“What are the implications of the stalled Doha Round for International Trade?”.

Rede von Helmuth Markov beim American European Community Association Round-Table Meeting im Europäischen Parlament in Strasbourg am 25 April 2007.

Ladies and Gentlemen,

It is a great pleasure for me to speak today at this round-table meeting of the AECA.

Your invitation to me is a clear illustration of the importance of international trade issues for your Association: not only bilateral transatlantic trade issues, which Chancellor Merkel consiers as one of the main foreign policy priorities of the German EU-presidency, but also multilateral trade issues and the Doha Round, on which all other trade matters very much hang.

You have asked me to say a few words about the „implications of the stalled Doha Round for international trade“.
Well, when these negotiations were launched in November 2001, Ministers had set themselves the objective of a short Round to be completed before 1 January 2005. Since then, many deadlines have been missed and, in July 2006, the Director general of the WTO, Pascal Lamy, announced the official suspension of the negotiations.

As far as I understand, however, negotiations, or more a „silent diplomacy“, of the Doha-round is still taking place and – officially – hopes are still high that the round could be successfully completed before the end of the year. But whichever way you look at it or describe the situation, it is obvious that no progress whatsoever has taken place since the suspension.

We are familiar with the main hurdles in the way:
– the US has to reduce the level of its domestic trade distorting subsidies to agriculture;
– Brazil and India have to increase access to their markets for industrial goods and services;
– the EU is under pressure to make further concessions in the area of agricultural market access.
Many additional conditions will have to be fulfilled; several other important players will have to make efforts on various topics; and much technical work will have to be carried out before an agreement can be signed.

To make it possible for the US administration to obtain from the Congress an extension of its negotiating powers under the Trade Promotion Authority, such agreement on modalities has to be found before the end of June. Some leading figures of the new Democratic majority of the US Congress, such as Charles Rangel, have given indications that they could be prepared to grant such an extension; but, for this, they expect that an attractive deal is within reach for the US.

The European Parliament has often deplored the fact that, in a process which is so obviously lacking democratic legitimacy and parliamentary oversight, the fate of such an important global undertaking can be dependent on the goodwill of the parliament of just one of the 150 parties involved. This is an unfortunate reality which might deserve critical consideration in the framework of a future reflexion on a possible institutional reform of the WTO (a subject on which our Committee will be working during the coming months). In the meantime, however, it is a constraint which we must accept.

Both Pascal Lamy and the European Commissioner for Trade, Peter Mandelson, have issued serious warnings concerning the state of play of the Doha Round. „If the situation does not change soon“ – Mandelson said last week, „governments will be forced to confront the unpleasant reality of a failure“. Although I have my personal views on possible consequences of such a failure, I will limit myself to mentioning those aspects which, in our debates and resolutions in the European Parliament, are most commonly raised.

The first consequence of a failure to complete the Doha Round is giving up all the progress made and results achieved so far, since the negotiations are based on the principle that “nothing is agreed until everything is agreed”. The actual economic value of what is on this table at this stage may be subject to debate: While Pascal Lamy has claimed that “in terms of market access or new disciplines, the Doha Round, as originally defined, is already worth two or three times the Uruguay Round that preceded it”, I frankly have my doubts about this.

It is true, however, that a number of valuable commitments included in the Hong Kong Declaration would all be lost or made entirely dependent on the goodwill of the members concerned if no agreement was concluded:
– such as the elimination of all forms of export subsidies to agriculture by 2013,
– the commitment to eventually granting Duty Free Quota Free (DFQF) treatment to most of the imports from the Least Developed Countries (LDCs),
– the special measures in favour of African cotton producers,
– the significant reduction of non-agricultural tariffs on the basis of a Swiss formula,
– the various offers already submitted by some members in the area of services, etc.

But there are other, more systemic, aspects to such a scenario which are even more worrying.

The first one is the risk of a loss of credibility of the WTO as a negotiating forum and the corresponding temptation for the main trading powers to push for their economic interest through other means. This risk has already materialised in the form of new bilateral and regional free trade negotiations.

One of the latest and most significant illustrations of this lies in the new trade policy strategy defined by Commissioner Mandelson in his communication on “Global Europe” published last autumn. On this, and the various initiatives taken in the wake of this communication, such as the adoption of draft mandates for free trade negotiations with India, Korea, ASEAN, Central America and the Andean Community, the opinions of the members of our Committee differ.

There is a broad consensus, however, around the idea that such bilateral and regional deals
– are a second best option,
– that they lead to trade diversion,
– are often unbalanced,
– contribute to introducing discrimination in international trade relations
-and tend to reduce the level of engagement of participating countries in the WTO.

(It is understood, at the same time, that, in the absence of progress at multilateral level, bilateral and regional initiatives may be useful to preserve the competitive position of EU exporters on key foreign markets, especially in cases where other major trading powers, such as the US and Japan, have already concluded or are in the process of negotiating such agreements with the countries or regions concerned.)

Whatever one may think about them, one can only hope that these agreements will remain as compatible as possible with multilateral rules and seek to supplement rather than replace possible commitments by the parties concerned in the framework of the WTO (“WTO +”).

If members of the WTO progressively turn to other formula to seek trade liberalisation and improve their access to foreign markets, the question also arises of how long multilateral rules will remain relevant.

The WTO is a framework of rules which must be respected to ensure the orderly conduct of international economic relations and which must be supplemented and updated regularly while maintaining its basic principles as:
– of most favoured nations (MFN),
– national treatment,
– transparency,
– binding commitments, etc,
– as well as its specialised agreements on trade in goods and services, intellectual property, agriculture, subsidies, anti-dumping, rules of origin, etc,

I do not belong to those who believe that the end of the Doha Round would be the end of the world. This would be neither the first, nor probably the last, major negotiation in diplomatic history to thus end up as a fiasco.

Nobody can dispute, however, that such a failure would be a huge loss of opportunity, for the world economy in general and for the developing countries in particular, and that it could inflict on the international trading system damages that nobody is able to fully assess at this stage and which might be difficult to repare.

For this reason, one should hope that no efforts will be spared by the members concerned – especially the EU and the US – to rescue this exercise and to find an agreement before the end of June. If this does not happen, the political calendar (US presidential elections) is such that it will not be possible to resume multilateral negotiations before then end of 2009 at the earliest. Needless to say, the European Parliament and its Committee on international trade are following these events with the greatest attention and will continue to play their role in controling and supporting EU negotiators in their difficult task. This will be actually one of the objectives of a parliamentary delegation to Geneva which our Committee is organising next week (2-4 May).