Set in a park with views across Lake Geneva to the snow-capped Alps, the elegant 1920s building that houses the World Trade Organisation is an unlikely, almost surreal setting for the intense multi-dimensional power play over global trade that ended suddenly last Tuesday afternoon (July 28).
There in surroundings more suited to academic endeavour, trade ministers from around the world had spent nine days arguing about texts that may eventually restructure the relative economic power and influence of nations as diverse as the United States, Switzerland, Jamaica and China.
However, for the third year running and after nearly seven years of discussion, reaching agreement again proved elusive despite surprising progress being made on complex issues relating to agriculture, goods, services and other issues.
For the Caribbean and irrespective of where one stands on the issue of trade liberalisation, all that the sudden end of these negotiations means is a brief technical respite from the inexorable global pressure for market opening. This is because very soon the region will have to address many of the same issues in a different context as Europe presses forward with new trade arrangements with Latin America, about which more later.
The decision to call a mini-ministerial meeting in Geneva starting July 21 was, by the WTO Director General, Pascal Lamy’s own admission, a gamble. He hoped it would advance the idling Doha development round from being around fifty per cent complete to something nearer to seventy-five per cent.
At the centre of this was his carefully timed July 27 package of proposals that offered potential compromises on unresolved agricultural issues. He suggested that the US cut only those farm subsidies that were ‘distorting’ by 70 per cent and the EU do the same by 80 per cent. This was coupled with a proposed 70 per cent reduction for the highest farm tariffs levied by developed countries and compromises on special and sensitive products for both developed and developing nations, involving variations in tariff cuts.
While there was no formal agreement, what was proposed was considered within the ‘landing zone’ for key players and there was a sense that this might form the basis for the resolution of other issues. However, all of this collapsed when China and India made clear that they also wanted the right to impose special safeguard duties to protect their small farmers.
Although this brought an end to the ministerial, it seems that Mr Lamy may have gone some way towards his ambition as signs are emerging of an informal consensus around his July 27 proposal and a view that areas of agreement should be captured to form a basis for moving forward in 2009.
This may be difficult, not least because of the need for trade direction from a new US president and because some key trade negotiators will demit office in the next twelve months. However, there is a sense that the progress made in Geneva on the big issues in agriculture plus the parlous state of the global economy, provide together enough of a spur to continue to take forward the round and address the remaining areas of difference.
For this reason what was agreed informally cannot be ignored or forgotten. It implies that a moment will come, perhaps in 2010, when the Caribbean will have to come to terms with a multilateral arrangement that requires it to gradually open its markets to Brazil, China, the United States and others in a manner that goes beyond what has been agreed with Europe in the context of the much debated Economic Partnership Agreement (EPA).
In Geneva, the Caribbean was negotiating on three main fronts: first defensively, to try to protect its long-standing preferences with Europe on bananas, rum, sugar and rice from being further eroded by the EU, which had been discussing in private offering similar or improved tariff arrangements to exporters in Latin American nations; secondly ministers and regional negotiators were defending Caribbean markets from being swamped by goods and services from nations including Brazil, the US and China and India; and thirdly the objective was to ensure as part of an overall deal improved access for Caribbean agriculture, goods and services to global markets.
The sudden end of the negotiation leaves the Caribbean in a state of limbo. No one is certain whether the detail of what has been agreed on tropical agricultural products and those subject to long-term preference can be locked into any future negotiation should the round resume.
A case in point is the uneasy agreement on bananas where the EU agreed with Latin nations and in the face of ACP protests to reduce its tariff on imported bananas to Euro114 a tonne from Euro176 a tonne thus bringing into question the viability of the region’s smallest producers.
Although this led to discussions with the EC on compensation, Europe’s Trade Commissioner – presumably mindful of the need for leverage in bi-regional and multilateral negotiations still to come – subsequently said that any agreement will not stand, on the principle that in trade negotiations “nothing is agreed until everything is agreed.” However, nations like Ecuador are suggesting that what was informally agreed strengthens their legal case for a tariff reduction. In addition other complex and difficult issues relating to rum remain on the table with again Latin nations pressing for significant tariff reductions from the EC or the opening of quotas for their products.
What no one should be in any doubt about is that many of these issues will re-surface within months in the course of separate trade negotiations that have already begun between Europe and Mercosur, with Central America and with the Andean nations. In each of these it is already apparent that concessions are being sought and consideration given to arrangements that would significantly reduce the value of what is left in the Caribbean and the ACP’s existing preferential arrangements with Europe.
All of which re-emphasises the point that there is a critical need to find ways to increase the velocity of the regional economic integration in preparation for an inevitable increase in competition as a result of trade liberalisation by nations that can simply out-produce and out-price the Caribbean.
Previous columns can be found at www.caribbean-council.org
[Ed note: The next column by David Jessop will appear on September 7.]
