2007 Seen as a Potentially ‘Defining Year’ for the Current Round of Global Trade Talks

2007 Seen as a Potentially ‘Defining Year’ for the Current Round of Global Trade Talks By JOHN ZAROCOSTAS Published: December 26, 2006 GENEVA, Dec. 25 — The international trade system is heading for turbulent times next year unless negotiators from developing and industrial nations move quickly, and decisively, to conclude a deal, top officials and business executives warn. “I think it’s probably a defining year for the round, and hence for the multilateral trading system,” said Pascal Lamy, director general of the World Trade Organization, which is overseeing the so-called Doha round of negotiations. The talks to improve trade in farm and industrial goods, which started in November 2001 in Doha, Qatar, collapsed in late July after the United States, the European Union, Japan and India failed to reach an agreement on reductions in farm subsidies and tariffs, which is critical to a wider agreement. Since then, some countries that had been waiting for the W.T.O. to forge an agreement have said they would begin negotiating bilateral accords with trading partners. A new wave of bilateral agreements could undermine the W.T.O.’s authority. And the absence of a global trade agreement poses other risks. It may escalate trade tensions among large economies, including China, the United States and the European Union. Trade experts also warn of a possible rise in protectionism as both rich and emerging nations seek to pry open markets. “This is one of the most dangerous moments that I recall,” said Peter Sutherland, chairman of BP and of Goldman Sachs International. “At the moment, it is virtually impossible to be other than pessimistic about the round and, therefore, about the W.T.O. There is a lack of leadership, as opposed to rhetoric.” His pessimism is shared by many trade negotiators and experts. At stake is five years of negotiations on a package to sweep away barriers to the international flow of goods and services, valued at more than $12 trillion a year. The complex areas of negotiations are all interrelated. As the W.T.O. itself puts it, “Nothing is agreed until everything is agreed.” And the accord must be approved by all members — there will be 150 when Vietnam joins in January. About two dozen trade ministers are to meet in late January on the sidelines of the World Economic Forum in Davos, Switzerland. But Mr. Lamy played down expectations. “My own sense is that a serious negotiating meeting will only make sense when people come with new numbers,” Mr. Lamy said. “I am not aware that that will be the case in Davos. Davos is a useful stock-taking exercise.” Mr. Lamy was also cautious on the idea of calling a W.T.O. ministerial meeting in February. “I think it’s only useful if, again, people come with new numbers on what they ask for, and new numbers on what they’re willing to pay for on agriculture and industrial tariffs,” Mr. Lamy said. National politics are casting a long shadow over the Doha round. President Bush’s loss of his Republican majority in both houses of Congress in November means that he will have to work hard to extend his trade promotion authority, which expires next July. Under this “fast track” authority, the president has the power to negotiate trade deals and Congress must vote yes or no on them without offering amendments. On the other side of the Atlantic, France, a country with an outspoken farm sector and a marked reluctance to lower agricultural barriers, is preparing for its presidential election in the spring. Given France’s influence on European Union trade policy, it will be difficult for the bloc’s trade commissioner, Peter Mandelson, to deliver deeper cuts on farm subsidies and tariffs. But without deeper cuts from the European Union, a senior American trade official said, it would be difficult for the Bush administration to sell the package at home. In any case, the days are gone when the United States and Europe set the agenda on trade, brokered secret deals in back rooms and then forced them on their partners. “The geopolitics have changed,” Mr. Lamy said. “India, Brazil, South Africa, Indonesia play a huge role in this agriculture negotiation.” Kamal Nath, the Indian minister for commerce and industry, recently said that unless the United States and the European Union substantially reduced their farm subsidies, “there would be no benefits for developing countries” from Doha. Many business groups are also skeptical. “We want things to move on Doha, but only if there’s a willingness to have real negotiations and not posturing,” said Christopher Wenk, director of international trade policy at the National Association of Manufacturers.