by Jeffrey J. Schott, Peterson Institute for International Economics
Letter to the editor in the Financial Times
October 28, 2005
© Financial Times
Progress in the Doha round has been disappointing. For the talks to succeed, the United States, the European Union, and Japan have to offer reforms that create export opportunities for foreign suppliers. Other countries will not be able to take those offers to the bank, however, unless the final package includes liberalization of industrial products and services by both developed and middle-income developing countries substantial enough to “balance” the overall accord.
To his credit, Rob Portman, US trade representative, has grasped the leadership mantle by tabling farm proposals that would require substantial changes in current US programs and cuts in current levels of subsidy disbursements. He cannot sell those changes to the US Congress with what is on the negotiating table today, however.
So he needs breakthroughs in the negotiations on services and industrial tariffs next year to be able to make good on the US offer. In short, Portman has gone out on a limb—albeit after extensive consultations with the congressional leadership—in an effort to spur reciprocal offers from other World Trade Organization members.
Peter Mandelson, the EU trade commissioner, has also been challenging his political masters to pursue a big package of trade reforms but has been stymied on the crucial issue of agricultural tariff cuts and quota expansion. His suggestion that a new EU offer prior to Hong Kong would be its “final” offer is not helpful: since what he could now offer would not meet the minimum demands of other countries and only lead to the suspension of the talks. Whether the EU offer could be improved will depend on whether offers from other countries help Mandelson “push the envelope” of EU reform—that is, the same situation as on the other side of the Atlantic.
It is not clear whether the European Union can propose deeper cuts in farm tariffs under its existing mandate, but it is clear that if it does not do so, the round will collapse. So if the French rule Brussels, going to Hong Kong will be a waste of time and money.
For the Doha round to advance, Mandelson needs the authority to emulate Portman. Both acknowledge that “nothing is agreed until everything is agreed.” What is needed is a contingent offer that snaps back or expires after a fixed period of time if not fully reciprocated. The European Union should match the level of ambition of the new US proposals; if substantial progress is not made in the industrial products and services talks by, say, June 30 2006, the European Union could then withdraw its more ambitious offer.
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