Economist: Doha

The Economist

November 10, 2001 U.S. Edition

THE HEAT is on. It may be oppressively hot in Doha, capital of Qatar, and host to the ministerial meeting of the World Trade Organisation (WTO). But the political temperature is rising even higher in the air-conditioned meeting rooms. As America has made significant concessions--a demonstration of real leadership according to some delegations--the European Union (EU) is beginning to look isolated. With the negotiations now moving into their final phase, hopes of a deal have risen among most of those participating. But even as the deadline approached, a deal is eluding the negotiators, raising the prospect of an extension to the talks, or even a complete collapse.

The aim at Doha is to undo the damage caused by the collapse of the ministerial talks at Seattle, two years ago. At that meeting a marked reluctance on the part of many countries to make the necessary concessions destroyed an opportunity to launch a new round of world trade negotiations. Doha is another chance to get a new round under way. But this time the stakes are even higher. With the world economy slowing sharply, failure could undermine the multilateral trading system and sideline the WTO. But success requires some big concessions, above all from America and the European Union.

With 142 countries represented at Doha, the negotiating process is cumbersome, especially since the rich countries are anxious to ensure that developing countries do not feel excluded from the deal-making and have a chance to voice their concerns. Large-scale gatherings of this kind often involve an initial period of what one delegate has called "grandstanding"--when every country gets the chance to state its position, and there is little evidence, in public at least, of readiness to move. But now that the final countdown has started, real concessions are being put on the table.

Most of the hard-bargaining has taken place in six groups, each tackling one of the key issues: agriculture, the environment, anti-dumping, implementation of the previous Uruguay round agreement, intellectual property, and investment and competition. A new draft text of an agreement, reflecting the work done in these groups, was circulated on November 13th, just hours before the meeting is due to end. Inevitably, though, the key deals, which would unlock an agreement, involve cross-negotiation: concessions on one issue are offered up in return for concessions made on others. That process is now under way. There is optimism that a deal can be worked out, but not yet certainty.

On November 12th it became clear that America was ready to offer concessions on a number of fronts. Most crucial have been the negotiations on intellectual property (formally known as Trade Related Aspects of Intellectual Property Rights or TRIPS). Central to the arguments about TRIPS is whether exceptions to patent protections can be made for public health concerns--that is, whether developing countries can breach drug patents because of the high cost of buying patented drugs for their populations. Brazil, India, and African countries want the broadest definition of TRIPS exemptions: America, Canada and Switzerland had wanted exceptions to be much more limited, largely restricted to health crises such as AIDS. As a result of American concessions, it now looks as if a form of wording which gives the developing countries most of what they want is on the table.

On anti-dumping too, there have been surprising signs of movement from the American delegation. Anti-dumping measures are employed by countries to keep out or penalise the import of goods which they claim are being sold for less than the cost of production. But they are highly controversial--calculating such costs is fraught with difficulties--and America's frequent use of them in recent years has infuriated many other countries, who see them as little more than protectionism by another name. America has been under intense pressure from several developing countries to offer concessions on anti-dumping, but Robert Zoellick, America's chief negotiator, has limited room for manoeuvre because President George Bush has not yet secured what is known as trade-promotion authority, or fast-track. This enables the president to present Congress with a complete trade package which it can either accept or reject, but which it cannot negotiate on line-by-line. Late last week, the Republican Party admitted that it still did not have enough votes to secure fast-track for Mr Bush.

In spite of this dilemma, Mr Zoellick appears to recognise that he has to try to offer something in Doha, and has agreed to discuss the anti-dumping issue--itself a significant concession. It is possible that he will try to persuade Congress and America's business lobbies that any move on anti-dumping is no more than a clarification of the existing agreements.

On textiles, though, the Americans say they can offer little. It was always going to be difficult to see how Mr Zoellick can make the concessions on textile imports which many developing countries, particularly India, want as part of the agreement on implementation of the Uruguay round, which was concluded in 1994. Using tough language, India is holding out for more.

Nevertheless, the shift in America's position on TRIPS and anti-dumping has left Europe looking more isolated than ever on agriculture. The draft text prepared before the ministers arrived in Doha, which forms the basis of the negotiations, speaks of phasing out agricultural-export subsidies. Even the Japanese have agreed to this. The French continue to be strongly opposed, however, and there has been no sign of a softening of the EU position. It is possible that the EU could be persuaded to move in return for stronger wording on the environment: but many developing countries already object to the existing draft, and would be loth to accept anything stronger. The pressure on Europe to avoid wrecking the prospects of a deal are now intense. But the French seem determined to stick to their guns.

Many developing countries, India and African countries especially, are also opposed to the inclusion of investment and competition as issues for the new trade round. But these are important priorities for the EU. Politically, it could be very difficult for Europe to make large concessions on these issues as well as on agriculture--unless it had something to show on the environment.

As if matters were not already difficult enough for the EU, a trade agreement it has with a group of African and Caribbean countries is now also threatening the chance of agreement at Doha. The developing countries involved have demanded a declaration at Doha that the preferential trading access they have to EU markets can continue: they want a waiver for the deal under WTO rules. This has incensed some Latin American countries, Honduras in particular, because such a waiver would mean their banana exports would, in effect, continue to be discriminated against by the EU. Such a stand-off, between two groups of developing countries, is potentially a deal-breaker, according to observers.

In the changed atmosphere brought about by the terrorist attacks on New York and Washington, renewing the rich world's commitment to free trade is an important element in the process of building Mr Bush's international coalition. That point seems to have been taken on board by Mr Zoellick and the American team. Much work remains to be done for an agreement to emerge: but Europe could now hold the key.

GRAPHIC: The world trade talks in Doha, Qatar, are due to end at midnight. A deal has now been described as "doable", but the negotiations are on a knife-edge; Slow-track Zoellick; Some protesters made it

LOAD-DATE: November 14, 2001

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