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A Political Jolt Needed to Break WTO "Alphonse and Gaston" Routine

by Jeffrey J. Schott, Peterson Institute for International Economics

Letter to the editor in the Financial Times
December 23, 2005

© Financial Times

Jagdish Bhagwati's rosy assessment of the World Trade Organization ministerial in Hong Kong exaggerates the progress and discounts the remaining challenges to concluding the Doha round ("A blend of strong measures puts trade talks back together," December 20).

First, he hails the agreement to eliminate farm export subsidies by 2013. I question whether one can call "progress" a decision that extends the end date for export subsidies for three years beyond what most countries wanted. Besides, most farm export subsidies already have been phased out, and ministers previously committed to eliminate almost all the rest quickly.

Second, he points out that the lack of progress on domestic farm support and tariff/quota reforms did not provoke Brazil and India to walk away from negotiations on nonagricultural market access (NAMA) and services, where they need to make offers of value to the United States and European Union. True enough, but the EU budget deal is a sobering reminder that hopes for augmenting the EU farm offer rest on a flimsy foundation.

Third, Professor Bhagwati asserts that the least-developed countries (LDCs) have been "bought off" by the commitment to apply duty-free/quota-free access to 97 percent of their trade by 2008 and thus will not block consensus on an eventual deal. Note, however, that this commitment only modestly augments the status quo; the United States already applies such treatment to 83 percent of LDC trade. The 3 percent loophole provides ample room to continue to distort trade in sugar, bananas, and apparel.

Fourth, the Hong Kong declaration endorses aid for trade, and the meeting spurred pledges for major increments in development assistance from the European Union, Japan, and the United States. Investments in physical and human capital can help developing countries take advantage of the opportunities created by new trade pacts and thus are vital to the achievement of the development objectives of the Doha round. How and when the monies are disbursed is another matter not bound by the trade bargain.

These are all small matters on the WTO agenda. The big payoff for development lies in issues left virtually unchanged in Hong Kong. As your excellent reporting from Hong Kong disclosed, progress on NAMA and services was microscopic. Without substantive offers in those areas, the United States and European Union will not be able to maintain and/or augment their offers on farm reforms. Yet developing countries are understandably sceptical that, even if they offered concrete reforms on goods and services trade, the European Union would up the ante in agriculture. So neither side moves.

I doubt that trade ministers have the political authority to break this "Alphonse and Gaston" routine. To succeed, the Doha round will need a political jolt. A trade summit involving countries whose policy reforms are crucial to the success of the WTO venture needs to be convened to break the impasse. President Lula da Silva of Brazil has already vetted the idea; Pascal Lamy would do well to take the ball and run with it.


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