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TRADE: New World Order in Doha’s Wake

Gustavo Capdevila

GENEVA, Aug 1 2008 (IPS) - The standoff between China and India, the world’s two fastest growing economies, and the United States not only buried the last attempt to save the Doha Round, but also demonstrated changes in the balance of power since the WTO was created in 1995, say observers.

The World Trade Organisation (WTO) effort to reach an agreement and conclude seven years of negotiations for greater trade liberalisation collapsed in Geneva on Tuesday, largely because of differences between these three countries.

Never before has any individual country in the multilateral trade system challenged the United States in this way, let alone to the point of forcing it into a stalemate.

The impasse was due to changes in the composition of the key actors that debated the fate of the Doha Round up to the last minute at WTO headquarters in Switzerland.

Previously, at the Uruguay Round (1986-1994) of multilateral trade talks, major decisions were made by a select group called the Quadrilateral, made up of Canada, the European Union, Japan and the United States.

At the Jul. 21-29 mini-ministerial conference involving over 30 countries, however, the key negotiating group was broadened to include Australia, Brazil, China and India. Canada was excluded, so this inner circle was named the Group of Seven (G7). “I think that the major difference that everyone has noted, compared to other WTO meetings, is that China has been included in the main core of the negotiations,” Anne Laure Constantin, a representative of the Institute for Agriculture and Trade Policy (IATP), told IPS.

“This is an important change because China is a very specific country that doesn’t really need this deal to improve its trade balance or to benefit more from trade,” she said.

A minister from a Latin American country, who requested anonymity, said that the outstanding development in the ministerial meeting, in terms of the balance of power within the WTO, is that “China abandoned its low-profile position.”

In Constantin’s view, “China has been under a lot of pressure from the U.S. to become more engaged in these negotiations.”

China was admitted to the WTO at the Fourth Ministerial Conference in November 2001 in Doha, the capital of Qatar, when the Doha Round of negotiations was launched.

China was reluctant to become involved in the hard core of negotiators while it was still a recent member of the WTO, a category that receives preferential treatment, such as special flexibility provisions and longer periods in which to implement trade agreements.

India may also have convinced Beijing to enter the core G7 negotiating group, out of India’s need for an ally with the same defensive interests on farm issues, Constantin said.

The entry of China “immediately made a big difference” in the G7, where it played a strong role, said Romain Benicchio, Oxfam International’s representative in Geneva. In particular, it adopted “an extreme position on cotton tariffs.”

“Some 140 million people depend on the cotton production chain” in China, said the Oxfam expert.

The other novelty is that India has consolidated its position as the leader of poor developing countries concerned with defending the livelihoods of subsistence farmers.

India’s Trade Minister Kamal Nath brought the negotiations almost to a standstill when he confronted the United States over its opposition to the Special Safeguard Mechanisms, demanded by the Group of 33 (G33) developing countries to protect their farmers from unforeseen surges in agricultural imports.

Rejection by the United States of these safeguards triggered the final collapse of the negotiations.

With respect to Brazil, Constantin said it was probably one of the countries in the WTO that stood to gain the most from the agreement that was emerging at the special ministerial meeting.

Benicchio said that Brazil’s position at the meeting was “hard to read. Traditionally, it has led a big coalition of developing countries, but this time we haven’t heard so much from them.”

“Its own interest may be one big difference,” he said.

Constantin compared Brazil’s attitude at the Fifth WTO Ministerial Conference, held in 2003 in the southeastern Mexican resort city of Cancún, to the stance it took this week in Geneva.

At Cancún, the Brazilian delegation was “more defensive and more radical in pushing developing countries’ issues,” the IATP expert said.

In contrast, at the recent ministerial meeting in Geneva, perhaps feeling that it was the last chance to salvage the Doha Round, “Brazil appeared more willing to let the U.S. continue with their trade distorting subsidies,” she said.

Alternatively, it may be that Brazil is also being more realistic about what the U.S. could really do, Constantin speculated.

The Group of 20 (G20), formed at Cancún by developing countries with shared interests in the talks on agriculture, was shaken by the failure of the Doha Round.

Although they did not clash directly, Brazil and India were on opposite sides when the decisions were adopted that ultimately led to the collapse of the talks.

Brazil did not join India in the defence of its position on agriculture, aligning itself instead with the United States, the EU, Australia and Japan.

Minister Nath and Brazilian Foreign Minister Celso Amorim tried to show that the differences have not broken the G20 apart, by a display of friendship in front of the media after the meeting.

Argentine Foreign Minister Jorge Taiana told IPS that “time will tell” whether certain alliances will suffer as a result of the Geneva conference.

Brazil, Argentina’s partner in the Southern Common Market (Mercosur) and in the G20, did not support Argentina in the negotiations on industrial products.

“Brazil’s solidarity with Argentina is eternal,” Amorim said repeatedly at Geneva.

He has come under criticism from sectors of Brazilian society for his policy of forging alliances with developing countries.

José Botafogo Gonçalvez, a well-known diplomat who heads the Brazilian Centre for International Relations (CEBRI), this week criticised Brazilian President Luiz Inácio Lula da Silva’s assessment that there is a confrontation between rich and poor countries at the WTO.

On the contrary, our competitors are no longer the industrialised countries but developing countries, Botafogo said in a newspaper interview.

Brazil is currently interested in Asia’s agricultural markets, especially those of India and China, he said.

Brazil now exports manufactured goods to the United States, from which it also imports consumer goods, he said. The real trading relationship now is with China, not the United States, Botafogo emphasised.