Trade Ministers Give Up on Compromise
Geneva Conference Collapses Over Agricultural Tariffs and Subsidies

By Paul Blustein
Washington Post Staff Writer
Sunday, July 2, 2006; A18

GENEVA, July 1-- A conference intended to achieve a last-ditch breakthrough in global trade negotiations collapsed Saturday, sharply diminishing prospects for an agreement that has been touted as a potential boon for the world economy and poor countries in particular.

Trade ministers from about 60 countries, who had planned to negotiate at the World Trade Organization's headquarters here until Sunday and perhaps even Monday, said this morning that they were so hopelessly deadlocked on issues such as reducing farm subsidies and tariffs that they were going home early. The impasse, some said, could undermine the WTO and the multilateral system that has underpinned the expansion of global commerce since the end of World War II.

"There is no need to pretend that this has not been a failure," said Kamal Nath, India's commerce and industry minister. He spoke at a news conference of representatives from developing countries, many of whom blamed the United States for making what they called unreasonable demands on them to open their markets.

Participants in the meeting held out the prospect that negotiations over the next several weeks could result in a compromise by the end of the month on the main issues in the Doha round, the talks begun in 2001 to lower trade barriers worldwide.

"We remain fully committed to an ambitious, robust round and have no intention of giving up hope," said Susan C. Schwab, the U.S. trade representative.

But seasoned trade diplomats expressed skepticism about the chances for a deal because the gaps are so wide and the negotiating positions are so rigid. Inability to reach a compromise this month would almost surely doom chances for completing the Doha round before new political problems complicate the task even further -- prime among them the looming expiration of President Bush's authority to negotiate trade agreements.

"The result of these discussions is pretty clear: There has been no progress. And therefore we are in a crisis," said Pascal Lamy, the WTO director-general.

"I still believe that the differences and the gaps are not unbridgeable," Lamy said. The WTO's 149 member countries authorized him to conduct an intense round of "shuttle diplomacy" this month, aimed at bringing the dissenting parties together, he said. But he conceded that he had not figured out even what the process would be -- whether, for example, he might call ministers to another meeting. "I got this mandate 20 minutes ago," he said.

Since it was established in 1995, the WTO has had a couple of spectacular breakdowns at its meetings, notably in Seattle in 1999 and in Cancun, Mexico, in 2003, where violent protests disrupted the proceedings. No demonstrations disrupted this weekend's meeting, but the discord among the member nations could prove to be more significant, some experts said.

"I think this is worse," said Celine Charveriat, a trade specialist with the aid group Oxfam who was advising developing nations at the meeting. "I haven't seen anybody who has the faintest idea how you can reach a deal."

Fears were widely expressed about the risk of an increasing trend toward negotiating two-way and regional trade agreements, which could sideline the WTO and erode the authority of its tribunals in adjudicating trade disputes.

"Even at this darkest hour, we must restate our sense that we still see the value of the multilateral system," said Kenya's minister of trade and industry, Mukhisa Kituyi.

Most immediately endangered is the Doha round, named for the Qatari capital where the WTO launched it in November 2001. The negotiations were proclaimed a "development round," meaning that its special purpose is to change international trade rules so developing countries can reap more of the benefits of world commerce.

Because poor countries typically depend heavily on agriculture, the chief issues include lowering tariffs and quotas that limit their ability to export their farm products, and curbing billions of dollars in subsidies that rich nations pay to their farmers. Such subsidies can lead to overproduction of crops and gluts on world markets that depress prices for farmers in poor countries.

The Bush administration views the round as a prime opportunity to gain new markets for U.S. exporters, especially farmers. It has insisted that other countries with high farm tariffs cut them drastically, in exchange for which the United States would reduce its farm subsidies by more than half. That would benefit poor countries, according to U.S. officials, who cite studies by the World Bank and other institutions showing that the biggest gains the round could bestow on the poor would come from lower barriers to agricultural trade.

But officials of many developing countries rebelled against that view of development at this weekend's meeting. Repeatedly emphasizing their "solidarity" and "unity" at a news conference, ministers from Africa, Latin America and Asia said that while they wanted barriers in rich countries lowered, they had to maintain many of their own high duties. Their farmers, who often operate at near-subsistence levels, need shelter from foreign competition, they said.

"There was a lot of talk about market access," said Mari Pangestu, Indonesia's trade minister, "But this is not about market access, it is about protecting targeted sectors that are vulnerable."

Among the most militant among the developing country ministers was India's Nath. He infuriated U.S. and other officials by announcing on Friday, just as the conference was beginning, that he was strongly considering leaving early because of the lack of promise for a breakthrough. And, according to participants at one Friday night meeting, Nath showed up very late because, he said, he wanted to catch the World Cup soccer match between Argentina and Germany -- although the representatives of Argentina had come to the meeting on time.

Nath and other ministers from developing nations were particularly critical of the United States for refusing to break the stalemate by going further in reducing subsidies. The hard-line U.S. position helped take some of the pressure off of European Union negotiators, who have been vilified at past WTO meetings as the biggest coddlers of rich farmers.

With obvious relish, Peter Mandelson, the European trade commissioner, cited figures at his news conference showing that although the United States is offering to cut the legal ceiling on its subsidy programs, its proposal would allow Washington to spend about $22.6 billion -- more than the $19 billion it paid out last year.

U.S. officials defended their position as the only way to guide the Doha round toward deep cuts in tariffs. They said they could not offer more concessions because other nations had been adamant in maintaining high duties on "sensitive" and special" products -- such as rice, in the case of Japan.

"We did not find closure or even narrow the range" in negotiating positions on that issue, Schwab said. "It was a real eye-opener."

Schwab pointed out that global trade talks have ground to a halt before, an example being the Uruguay round, which appeared to fall apart in 1990 but ended in a deal in 1993.

But Lamy and others have been warning that time is running out for the Doha round. Months would be required to draft a final agreement, which would contain thousands of details on individual tariffs. And after Bush's authority to negotiate broad trade agreements expires in July 2007, any deal submitted to Congress could be picked apart by amendments.

"If we do not turn things around in the next two weeks, we will not make a breakthrough this summer, and then we will be facing defeat," the E.U.'s Mandelson said.

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