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Global Trade Negotiations Collapse

Efforts to reach a breakthrough in the Doha Round of trade liberalization talks fell apart.

GENEVA — The Doha Round of trade liberalization talks fell apart Tuesday because of bitter differences among the U.S., India and China over farm trade issues.

This story first appeared in the July 30, 2008 issue of WWD.  Subscribe Today.

The collapse came after nine days of round-the-clock negotiations in which ministers from about 35 key nations took part.

“It is clear that, despite our best efforts, we will not be able to reach a breakthrough at this time,” said U.S. Trade Representative Susan Schwab. “Regrettably, our negotiations deadlocked on the scope of a safeguard mechanism to remedy surges in imported agricultural products.”

Pascal Lamy, World Trade Organization director general, who took a hands-on approach in a bid to broker an agreement that would reduce farm subsidies and strengthen global trading, was blunt in his assessment: “It is no use beating around the bush. This meeting has collapsed. Members have not been able to bridge their differences. What members have let slip through their fingers is a package worth more than $130 billion in tariff savings annually.”

Similar efforts to secure a deal to lower subsidies and tariffs on agricultural products and industrial goods, including textiles and apparel, were derailed the previous two summers over the inability to bridge the political divide between Western powers and emerging nations over protecting industries and opening markets.

“The failure to reach agreement is a profound disappointment,” said European Union Trade Commissioner Peter Mandelson. “This is a setback for the international trading system, greater than just the lost trading opportunities. We would all have been winners from a Doha deal.”

China’s alliance with India over shielding their farm sectors from surges in imports, and protecting commodities such as cotton, sugar and rice from new tariff cuts, were said to be a main trigger for the collapse.

The Indian government that last week survived a vote of confidence was in no mood to give in on the farm demands of the U.S., which feared that an agreement would not open new markets for American growers. The Bush administration was under bipartisan pressure from Congress to deliver new market access for farmers, industry and service providers.

India and China both rejected the U.S. demands and said Washington’s track record was poor when it came to lowering farm-support measures and sheltering problematic commodities, such as cotton. Advocacy groups such as Oxfam International that have championed the cause of poor nations, especially African cotton producers, blamed the U.S. and the EU for the failure.

“If the EU and U.S. had made meaningful offers that lived up to their promises, we might have seen progress,” said Oxfam director Jeremy Hobbs. “Instead, they demanded harsh concessions from developing countries in exchange for largely illusory reforms and limited flexibilities.”

But trade envoys said back-tracking by China also soured the chances of crafting an agreement. China had signaled in the G-7 (the Group of Seven major economic powers) talks chaired by Lamy, which included the U.S., EU, India, Brazil, Japan and Australia, that it might be prepared to make deeper tariff cuts in some industrial sectors.

John Engler, president of the National Association of Manufacturers, said, “WTO members declined to agree on terms that could have provided greater opportunities for trade of manufactured goods. Time and again at the Geneva meetings, China and India reiterated how they could not lower their barriers, but insisted we must lower ours.”

Cass Johnson, president of the National Council of Textile Organizations, said, “Politically, there has been a seismic shift in attitudes toward trade in the U.S. since the round was inaugurated seven years ago. It is no longer politically possible for the United States to sign a trade pact where there is all pain and almost no gain. India and China never got that message.”