Fatal Attraction: A WTO Update

July 30, 2009

By: Larry Combest

WASHINGTON (July 30, 2009)—This spring, world politicians once again revisited the idle Doha Round of international trade negotiations, doing so first at April’s G-20 Economic Summit. Here, a pledge was secured that the key players in the world economy remained “committed to reaching an ambitious and balanced conclusion” to the Doha Round “building on the progress already made.”

A variety of high-level meetings followed, all touting the importance of Doha. This culminated in a July 9 commitment by leaders of the G-8 group of major industrial countries, plus five key emerging economies (India, Brazil, China, Mexico, and South Africa), to conclude the Doha Round in 2010. Instructions were issued for respective national leaders to begin work immediately.

If U.S. farmers, manufacturers, and service providers found little to cheer about in this announcement, perhaps memories of the frenzied but failed attempts to conclude Doha in 2008 were still too fresh in their minds.

In December 2008, during the waning days of the Bush Administration, a final effort was made to force an agreement on “modalities” (WTO-speak for the rules that determine the actual commitments made by countries) that the U.S. private sector almost unanimously saw as unfavorable to their interests.

Alarmed by this situation, the American Farm Bureau Federation (AFBF), the National Association of Manufacturers (NAM), and the Coalition of Services Industries (CSI) sent a joint letter to President Bush warning against acceptance of a “weak and unbalanced set of modalities.” Similar letters from Congress followed.

Girded by these strong messages, the Bush Administration held firm and plans for an end-of-year Ministerial meeting collapsed.

Why was the U.S. private sector so opposed to the “compromise” agreement on the table? In the case of U.S. agriculture, it would have accomplished two things: (1) put U.S. domestic farm support policies in a straight-jacket; and (2) virtually ensured that no meaningful market access would be secured for U.S. agricultural exports to emerging developing economies—countries that will not only be our major markets in the future but, in many cases, our major competitors as well.

The picture looked no rosier in NAMA (non-agricultural market access) negotiations, where U.S. tariffs, already low, would be cut to the bone. That’s while the WTO-bound tariffs of the major emerging economies would largely remain higher than those actually applied. Same for the Services negotiations, where what is currently on the table falls well short of the policies already in place.

Early this year, when it became clear that the Doha Round would be taken up at the G-20 meeting, another AFBF/NAM/CSI joint letter was sent, this time to President Obama. The letter warned against trying to conclude Doha on the basis of existing draft negotiating agreements on modalities, saying they were not a basis for advancing the talks and needed to be revised to provide market access gains for U.S. exporters in the advanced developing countries.

The G-8 + 5 declaration calls for conclusion of the Round “building on the progress already made, including with regard to modalities.” Unfortunately this language, hazy and diplomatic, combined with failure of our negotiators to call for specific changes, strongly suggests that this Administration will not seek any fundamental changes in negotiating texts.

For U.S. agriculture, this would mean all of the loopholes that enable the key emerging economies to evade significant market access commitments would remain in place—in particular, lower or zero tariff cuts for the 12% of tariff lines designated as “special products” and a special safeguard mechanism that would permit rolling back of Doha, and even pre-Doha, tariff commitments when prices or imports increase beyond certain levels.

And on the domestic support side, the 70% cut on overall “trade-distorting” support, backed up by restraints on specific products and programs, would be locked in place. This would require major changes in the 2008 farm bill and impair the U.S. government’s ability to respond to future downturns in the agricultural economy.

Instead, the Obama Administration appears to be pinning its hopes on wresting bilateral commitments to improve market access for U.S. agricultural and industrial products—going beyond those required by modalities. The language in the G-8 + 5 declaration calling for “enhancing the transparency and understanding of the negotiating results to date” is supposed to provide an opening for this effort.

As the Bush Administration discovered, securing such commitments is likely to be a tough slog. The reactions of our negotiating partners to the U.S. call for such commitments have been at best muddled, with a few indications of willingness to talk coupled with many widespread messages of unwillingness to go beyond modalities.

The trade agenda put forward by the President early this year made clear that to conclude Doha, the imbalance in the negotiations, tilted against the U.S., must be corrected. As our negotiators embark once again on an effort to conclude this long-running and disheartening negotiation, we in the farm community, and our Congressional representatives, need to remain vigilant and hold them to this promise.

About the Author: Larry Combest, represented the 19th District of Texas for 18 years in Congress, where he served as Chairman of the House Intelligence and Agriculture Committees.