World trade talks stall

Has trade been the engine of world economic growth?

Trade officials are meeting at the World Trade Organisation in Geneva this week in an attempt to revive plans for a new round of global trade talks.

But the mood is pessimistic, with just seven months to go before the formal start of the talks at a WTO meeting in Qatar in November - and four months before a self-imposed July deadline for agreement on a new trade agenda.

The multi-lateral trading system has probably done more to boost living standards and lift people out of poverty over the past 50 years than any other government intervention

Mike Moore
WTO

Previous attempts at reaching a new agreement to liberalise world trade in Seattle in 1999 were abandoned after mass demonstrations disrupted the meeting.

That meeting also revealed deep-seated differences in approach between the world's two leading trade blocs, the US and the EU - and an even bigger gap between both of them and the developing world, which make up the majority of the WTO's membership.

Now plans to extend free trade in agriculture - vital to many developing countries - are in jeopardy.

The EU, along with Japan, Korea, Switzerland and Norway, has said that it is vital to retain farm subsidies to boost rural communities, ensure food supply and boost animal welfare.

Negotiators from agricultural exporting nations in the Cairns group, which have been calling for the abolition of agricultural subsidies, will now press their argument in a series of meetings over the next year.

WTO head Mike Moore said that the disagreements were healthy.

"The next phases are not going to be easy, but there is clearly a healthy determination to work together on this," he said in Geneva.

Trade splits

But, as negotiations begin in earnest in the areas of agriculture and services - along the parameters which were agreed in the previous set of trade talks, the Uruguay Round - trade tensions are bound to increase.

Protesters mobilised against WTO talks

In particular, the US under the new Bush administration is hardening its position, resisting demands for concessions on US-administered "anti-dumping" laws and putting more emphasis on extending the North American Free Trade Area (NAFTA) to other Latin American countries.

Developing countries, sceptical that previous agreements offering more access for their textile and agricultural exports will be implemented, are also talking tough.

Other major exporting countries are worried by the deadlock.

"Failure to launch a new round this year would be a dangerous blow to the membership of the WTO," said David Spencer, Australia's top trade negotiator.

"With the slowing down of the world economy, a round is absolutely critical to fend off protectionism," he added.

Developing countries wary

Since the WTO operates by consensus, gaining the agreement of Third World members is crucial to moving the trade talks back onto the agenda.

With the slowing down of the world economy, a trade round is absolutely critical to fend off protectionism

David Spencer, Australian trade negotiator

But developing countries believe that they have not gained much from previous rounds of trade talks, which delayed plans to eliminate agricultural subsidies in the rich countries which amount to more than $300bn each year.

They are also sceptical that the rich countries will implement their commitments to free trade in textiles and clothing, which come into force in 2004.

And they want to prevent issues like investment, competition policy and above all labour standards being included in any future trade talks - which they believe would be a form of disguised protectionism designed to keep cheap goods out of Western markets.

Both the UK government and the head of the WTO have been working hard to persuade them that trade liberalisation would be the biggest contribution to world poverty.

Mike Moore: new round needed for poor

"By liberalising trade, we can make a huge contribution to alleviating poverty," WTO director-general Mike Moore said in London last week.

"The multi-lateral trading system has probably done more to boost living standards and lift people out of poverty over the past 50 years than any other government intervention," he added.

And Clare Short, the UK Minister for International Development, added that "(we) need to ensure that the next trade round is a development one, that will secure significant market access improvements for developing country products."

US getting tough

However, any global trade talks face opposition in the US Congress, where Democrats - with the support of American trade unions - argue that any talks should ensure that labour and environmental standards are included.

The new US trade representative, Robert Zoellick, is pushing Congress to give the Bush administration "fast-track" negotiating authority to conclude trade pacts, but is already finding it hard going.

He was pressed at his confirmation hearing to be tougher in trade disputes with other countries, and has affirmed that the US would not put its "anti-dumping" laws on the table.

And he has made it clear that President George W Bush's first priority will be negotiating a trade pact in the Western Hemisphere, which will be launched at a Summit of the Americas in Quebec in April.

With the US divided on the benefits of free trade, protectionist pressures are likely to grow - and the anti-globalisation protesters are already mobilising the fight against any extension of the WTO's authority.