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Last Updated: Sunday, 18 December 2005, 15:26 GMT
Will there be another trade round?
By Steve Schifferes
BBC News economics reporter in Hong Kong

Trade negotiators in Hong Kong
Negotiators will soon be round a table again

The 149 countries of the World Trade Organisation have agreed a modest deal to end agricultural export subsidies and give more help to the poorest countries.

But where does that leave the wider trade talks, and the future of free trade?

The talks at Hong Kong have avoided collapse, but there is still a long way to go in a relatively short time if a new world trade deal is to be agreed.

This meeting sidestepped the toughest issues of how far to open markets for agricultural goods in rich countries and manufactures and services in developing countries.

These need to be resolved in the next three months if there is to be hope of a final agreement by the end of 2006.

Tight deadline

This is a very tough deadline, given that these issues have been discussed in the World Trade Organization for many years without a result.

And it will require a real injection of political will.

I seriously doubt that any agreement with this imbalance will be acceptable to the US Congress
Charles Grassley, chairman US Senate Finance Committee

The UK and Brazil have already discussed a high-level meeting of G8 leaders plus key leaders from developing countries to add new momentum to the process.

But it is uncertain whether that would work, or whether a new Ministerial conference can be called in time.

So it will be up to negotiators in Geneva to try and resolve the large number of outstanding issues if a real trade deal is to emerge.

But there is a real question whether countries in the rich world have an appetite for a trade deal, particularly when the balance of the deal is likely to give more benefits to people in developing countries than their own citizens.

North-South divide?

The Chilean foreign minister Ignacio Walker pointed out that it is now the South that are the free traders, and the North that is more protectionist.

This points to a real difficulty with the current politics of trade.

MAIN POINTS OF THE DEAL
Agricultural subsidies: Farm export subsidies will progressively be phased out by 2013. However, there has been no agreement on import tariffs
Cotton: Rich countries will phase out export subsidies for cotton but there is no agreement on a date for reducing domestic subsidies for US farmers
Development Aid: The poorest countries will get quota-free and duty-free access to global markets for 97% of their goods

As the trade rounds have become more complex, the pay-offs for countries, especially the rich, have become less clear.

At the same time, the developing countries are acting as an increasingly effective counterweight to the rich blocs of the United States and the European Union.

This has also made it harder to reach a deal, as there are many more special interests that must be accommodated.

And the glare of publicity has meant that public opinion, which has been moving away from support for free trade in many countries, has become a more important factor.

It is still not clear that this trade round can be completed in time, or that it can win support in domestic politics of key countries, notably the United States.

US reservations

Recently the US Congress passed a free trade deal with Central America by only two votes, and a key Senator has expressed his scepticism about the Hong Kong deal.

"I seriously doubt that any agreement with this imbalance will be acceptable to the US Congress," Senate Finance Committee Chairman Charles Grassley, whose committee has jurisdiction over trade legislation, said in a statement.

Pascal Lamy, WTO director-general
Officials may have to rethink how trade negotiations take place

His words were echoed by Lori Wallach, director of Public Citizen/Global Trade Watch, a campaigning group that has played a key role in opposed trade deals in the past.

She told the BBC that many groups would be mobilizing to fight against the deal and said that trade issue was now a hot potato for many Republican Congressmen.

But even if a trade round is agreed, ambitions have been dramatically scaled down, with the likelihood of only limited progress, especially in the fastest growing area in the world economy, the service sector.

Further development of the international trading system would come up against serious conflict with domestic regulations in many countries, and the trading system still struggling to see if it can come to terms with environmental issues like GM foods.

Trade fatigue

There is a sense of exhaustion over the complexity of issues that trade is now expected to tackle, and the difficulty of reaching consensus among 150 members.

So it may be better not to risk again the kind of failure next time.

Instead, as the former WTO director-general Supachai has suggested, in future negotiations may be better carried out incrementally and on a small scale.

Workers in a Kenyan clothing factory
African countries were supposed to benefit from the focus on trade

That would leave a rules-based world trading system in place, with its certainty and predictability.

But it would make it more difficult to expand free trade except on a bilateral basis, with individual agreements between countries - where imbalances of power are great.

We are at a real turning point in the future of the world trading system, with significant changes in its architecture with the emergence of developing country blocs.

But unless they take an even bigger role in leading on this issue in the future, it is unlikely that there is the political will in the North to expand free trade any further.




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