The Doha Failure: Plenty of Blame to Go Around

People have not been shy about assigning blame for the failure of the Doha talks.  The G-6 WTO Members who met in an effort to get things moving were Australia, Brazil, the EU, India, Japan and the U.S.  Most are blaming the U.S., while the U.S. is pointing mainly to the EU.  Here's a brief rundown of what some of the key players from each country have said about the apparent collapse of the talks:

United States:  Susan Schwab "accused the EU and others of "pocketing" an offer the United States made last year to reduce farm subsidies and pushing for deeper U.S. cuts without offering significant new market access in return."  Schwab also said "aside from Australia, none of the other players had come up with enhanced offers to open up their markets to foreign goods."  Senate finance committee chairman Chuck Grassley said that as long as the EU and India "wear their blinders, we'll never see eye to eye on a good trade deal, and poorer countries will pay the highest price".  Bill Thomas, chairman of the Ways and Means Committee in the House of Representatives, said the EU had "made a mockery" of the Doha negotiations.

European Union:  Peter Mandelson "accused the United States of "stone-walling" by refusing to offer deeper cuts in U.S. trade-distorting domestic farm subsidies, which now total about $20 billion annually."

Brazil:  Celso Amorim said the main deal-breaker was the demand for cuts in subsidies to agriculture, where "it was up to the United States to make the gesture. ... It is a pity that we have not managed to move forward, in part due to the US refusal to eliminate domestic (farm) subsidies, ..."

India:  Kamal Nath, without naming the United States, said in a statement that “...unfortunately one member is unable to make any effective reduction in trade distorting subsidies, but at the same time, is insisting that developing countries open up their markets to provide access to their subsidised products.”

I couldn't find any comment by a Japanese official indicating who was to blame, but one article said that Japan was among the countries blaming the U.S.  As for Australia, I didn't see them blame anyone in particular, and no one seemed to blame them.

Trade negotiations are not my area of expertise, so I don't have much of an opinion on this.  But if anyone else does, feel free to comment.  (Note that you can comment anonymously if you have something to say but don't want people to know it was you who said it).

UPDATE: Alan Beattie of the Financial Times spreads the blame around nicely (and the rest of the article is worth a read, too):

The European Union should have offered deeper cuts in farm tariffs. The US should have signalled compromise on farm subsidies earlier, and should not have changed trade representative mid-stream. India and other developing countries should not have insisted on huge loopholes in their tariff reductions.

...

The price the EU paid for pacifying the French-led rebellion of agrarian member states was making a pretty weak, though skilfully spun, offer to cut farm tariffs. The Indian government, acutely aware that its predecessor lost an electionby ignoring the villages, pandered shamelessly to its protectionist farmers and seemed almost gleeful when the talks broke up.

The US trade representative maintained complete harmony with Capitol Hill throughout, but only by promising farmers new agricultural export markets that they were unlikely to get.

Comments

[Sungjoon Cho]

After all, all politics is local. The main culprit for the collapse is nothing but the domestic politics, especially politics in major Members which have pending elections or whose current political atmospheres are hostile to trade concessions. Trade negotiators cannot create bargaining positions on their own. These positions come from the headquarters. Europe (France in particular) and Japan are not ready for substantial concessions in agriculture (elections, those elections…) In the U.S., politicians from the Farm Belt have already floated the idea of extending the Farm Bill in the face of the November mid-term election. The current domestic political situation in the U.S. makes it hard for the government to maintain a liberal trade stance. Critically, the U.S. has long opposed the so-called “Doha-lite,” which tends to further shrink their negotiational space. Of course, some might say even this was strategically contemplated. The U.S. may have wanted sizable concessions from the EU and Brazil/India enough to placate domestic opponents. It may have thought a small deal would incur more political costs domestically than any abstract, indirect benefits.

As to the mismatch between the bombasts in the G8 summit and today’s misery, that is the (political) way to go. No big shots want to be in the politically embarrassing situation. They all want to look nice and committed to the multilateral trading system. So, it is always the working level’s job to deliver the bad news. That’s what has happened now, as in the past.

[Seema Sapra]

I have some questions and would appreciate any answers:

To what extent are the U.S., EU, and other developed country agricultural subsidies that were the subject of demands for cuts, already illegal under the existing WTO agreements?

Was reduction in these subsidies contemplated in the so-called "Uruguay Round grand bargain" and is there any documentary or other evidence that this was the case?

I came aross a reference that the U.S proposed that it receive market access for every dollar it reduced on farm subsidies. Is there any statement on record to substantiate this?

[Bryan Mercurio]

I wholeheartedly agree with Sunjoon's comments on local politics and elections...it also seems tough to lay blame when it seems that all the major players were holding out and waiting for someone else to act. That, coupled with unrealistic expectations/wishes/demands (at least publicly) and an unwillingness to conclude a ‘Mickey Mouse’ agreement (Doha-Lite) for the sake of a handshake and a photo-op all played a part in the demise.

[Joel P. Trachtman]

There is plenty of blame to go around, but it appears that the only state blaming anyone but the U.S. is the U.S.

In answer to Seema's question, the Cotton case shows that the U.S. subsidy program is somewhat vulnerable, as the "peace clause" has expired and domestic support that causes "serious injury" may be actionable. It may also be countervailed. But the reason for these negotiations is that there is still lots of room for the U.S. agricultural subsidies under existing WTO law.

[Simon Lester]

Despite my previous statement that I don't have much of an opinion on this, I do think that a fundamental problem we are facing is that agriculture is such a huge stumbling block. As Sungjoon points out, the U.S., EU and Japan all face enormous domestic pressure not to change the status quo for agricultural protection and subsidies. At the same time, however, the key issue for many other WTO Members is opening up these agricultural markets. So, we're at an impasse here essentially because of agriculture.

What can be done about it? I think that the U.S., EU and Japan need to take a close look at their policies in these areas. Putting aside the criticisms made in the context of the WTO, there are many people making the case that the policies are not the right ones from a purely domestic perspective. In the U.S., for example, it has been contended that a huge amount of money goes to people who don't even farm (http://www.washingtonpost.com/wp-dyn/content/article/2006/07/01/AR2006070100962.html ). Until that domestic re-examination occurs, there may not be much hope for the multilateral trade talks.

[Bryan Mercurio]

Most of the economic data substantiates Simon's argument that agricultural policies are not efficient, even domestically. But this simply brings us back to Sunjoon's point that all (trade) politics are local. This deadlock, coupled with the other pains with consensus decision-making in recent years, has me re-thinking the wisdom of an all or nothing approach. I am not ready to advocate a return to plurilateralism as I am not convinced the pros will outweight the cons, but at some point it may become necessary to save the institution (from itself as well as FTAs). Just a thought.

[Sturt]

Per Seema's question, the Uruguay Round Agriculture Agreement contained an obligation in Article 20 to "continue the reform process" - ie, to negotiate further reductions in export subsidies, trade distorting domestic support and market access barriers. The current collapse of negotiations puts that promise at risk, at least for a while.

[Seema Sapra]

Thank you to Professor Trachtman and Sturt for providing some useful answers to my questions.
The time limit imposed on the peace clause in the uruguay round is perhaps another indication of how the future reduction of farm subsidies was part of the Uruguay Round compromise.

Some thoughts on the domestic source of trade politics (I have been thinking on this as part of my research):
Comments very welcome!

Trade politics and maybe all other politics has always been local in its origin with the domestic context determining how and what a country identifies and evaluates as its interests and preferences in international negotiations including earlier and the present trade rounds.

What is perhaps becoming evident is that the present round is different from earlier trade rounds, in that in earlier rounds, the domestic politics of only developed countries, (the G7 or the OECD) was able to influence outcomes in trade rounds and there was little or no political involvement and influence from domestic constituents in developing countries. Not only were developing country governments either ill-informed or uninterested in trade negotiations, but there was also lesser political control and input from within the countty over what trade agreements were entered into by developing country governments.

At present, due to many reasons including democratization, trade interests and “win-sets” in trade negotiations in developing countries are also increasingly “contested” in developing country domestic politics. There are some interesting papers on how the process of making trade policy is changing in certain developing countries at http://www.lse.ac.uk/collections/internationalTradePolicyUnit/events.htm

The domestic politics question has also important implications for how to reconcile “development” issues with trade issues. All law including WTO law is the outcome of politics. The law-making process at the WTO can be visualised as a two-level game of international negotiations applying Robert Putman’s model. Thus the WTO in its institutional design was intended to make trade rules by the interaction between poltics at the domestic and the international level. In the past, developing countries have been disadvantaged in participating in this politics at both levels: in their own domestic context and also at the international table. This disadvantage has also been responsible for trade rules that have tended to reflect developed country interests.

Thus, rather than focus the “trade and development” linkage research solely on what the substantive trade rules should be, (for instance Special and Differential treatment), one could look at how to improve the trade rule making process in order to achieve better legal outcomes from the perspective of development. This would involve improving political participation in the process at both the domestic level and the international level for developing countries. (Such improvement is possible both at the multilateral and /or the bilateral /regional level.)

Unfortunately, this will result in even more politics when it comes to international trade rounds. But the ensuing difficulties would not to my mind justify sacrificing the politics, which is what determines whether ‘good” law is being made.

[Marc L. Busch]

I am struck by the fact that traded services seemed to get brushed under the table a long time ago. Wasn't the round to tackle agriculture and traded services? While we bemoan the many domestic political reasons why agriculture was going to be a tough nut to crack, it is worth keeping in mind that few Members proved willing to submit substantive proposals concerning traded services.

In retrospect, will we also look back on the name of this round as having, in part, been part of the problem: it put too much of a spotlight on the "gains" to be realized by developing countries, which promptly defined "gain" in terms of export opportunities, and gave them latitude to resist making concessions of their own?

[Joel P. Trachtman]

On Marc Busch's point, I wonder whether one potential route from here is not to leave agriculture aside and work on selected other topics, such as the built-in agenda topics including services. The problem with this strategy, of course is that some countries don't get much unless agriculture is addressed.

While I agree with Marc that a mercantilist perspective that gain only comes from exports is short-sighted, I do think developing countries have real concerns about export opportunities and are reasonable in continuing to seek export-led growth, in addition to other types of stimulus.

[Jalal Alavi]

Two points on Marc Bush's and Seema Sapra's views:
1- On Marc Bush's comment, it seems that he is blaming developing countries for what happened this week. Doha round, like any other negotiating round, is a give-and-take exercise. In a give-and-take exercise, the failure can be attributable to all parties. As is the case now. But it should be recalled that Doha Development Round was launched to address the development deficit of the trading system. And this has nothing to do with the give-and-take tactic. The system as a whole is mandated to enhance development relevance of the trade rules. Doha round seems far from delivering on this promise.
2- On Seema Sapra’s views, I agree with her on the need for rethinking of the way trade rules are made. But if we intend to make trade rule-making more conducive to “Development”, political participation is not a panacea. There is aslo a strong need for a "development legal system" to support the rule-making processes in the WTO. Perhaps one can think of an international law of development and a judicial system to enforce it in the process of trade rule-making.

[Simon Lester]

I read Marc Busch's comment somewhat differently than Jalal. I don't think he is saying that the recent failure is the developing countries' fault. Rather, he is saying that we shouldn't blame the developed countries exclusively, as many press reports seem to be doing, and we should recognize that everyone shares a bit of the blame for failing to "give" enough in terms of concessions.

[Marc L. Busch]

Thank you, Simon, for making my point clearer than I did.

On Joel's concern for developing countries seeking export-led growth opportunities, I concur, but would also note that this is hard to do without liberalizing at home as well (the same goes for attracting, and benefiting from, foreign direct investment).

[Jalal Alavi]

My apologies to Professor Bush for my misunderstanding. And I am grateful to Simon for his kind clarification.