Dead round walking?

In Geneva this week the director of the World Trade Organisation (WTO) Pascal Lamy tried to avert a collapse of four years of global trade talks by announcing they were “suspended”. But the fact is the round of talks are on ice for the foreseeable future. In the words of Indian Trade Minister Kamal Nath, the round is not dead, merely “between intensive care and the crematorium”.

According to the Australian National Farmers’ Federation, the failure of the WTO talks means a loss each year to domestic producers of an estimated $1 billion to $1.5 billion in additional revenue. Australian farmers, however, will not be worse off. Only their hopes of more trade opportunities and increased income have been dashed.

But the poor farmers of the world most certainly will lose out because of the suspension of the trade talks. As Trade Minister Vaile pointed out, “The real price to be paid is by the least developed countries”. Developing countries are now faced with a continuation of the unfair trade rules that have allowed the United States (US) and European Union (EU) to dump their heavily subsidised agricultural produce onto world markets, while insisting that poorer countries remove barriers to imported goods.

And an end to farm subsidies has always been a central aim for these trade talks as far as developing countries, such as Brazil and Thailand, are concerned. In their place they have wanted to see a set of trade rules that were fair and provided new trading opportunities but without undermining the livelihoods of the majority of their populations that relied on agriculture.

It is increasingly recognised that for poor countries there is more to economic development than just opening up their markets to trade and investment - in fact to do so prematurely can be disastrous. Developing country governments need the flexibility to follow the paths taken by other successful countries, such as the Asian tigers, even if that means opening their markets more slowly than exporting countries like Australia would like.

So what should happen next? The suspension of the round does not herald the end of the World Trade Organisation. There is still a strong development case for a multilateral system, even one as flawed as that of the WTO. Australia and other richer countries should resist the temptation to try and get what they want via a series of bilateral trade agreements. Apart from introducing more complication and incoherence into trade relations, these deals usually involve developing countries losing more than they gain because of their weak negotiating position.

But if the multilateral talks are to be resurrected, trade negotiators need a complete change of mindset. The US and EU should only come back to the table once they have done their homework and have a clear commitment to end the dumping of their agricultural surpluses. They and the Australian Government must also acknowledge developing countries’ special needs for flexibility over how and when they open up their markets.

Meanwhile the US and EU should at the very least respect current rules on subsidies - or if they continue to break them, accept that they will face litigation in the WTO court. They must not abandon the multilateral system and should refrain from arm-twisting developing countries into bilateral trade agreements that are even more damaging than those on the table in Geneva. They should use the time ahead to reopen the debate on institutional reform of the WTO.

However minor, such gains would at least give the world’s poorest countries something to show for four grinding years in the negotiating chamber.