Not Ready to Compromise

This was originally posted on www.tradelawyersblog by Cyndee Todgham Cherniak

The “Doha Round” of multilateral trade talks at the World Trade Organization lapsed back into limbo on July 29, 2008 as an informal meeting of Ministers did not end in the acceptance of the compromise "package of elements".

If the United States, India, and China fail to reach a compromise, and the "Doha Round" fails, it might represent the beginning of the end for the World Trade Organization.  Failure means one thing: that Membership in the WTO does not include the responsibility to compromise so that the system itself can evolve. Evolution does not require big steps at each Round.  Evolution does require progress on important issues, including agricultural subsidies, NAMA tariff reductions, services liberalization, improvements to the Anti-dumping Agreement and Subsidies and Countervailing Measures Agreement, improvements to the dispute settlement mechanism, improvements to rules of origin, etc.

Negotiations of a middle ground to improve the multilateral trading system should not appear to be a matter of brinkmanship - and it does appear that the United States and the European Union on one side are locked in a battle with China and India (and other developing countries) on the other side.  Something is not right with this picture.

It is difficult to believe that a compromise cannot be reached with respect to the special agricultural safeguard mechanism.  It seems reasonable for developing countries to ask for an agricultural safeguard mechanism.  The developing countries are being asked to reduce agricultural tariffs so that other countries can export agricultural commodities to the developing countries.  It is reasonable for the developing countries to be concerned that the reductions are too steep and it is legitimate to want to protect the developing country farmers.  If the developing country farmers cannot sell their goods in the domestic market of the developing country, does the developed countries really expect that they will find alternative export markets?  Do the developed countries really expect that the developing country farmers will take up manufacturing or services jobs if they cannot be farmers?  It is one thing to desire access to the developing country markets - it is quite another to be insensitive to the concerns of the developing countries.

Why is it that a special agricultural safeguard mechanism is unacceptable?  The compromise special agricultural safeguard mechanism contained in the July 26th "package of elements" provides restrictions of the safeguard mechanism, which are transparent and involve a degree of certainty.  The exporting countries will know what level of increase in imports into the developing country will be considered to constitute a surge (40%). 

The sticking point must be that the developing countries may impose surtaxes that exceed the existing bound rates by 15%.  Developed countries today can impose agricultural safeguard surtaxes at any level - even more than 15%.  If challenged at the WTO, the level of safeguard surtaxes may be found to be WTO inconsistent.  However, based on the WTO case law, the WTO may not require the improperly collected surtaxes to be refunded after the years it takes to resolve the dispute. 

So, the agricultural safeguard rules become more clear and limitations are placed on the levels of surtaxes.  This is better than what the multilateral trading system has currently.

It would have made more sense for the developed countries to accept the special agricultural safeguard for now and work towards greater improvements so that the Doha Round, when all is put on the table, results in positive evolution. 

We should be disappointed.