2/12/2005
Compromise Needed In Trade Talks - By Anthony Pouliquen

At the end of July 2004, the World Trade Organisation met in Geneva and adopted the Oshima text. When compared to the product of the trade negotiations launched in Doha in November 2001 (the Doha Development Agenda), this proposed considerably greater liberalisation of farm trade, substantial cuts in trade-distorting support for agriculture, the elimination of trade distorting export competition practices and a significant opening of the EU's markets for agricultural produce.

According to this agreement, all developing countries would benefit from special treatment, namely longer transition periods and flexibilities in tariff cuts. Besides, the world's 50 poorest countries would be exempted from having to reduce their industrial tariffs.

But WTO officials have warned the talks are close to breaking point, due to internal rifts and logjams in negotiations on the cuts rich parties (especially the US and the EU) will apply to the subsidies they grant their highly protected farm sectors.

The EU's proposal to cut farm tariffs an average of 38% was well short of the 54% its trading partners wanted. Peter Mandelson, the EU trade commissioner, ran into trouble in October when he offered further reforms to try to keep the Doha round on track. The offer was criticised by the US and Brazil as not going far enough, while France threatened to veto the whole round if there were further cuts.

So far developing countries have all been distinctly unimpressed by the cuts proposed by the so-called Five Interested Parties (EU, US, Australia, Brazil and India). Indeed, both blocs have actually been reclassifying some subsidies into other World Trade Organisation categories in order to reduce cuts. The so-called Green Box is supposed to contain only subsidies that don't distort trade, and this is where the EU has reclassified many of its subsidies, thus removing them from the Amber Box, which counted trade-distorting subsidies.

Although the EU has offered to cut its subsidy ceilings by 70%, its total spending on trade-distorting agricultural subsidies will remain unchanged at around $23bn a year. For the US, spending could fall by 19% from the current level of around $21bn, but the US could in fact leave its spending steady and still claim to have cut its subsidy ceilings by 53%.

America's negotiating mandate runs out in 2007, which means that, as Brazil officials have suggested, organising a “Hong Kong II” even before next month’s discussions have taken place gives the impression of negotiations that will be postponed for ever. According the Guardian on 25 October, Peter Mandelson will need the French to compromise and give up some of their beloved farm subsidies if the talks are to avoid collapse in the next few weeks.