Global Policy Forum

By Larry Elliott

The French hate the Americans. The Americans loathe the French. Developing countries wonder what on earth is going on. The spat within Nato over what to do about Saddam Hussein? No, this is an issue that it would take more than one Hans Blix to sort out - the Doha round of trade talks.

It was not supposed to be like this, of course. As the planes dropped their payloads on Afghanistan, the talk was not just of being tough on terrorism, tough on the causes of terrorism. The trade ministers who gathered in Qatar in November 2001 were under serious pressure to repair the damage from the disastrous Seattle meeting two years earlier by committing themselves to opening up markets. Failure was too tough to contemplate: it would represent victory for the terrorists.

As the events of the weekend highlighted, the US and Britain are still keen on prosecuting the war against terrorism. The carriers are moving to the Gulf. The planes are being armed with their hi-tech weaponry. The ground troops are preparing for an invasion. We can see every night on TV how the US is preparing to deal with Saddam. Much less, however, is heard about the other side of the equation, how breaking down protectionist barriers will lead to faster development. Terrorism breeds in conditions of poverty, so making countries richer makes us all safer.

That, at least, was the theory. But it is now 15 months since the launch of the Doha round and progress has been painfully slow. Should it come to war against Saddam, the hope in both the White House and Downing Street is that it will be short and decisive.

No such optimism is to be found in the corridors of the WTO on the shore of Lac Léman on the outskirts of Geneva. There, last week, it was abundantly clear that the talks are going nowhere fast. Negotiations are like a game of three-dimensional chess conducted by more than 140 players paying only lip-service to deadlines.

The stalemate in Geneva exposes one of the myths about the WTO; that it is really Spectre in disguise, a body bent on world domination led by an evil mastermind from his lair in a hollowed-out volcano. In reality, the WTO is no different from any other international bureaucracy in that it takes orders from its member governments. If there are any Dr Evil characters bent on the immiseration of developing countries through dastardly trade policies they are the ones responsible for the common agricultural policy or those in Washington who kowtow to the US drugs industry. There are three big problems with the talks. The first is that progress requires policymakers to be fully engaged in the process and to demonstrate, through a willingness to cut deals, a shared interest in pushing ahead with the agenda. Even before the recent falling out between the US on one side and Germany and France on the other over Iraq and Nato, it was clear that no such willingness is apparent. George Bush has other things on his plate; likewise Tony Blair, who in other circumstances would be expected to urge faster progress on the Doha round, and Gerhard Schrí¶der. Jacques Chirac, fearful of France's farmers, has no real incentive to speed things up.

The spat over Saddam has made matters worse. There were some hopeful signs last week that a deal on providing affordable life-saving drugs for poor countries might be finally agreed in Geneva tomorrow following concessions designed to mollify the fears of big American drugs companies that their patents would be infringed willy-nilly by low-cost producers in India and Brazil.

But as one official put it: "The White House is very involved in this issue. The US drugs industry is involved through the White House." In the circumstances, there are doubts about whether Bush will be willing to sign up to a deal which - despite the new safeguards - would be seen as a climbdown. There is considerable frustration with the tough American stance in Geneva, where an agreement on drugs is seen as a way of breaking the logjam.

Scoffing

Officials openly scoff at some of the points raised by the US, particularly that the new system may be abused so that poor people in Africa would be demanding cut-price Viagra. "If you've got Aids and malaria, you're really not that worried about erectile dysfunction," one said. "You really don't live long enough for it be a problem." Moreover, any watering down of patent protection in the world's poorest countries will have scant impact on the profitability of the multinational drugs companies, which make the lion's share of their money in the US itself. A deal on drugs for poor countries should be a win-win play - better healthcare, no risk of damage to research and development of new drugs, and a sign of good intent from the west that might help kickstart the talks.

The second problem is the sheer scale and complexity of the agenda. As ever, the core of the negotiations concern market access - breaking down the system of tariffs and other barriers, such as quotas - that restrict trade. But there are also attempts to liberalise trade in services and agriculture, and to bring a new range of issues - such as competition policy and investment - under the WTO umbrella.

There was always a risk that the agenda would become so overloaded that the system could not cope and this looks like more and more likely as the weeks and months roll past. The three-dimensional chess means that progress in one area is contingent on progress in another. As such, none of the players is prepared to offer anything on market access or services until it sees what is on offer on agriculture.

There is frustration with poor countries, mainly those in Africa, who have demanded a set of more than 80 concessions and exemptions and are refusing to negotiate on them, let alone put them in a list of priorities. Such a hardline approach may be understandable after the shabby way in which the interests of poor countries were blatantly ignored in the last round of talks, but it is leading to stagnation in Geneva. What's more, it may backfire in the end if the developed countries lose patience and decide that the agonising process of negotiating special and differential treatment is more trouble than it's worth.

Impasse

Finally, of course, no trade talks these days would be complete without an impasse over agriculture. The extent of the problem here was underlined by the paper put out last week by Stuart Harbinson, the chair of the agricultural talks; this was sent back to the drawing board by ministers from more than 20 world trade organisation members at the Tokyo meeting over the weekend after it failed to please either of the two main camps. Harbinson said he hoped his second draft in the coming weeks, would find a better compromise.

His original plan was a serious attempt to force the players to face up to how much needed to be done between now and the WTO's ministerial meeting planned for Cancun in Mexico in September. The EU hated the Harbinson paper, because it demands big cuts in the export subsidies that are ravaging agriculture in the developing world, as well as reductions in the support the Americans give their farmers through export credits. Deep down, however, the Americans are far more ready to countenance liberalisation of trade in agriculture than is the EU. Washington will not move in other areas unless Brussels accepts deep cuts in farm subsidies.

Talks hang by a thread but here are some predictions. Ultimately, a compromise will be reached on agriculture, where it is questionable whether Europe can continue its extravagant feather-bedding of farmers at a time when unemployment is high, budget deficits are rising and the farmers of central and eastern Europe are about to join the club. Reducing farm support - even though it will not meet the aspirations of the development agencies - will act as a catalyst for the rest of the talks, where there will be a surprising amount of liberalisation of trade in services. But this won't happen yet. The chances of the talks ending on schedule next year are between slim and none. A crisis in the talks is needed first. On current form that will come in Cancun. There is too much to do, and very little time.

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