm trade, this week’s breakthrough on the technicalities of tariff conversion merely opens the door to the real haggling over how to structure tariff cuts for farm goods. And in the other areas of farm trade—such as export subsidies and domestic support—the horse-trading has barely started.

Elsewhere, too, there is much to do. The services talks—to free up trade in areas from telecoms to legal work—have made scant progress. According to the official timetable, all WTO members, except the very poorest, were supposed to have made initial offers on what services they would liberalise two years ago. By the end of May, countries are supposed to have submitted their revised—and improved—offers. In fact, almost 40 countries, including several large emerging economies, have submitted nothing at all. Talks on reducing industrial tariffs, too, have a long way to go. Again, many large emerging economies are proving reluctant liberalisers. For months, the blockage in agriculture has given negotiators an excuse for intransigence elsewhere. With luck, this week’s breakthrough will prompt a change of heart.

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