28/7/2006
Transcript of Peter Mandelson's remarks on his return from Geneva following the suspension of the WTO Doha negotiations. Brussels, 25 July 2006

Flexibility was needed – flexibility was lacking

I said yesterday what I have to say about the suspension of the DDA negotiations. It is deeply regrettable, disappointing and it could have been avoided. This is not just another missed deadline. It is a major missed opportunity, with serious systemic implications for multilateral trade. My statement in Geneva yesterday has been circulated to you all.

I want to emphasise several things. First, the gaps between us were not great. It should, with good will and commitment, have been possible to come together in a deal that would have delivered real economic benefits for developed and developing countries, even if it did not meet the highest demands of some negotiators.

The European Union, despite divergent views among Member States, was able with a great effort over the last six months to show significant flexibility on the difficult agricultural market access issues. To raise our envisaged average farm tariff cut from 39% to 50% is hardly putting "nothing on the table". Other negotiators, to a greater or lesser extent, also showed flexibility on areas where they had acute defensive concerns, be it in agriculture or industrial tariffs.

The EU could not, I think, have made more effort and put more into making these talks a success. We have shored them up not once, but at least four times: in Cancun, by agreeing to limit their scope; subsequently, by offering to eliminate all export subsidies, in Geneva in July 2004, and by pushing for a robust Framework Agreement; in Hong Kong, by agreeing on a date for the elimination of export subsidies; and again, in the last few months, by showing we could put more currency on the table. To listen to some in Geneva yesterday, you would have thought that Europe had simply sat on its hands.

But the United States, I regret to say, showed no flexibility at all in the end on the issue of domestic subsidies in agriculture. I regret this, although I do understand the domestic political considerations which influenced the United States’ negotiating position. As a result, the United States have been asking too much from others in exchange for doing too little themselves. This is not my definition of leadership. And now, the United States seems to be saying to the rest of the world: "we are right, you are isolated".

The costs of failure

The costs of this breakdown are high - and will be even higher if it becomes permanent. As Pascal Lamy said yesterday, we are all losers. Let me remind you exactly what risks being lost: real cuts in tariffs in industry and agriculture in all developed and most large developing countries and thus a major boost to world trade; Duty Free Quota Free access to rich countries’ markets for the poorest. Greater investment, and choice in the provision of services, which are the backbone of modern economies; an ambitious agreement on trade facilitation, to reduce what is today a high tax on world trade flows. And, more importantly than any of the above, consolidation of a programme of fundamental reforms of farm subsidies in the rich world - something that ultimately only the WTO can deliver.

The other reason we care so much about the talks’ collapse is because of our commitment to the multilateral system and process. This is central at a time of global economic and geopolitical uncertainty. It is crucial, also, at a time when the fear of market openness is growing in many nations, when society is being impacted by dramatic technological and economic change and when those who oppose free trade and open markets are successfully taking political advantage of these fears. Yesterday’s failure will certainly be cheered by the wrong crowd, something to be borne in mind by those who profess a commitment to free trade but cannot stand up to lobbies representing a fraction of national economic output.

This is all the more unacceptable because what is already on the table in this Round, in terms of market access, subsidy elimination and measures to help the poorer developing countries, far outstrips the achievements of previous Rounds. What we now stand to lose is far more significant than the relatively small issues on which the negotiations have foundered.

Remaking the case for free trade for conviction

But this is not a time for recrimination or for crying over spilt milk. We need to look ahead and to rebuild. As I said yesterday, Europe remains committed to this Round. When can it restart? I do not know and I doubt it can be soon. But I am convinced that we must retain the offers that are already on the table and push hard to restart the negotiation when circumstances allow. We need this Round and we need the multilateral trading system that it supports.

So Doha will remain a central priority of European trade policy. We will work to bring it back to life and to success.

The bigger question is how, in the wake of such a crisis, can we restore confidence and bolster support for the multilateral trade system?

For this, we need to revisit and remake with conviction and commitment the case for open markets and the case for trade as a trigger for growth, development and poverty reduction.

Many in the WTO membership are ambivalent towards free trade; they think that a development round means one that they should be exempt from. This is wrong. No successful development model has been built without progressive trade liberalisation driving it. The WTO is pro development not because it promotes "liberalisation" as such, but because it is the only tool that provides progressive market liberalisation, within a rules based system.

Also wrong is the idea that the WTO is there to create a tariff free world in farm trade, and that farm reforms in rich countries must be paid for, dollar for dollar, by reduced tariffs in developing country farm markets. The WTO is first and foremost an instrument to foster and lock in reforms. Attempts to create a new market access exchange rate for this to happen will never be accepted.

Moving forward - a development package

What can we do next? In the short term, we should ensure that the more needy developing countries do not fall victim to the inability of the WTO membership as a whole to strike a deal. As a starting point, we should extract from the rubble of the negotiation a significant development package and frontload it, creating an early harvest for the most needy developing countries.

What should this consist of? First we should push ahead with the Aid for Trade package because developing countries’ capacity constraints remain unchanged. Second, we should continue to put together a new agreement on trade facilitation, which is linked to aid for trade and will be a focus of our trade related assistance in the years ahead. Third, we should put in place the new Integrated Framework for technical assistance to trade for the LDCs and get it up and running. Fourth, the Hong Kong agreement on duty free quota free market access should be fully implemented outside of the Round and possibly improved. Fifth, we should also pursue specific proposals on Special and Differential Treatment on a fast track and stand alone basis, adapting existing WTO agreements in this way. Sixth, we should continue to work on making origin rules more development friendly. Seventh, we should see if we can put in place improvements on the dispute settlement understanding to make it easier for developing countries to use. This in summary is a seven point action plan for salvaging or extending the development agenda.

Outside of the WTO, Europe will also focus intensively on its pro-development Economic Partnership Agreements with the African, Caribbean and Pacific countries. We will use these as a trade instrument at the service of development, seeking to compensate where we can for the lost benefits those poorer developing countries would have gained through early completion of the Round.

We also need to begin to think through the agenda of work for the WTO. How can we strengthen that organisation both in its policies and in the way it operates? I do not advocate a programme of urgent reform: that would risk side- tracking us. But we should reflect on the negotiating process we have been through to see how it can be improved if we are to kick start this Round again - which is what the EU wants to do.