The challenge before Pascal Lamy
Pascal Lamy, the new director-general of the World Trade
Organisation (WTO), has begun to set the agenda for the Doha Round
negotiations at the Hong Kong ministerial meeting during December 13-18,
2005. Recognising the vast differences that remain among participants, he
has publicly stated what has been known for some time: contrary to the
original deadline, the round will not be concluded by December 31, 2005.
Instead, Lamy has urged the member countries to forge an agreement at Hong
Kong that would bring them two-thirds way to the final agreement. He has
proposed the members complete the remaining one-third of the task by the
of 2006. That would still close the round two years faster than the
predecessor Uruguay Round and is therefore an ambitious undertaking.
Lamy faces a truly uphill task. A relatively recent development that adds
to the challenge he faces is the sophistication, organisation and
coherence that developing countries have achieved in articulating their
demands in the negotiations. In the Uruguay Round negotiations, only
agricultural exporting developing countries were successful in effectively
voicing their demands through the so-called Cairns Group.
And even then, they had to align themselves with a subset of agricultural
exporting developed countries whose interests outside of agriculture were
in conflict with theirs. The remaining developing countries were at best
loosely organised and eventually became the victims of the "divide
and rule" strategy of developed countries.
In contrast, virtually all of the major developing countries from Asia,
Africa and Latin America - Brazil, China, Egypt, India, Indonesia,
Pakistan, Mexico, South Africa and Tanzania - are today members of the
developing country grouping known as G-20. At the same time, when compared
with the total number of developing countries, G-20 is small and therefore
less unwieldy than the past developing country groups such as G-77.
The benefit of these two key attributes was illustrated soon after
the group's inception during the preparations for the Cancun ministerial
meeting two years ago: it successfully led the effort to persuade the
European Union to drop three out of four Singapore issues from the Doha
Another factor strengthening the negotiating power of developing countries
is their increased share in world trade. They now account for more than
30% of the world merchandise trade. Add to this fact the vast population
in these countries and you know that the Quad countries - the US, EU,
Canada and Japan - can no longer determine the outcome of the round by
themselves as they did in the past.
The task faced by Lamy is further complicated by the fact that
liberalising agenda itself is politically more changed in the developed
countries than in the past. The Uruguay Round liberalisation focused
principally on industrial goods and services and essentially sidestepped
agriculture. Neither the liberalisation of industrial goods nor services
posed serious political hurdles. The main controversial proposal concerned
the removal of the quotas on textiles and clothing but it was handsomely
compensated by the introduction of very high standards of intellectual
In contrast, the key sector the Doha Round aims to liberalise is
agriculture. Farm lobbies are powerful and interventions include subsidies
on output and exports whose removal is highly contentious. Even in
industrial goods, developed countries must now deal with peak tariffs that
apply virtually exclusively to labour-intensive products that employ
unskilled or low-skilled workers.
Developed countries also see the already large developing country market
turn even larger over the course of the implementation period of the Doha
Round if it is successfully completed. Therefore, they are reluctant to
proceed with liberalisation unless the major developing countries such as
Brazil, China, India and other developing countries in Asia and Latin
America reciprocate. Because China has gone a long way towards opening its
markets as a result of its WTO entry conditions, the burden is greatest on
Brazil and India. It is here that Lamy faces his greatest challenge.
Encouraged by the heads of multilateral institutions such as the
World Bank and IMF, influential NGOs such as the Oxfam and the vast
majority of well-intentioned but ill-informed press, developing countries
have come to believe that protection is principally a developed country
problem and it is these countries that must undertake the liberalisation
they have been preaching for the last five decades.
Unsurprisingly, in the "Bhurban Declaration" issued by G-20
following the September 9-10, 2005 summit in Bhurban, Pakistan, the member
countries demand many concessions including the elimination of export
subsidies within five years from developed countries but offer few
concessions of their own.
Lamy himself accords a high priority to ending export subsidies in
agriculture by a certain date and to substantial reductions in domestic
support measures. Nonetheless, his success in moving the Doha Round
forward at Hong Kong will very much depend on his ability to persuade
developing countries to undertake liberalisation commitments commensurate
with those they seek from developed countries.
The pressure on India to undertake liberalisation commitments at Hong Kong
will be immense. The massive liberalisation undertaken during the last 15
years notwithstanding, India remains among the most-protected markets.
Moreover, even though it currently accounts for less than 1% of the world
imports, it promises to be a vast market in the forthcoming decades.
Therefore, developed countries see liberalisation by India as perhaps the
most important key to the successful completion of the Doha Round.
India's own experience, and that of all its neighbours, shows that
liberalisation brings benefits. These benefits are multiplied if the
country's trading partners liberalise along with it. Therefore, while
India must drive a hard bargain at Hong Kong, it will be tragic if it
allowed the negotiations to fall on its unwillingness to liberalise.
TIMES: SEPTEMBER 21, 2005